How did a scrappy German startup win the meal-kit wars? The answer is as dramatic as any real-life battle.
A few years ago, if you were looking for a subscription-based ingredient delivery service, you probably thought of Blue Apron. Today, HelloFresh dominates the direct-to-consumer meal-kit field.
While other meal kit services struggled, HelloFresh added 1 million new customers in the first quarter of 2020, after the lockdown closed restaurants and forced families to find new ways to dine at home. This is in sharp contrast to just five years ago, when Blue Apron owned 70% of the market, and HelloFresh tied as runner-up alongside the now-defunct Plated.
HelloFresh poured money into their all-fronts marketing strategy that included a wide range of channels, from influencer marketing to literally knocking on doors. Some of these strategies worked better than others, but they all led to complete market dominance.
Let’s take a closer look at HelloFresh’s impressive rise to number one and see what other D2C marketers can learn from their aggressive marketing strategy.
HelloFresh Wanted Total Market Domination
HelloFresh was conceived with a single goal in mind: dominate the global meal-kit delivery industry.
In 2011, Oliver Samwer, a German internet mogul, was interested in creating and owning entire market categories. The billionaire is known for his aggressive tactics and winner-take-all ecommerce philosophy. “The time for blitzkrieg must be chosen wisely,” he once wrote to the manager of one of his companies. “Each country tells me with blood when it is time. I am ready—anytime!”
When HelloFresh, originally named Jade 1314, first launched, meal kits weren’t even on most American’s radar yet. Samwer based the idea on a Swedish company, Linas Matkasse, that sold pre-portioned grocery baskets with attached recipe cards. He tapped 26-year-old business-school grad Dominick Richter to head the meal-kit project.
The idea was simple: consumers could sign up to receive weekly refrigerated boxes, with pre-portioned ingredients and instructions for cooking. The ingredients were high quality and fresh, and the instructions were simple enough for even a beginner cook. Busy professionals could experience the satisfaction of cooking from scratch, without the inconvenience of having to plan and shop.
Under Richter’s and Samwer’s leadership, HelloFresh launched in Germany after just three months. Within the first year, they expanded to five countries across Europe and into Australia. In 2014, they took the business to the United States, and by early 2015 they had distribution centers set up to ship across the lower 48. Only now, they weren’t alone.
Competing service Blue Apron launched in 2012, with a nearly identical offering and value proposition. Other services, such as Plated, Home Chef, and Sun Basket soon followed. Funding was plentiful because investors were drawn to the predictive nature of a weekly subscription service. Over the next six years, venture capitalists would invest $1 billion in over 100 similar startups.
Even though the meal-kit category didn’t exist in America when HelloFresh began, the company was now just one of the crowd. New York-based Blue Apron scooped up an early lead with the most funding and marketshare. HelloFresh faced a steep uphill battle for supremacy.
A Crowded Field with a Common Enemy: Customer Churn
HelloFresh was flush with competitors, but they had to keep their eye on another, more pressing enemy: high customer churn rates.
The problem wasn’t HelloFresh’s alone. High turnover is a problem endemic in meal-kit companies. Meal-kit subscriptions are expensive, they produce a lot of physical waste, and they are convenient for only a very specific subset of consumers: people who are too busy to shop for and plan meals but still have the time and motivation to spend 30-60 minutes each evening cooking dinner. Many customers would sign up at a discount rate and then either switch to another service (for another discount) or just discard the idea entirely.
Although most companies have been cagey about their churn numbers, an independent study found that the average meal-kit customer sticks around for only five months, and across the industry, yearly customer retention rates hover at just 10-15%.
Such high customer turnover meant that, to survive, HelloFresh needed constant fresh blood to counteract losses and promote growth. To stay afloat, HelloFresh focused their efforts on bringing in new users by any means necessary, pouring millions into marketing, sometimes more than one-third of its revenue each year.
To outsell and outlast the competition, HelloFresh needed a steady stream of new customers, and they would do almost anything to get them.
