Meal kit company HelloFresh announced today that it is acquiring prepared meal delivery service Factor75. The deal is being done through Berlin-based HelloFresh’s U.S. subsidiaries and has the company paying up to $277 million in cash (up to $100 million is in the form of an earn-out and management incentives) for Factor75.
Factor75’s revenue is projected to reach $100 million for the full year 2020. HelloFresh is using the acquisition to expand its presence and market reach here in the U.S. Through the Factor75 purchase, HelloFresh will gain a Chicago office along with four production and fulfillment facilities. There is also a forthcoming facility that, according to the press announcement, will provide enough capacity to deliver more than $500 million worth of prepared meals annually.
This the second big acquisition of a prepared meal delivery service is as many months. At the end of October, Nestlé acquired Freshly in a deal that valued Freshly at $950 million (actual purchase price and deal structure details were not disclosed).
Both these acquisitions come against the backdrop of the COVID-19 pandemic, which has more people eating at home. Prepared meal kit companies like Factor75 and Freshly offer a convenient way to mix up home dining because meals are already cooked and just need to be re-heated. There’s no extensive preparation or lengthy cooking times like there is with traditional meal kits that just send ingredients.
Given that there are now three promising COVID vaccines on the horizon, one has to wonder if Factor75 is exiting at the right time. Obviously there is still a mountain of regulatory and logistical work that needs to be done before any vaccine becomes widely available. But if vaccines start to roll out over the next six to 12 months and consumers feel more free to venture out to restaurants and grocery stores whenever they want, will consumers still have an appetite for meal kits and prepared meal services?