Fresh-food IPOs highlight healthy eating demand

Bloomberg

Two European companies in the burgeoning business of fresh food are planning initial public offerings, underlining consumers’ quest for healthier diets as demand for packaged and processed foods wanes.
HelloFresh SE, an unprofitable meal-kit startup controlled by Rocket Internet SE, plans to sell as much as $353 million of stock in Frankfurt even after US rival Blue Apron Holdings Inc. flopped in its IPO. Bakkavor Group Plc, which provides fresh prepared foods to grocers, plans to raise about 100 million pounds ($132 million) in a separate listing in London.
The moves come amid a fast-changing food landscape, with new players flooding in and owners of mainstream brands battling to keep pace. Amazon.com Inc. set the tone with its $13.4 billion acquisition of Whole Foods Market Inc. in August following swift expansion of its AmazonFresh food-delivery service.
Nestle SA, the world’s largest food company, in June bought a stake in prepared-meals startup Freshly to further Chief Executive Officer Mark Schneider’s shift towards healthier foods. UK supermarket leader Tesco Plc said last week that fresh groceries were a highlight in an otherwise difficult first half. As mass-market packaged brands fall out of fashion, Anglo-Dutch consumer giant Unilever plans to sell its spreads business. The path hasn’t been entirely smooth for the newcomers. HelloFresh Chief Executive Officer Dominik Richter will have to prove to investors that his company isn’t the next Blue Apron, which has lost almost half its value since going public in June. The US company has struggled with higher costs and a decline in customers.

‘Track Record’
Berlin-based HelloFresh will sell new shares to raise 250 million euros to 300 million euros on the Frankfurt Stock Exchange, the company said.
HelloFresh has shown a “strong track record” of improving profit margins and aims to break even in the next 15 months, it said.
The IPO could value the business at 1.5 billion euros to 2 billion euros, according to people familiar with the matter.
Founded in 2011, HelloFresh sells meal kits in 10 countries including the US and remains unprofitable. Richter says his company is performing better than competitors, citing faster growth, better profitability and market-share gains. The company in September reported a 53 percent sales growth from a year earlier and signed up 90,000 accounts during the second quarter.
“The public listing marks the next logical step to further expand our business, to secure our position as the leading global player and to pursue our long-term growth strategy,” Richter said in the statement.
Bakkavor, which supplies UK grocers with salads, desserts, pizza and other prepared meals, plans to sell at least a 25 percent stake and will seek admission for its listing on the London Stock Exchange in November, it said.
The company is controlled by Icelandic siblings Agust and Lydur Gudmondsson, who will trim their 59 percent holding in the sale.
Bakkavor has a 30 percent share of the UK’s 7 billion-pound fresh prepared-food market. Customers include Tesco, Marks & Spencer Group Plc and J Sainsbury Plc.