HelloFresh Built an Influencer Army
HelloFresh’s product is very visually appealing: the bright-green box, the cute pre-packaged ingredients, and, of course, the tasty finished meals. This makes it a natural fit for influencer marketing. While other meal-kit brands have flirted with the concept, HelloFresh has fully embraced the potential of influencer marketing, hiring thousands of influencers and microinfluencers across different fields and mediums.
The company’s audience is 80% women, primarily between the ages of 30 and 50. With that in mind, HelloFresh’s influencer marketing campaigns are designed to target busy moms and young professionals who care about health and nutrition.
The company employs a variety of lifestyle, motherhood, and cooking influencers to share, across blogs and social media, their experiences with HelloFresh. They also pay podcasters to talk about their experiences cooking with the kits. In every case, the influencer asks their followers to sign up for the service using a unique promo code. By using the code, potential customers can receive a discount on their first month. Not only does this drive sign-ups, but it also makes it very easy to track customer acquisition. HelloFresh can see which influencers were the most effective at generating sign-ups and can then tap them for more campaigns while jettisoning the less effective spokespeople.
Why stop at bloggers, though? HelloFresh digs deep into their pockets to pay celebrities, such as Mandy Moore, Lea Michele, and contestants from The Bachelor. These personalities create social media content and mention HelloFresh in interviews. In an experimental move, the company also partnered with Jessica Alba to create a custom date-night box featuring truffled mushroom risotto and chocolate lava cake.
The investment in influencer marketing helped HelloFresh build momentum for more organic social media marketing efforts.
Also helpful? Millennials love taking pictures of their food. The hashtag #HelloFreshPics has generated over 200,000 Instagram posts and is popular on Twitter and Pinterest as well. While some of the pictures are from influencers, most are just from happy customers.
An All-Fronts Assault, with Mixed Results
While influencer marketing is a large part of HelloFresh’s marketing strategy, the other major component can be summed up as “be everywhere.” From subway advertisements to mailers to a variety of experimental tactics, the company strives to stay in consumers’ minds and eye line.
The company spends millions yearly on traditional advertising methods, including television spots, online display ads, magazine ads, and direct mailings. They paper their logo across subway stations, city buses, and billboards.
In addition, HelloFresh is always trying experimental marketing methods. They have a robust blog with shareable content and quizzes. They are piloting in-app offers on Spotify, where would-be customers can click to the HelloFresh website while browsing podcasts. The company is also dipping their toes into the creative content waters, tapping Annie Murphy from Schitt’s Creek to star in a mock soap opera called Hungry Hearts.
HelloFresh has also turned your friends and family into product ambassadors. Their robust referral program turns customers into influencers by encouraging them to invite others to sign up. If they’re successful, both the inviter and the invitee get a monetary discount. Long-term members can send a free week of meals to a friend. This is a powerful marketing method: the endorsement of a trusted associate offers far more social proof than any celebrity influencer ever could.
Not all of HelloFresh’s marketing strategies have been winners, though. HelloFresh’s street-team program literally had product reps out on the streets in large cities handing out vouchers and knocking on doors. While these foot soldiers were tolerated in cities such as London and Sydney, in Brooklyn the move came across as aggressive, bordering on street harassment. After a slew of complaints, HelloFresh ended the program.
HelloFresh Uses Marketing to Outwit and Outlast the Competition
HelloFresh’s strategy of ignoring their competitors and focusing on unrelenting growth worked. They continued to bring in new users while competitors floundered. After a disastrous IPO and some bad press, Blue Apron’s profits began declining steadily, as did their marketshare. Other meal-kit services sold themselves to grocery chains, were absorbed by other companies, or simply dissolved.
The field is decidedly less crowded now. But as others lost steam, HelloFresh continued to thrive. In 2019, they turned a profit for the first time. Their success continues, thanks in large part to a major increase in demand for home meal-kit services during the Covid-19 crisis.
Not every company can afford, or even wants, to take such an aggressive marketing approach. But D2C marketers can still learn a lot from HelloFresh’s rise to glory: the importance of tracking and analytics, the power of influencers both big and small, and the importance of knowing your true enemies.
