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European Fresh-Food IPOs Highlight Demand For Healthier Eating

Published on Oct 10 2017 11:40 AM in Fresh Produce tagged: Bakkavor / fresh food / HelloFresh

European Fresh-Food IPOs Highlight Demand For Healthier Eating

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, an unprofitable meal-kit start-up controlled by  Rocket Internet, plans to sell as much as €300 million ($353 million) of stock in Frankfurt, even after US rival Blue Apron flopped in its IPO. Bakkavor Group, which provides fresh prepared foods to grocers, plans to raise about £100 million ($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 set the tone with its $13.4 billion acquisition of Whole Foods Market in August, following swift expansion of its AmazonFresh food-delivery service.

In June, Nestlé, the world’s largest food company, bought a stake in prepared-meals start-up Freshly to further chief executive officer Mark Schneider’s shift toward healthier foods. UK supermarket leader Tesco 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 CEO 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 to €300 million on the Frankfurt Stock Exchange, the company said in a statement. 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 to €2 billion, according to people familiar with the matter.

Founded in 2011, HelloFresh sells meal kits in ten countries, including the US, and remains unprofitable. Richter says that his company is performing better than competitors, citing faster growth, better profitability and market-share gains. In September, the company reported 53% 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% stake and will seek admission for its listing on the London Stock Exchange in November, it said in a statement. The company is controlled by Icelandic siblings Agust and Lydur Gudmondsson, who will trim their 59% holding in the sale.

Bakkavor has a 30% share of the UK’s £7 billion fresh prepared-food market. Customers include Tesco, Marks & Spencer and Sainsbury's.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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