I have just completed a deep dive on Hellofresh (ETR:HFG) and will be purchasing shares. Marley Spoon is a direct competitor of Hellofresh, as a result I thought I would put my thoughts here as to why I am buying Hellofresh rather than Marley Spoon.

Why Hellofresh over Marley Spoon or others in the space?

• Hellofresh is the major player in the space and is actually profitable and has positive cash flows. In just ten years, HFG has gone from a start-up in Germany to delivering 1 billion meals worldwide in CY21 with $8.8 bn (AUD) worth of revenue. IMHO Hellofresh now has the scale that it is the winner that takes all from the network effects and size compared to smaller competitors.
• From my research Hellofresh is one of those businesses that has worked out the "secret formula" of business. Over COVID they scaled massively and not from a small base. CY19 revenue = EUR 1.8 bn to CY21 = EUR 6 bn. To scale like that during a pandemic you must have a highly effective and efficient business model and processes. I might add the CY20 and CY21 were the first years the business become profitable and significantly operating cash flow positive, so it wasn't just a case of pump the money in and see the revenues increase.
• Hellofresh knows how to land and expand. Currently based in around 19 countries. Hellofresh's size means it has learnt all the lessons and growing pains already compared to smaller competitors.
• Hellofresh plans to spend EUR 500 mil this year in capex on tech and expanding capacity for EUR 10 bn of revenue. MMM revenue in CY21 was less than HFG capex for this year. How can you compete when your largest competitor is able to grow so much faster than you can?
• Marley Spoon is a dinner meal kit business only currently. Hellofresh has expanded into ready to eat (Youfoodz and Factor) and launched in some geographies "Hellofresh Market" that provides breakfast and lunch options. Another advantage over competitors for Hellofresh. Especially considering part of the business model of HFG and MMM is convivence.
• Hellofresh management is all about optimising the business through technology. Decisions are made on data. The profitability of the business is showing this is working.
• Customer reviews of both brands are about equal.
• MMM is currently a cash burner and unprofitable. Growth rates were less than HFG during COVID on a much lower base which should make it easier to grow at a faster rate.
• Blue Apron a USA based competitor. Listed at around US$145 a share in 2017. Current share price is US$5.25. Total losses (retained earnings) = US$666 mil and according to TIKR around US$750 mil of paid in capital. Money was thrown at this business for years and it couldn't crack the market. Last year revenues were under US$500mil and the company is still burning cash. Just shows the differences in outcome between two businesses in the same space...

Hellofresh is currently priced at a PE of around 30x. Not expensive for a company increasing revenues at a CAGR of 50%+ for at least 5 years (100% in 2020). Why take a punt on MMM comparatively? In my view any risks to the Marley Spoon model are the same as Hellofresh, unless you feel Hellofresh isn't the winner. Therefore, the risk reward of purchasing Hellofresh shares over Marley Spoon is heavily skewed to Hellofresh in my view.