Having ridden out the surge in demand for meal delivery services brought upon by the pandemic, Marley Spoon (ASX: MMM) is set to be one of the few brands that will maintain that momentum in the post-COVID world with the sector poised to undergo a period of consolidation.
Demand for such services was first accelerated in 2020 as fears of COVID-19 spread throughout the world and customers were hesitant to shop for their fresh produce at local supermarkets. This resulted in a sudden rise in grocery delivery services, as well as meal delivery services like Marley Spoon which entered into an alliance with Woolworths.
With competition for subscribers more fierce as those fears subside, Marley Spoon has expanded its portfolio of food delivery brands with the acquisition of Chefgood, a Melbourne-based ready-to-heat meal provider.
Established by passionate foodies Michelle Sievwright and fine dining chef Susan McKay, Chefgood offers more than 30 meals rotating every week across different subscription plans. These packages target healthy and weight conscious consumers, and also offers a small range of add-on items
Chefgood will continue to operate under its current brand but join the Marley Spoon portfolio that also delivers Martha Stewart & Marley Spoon, Marley Spoon, and Dinnerly.
“We are very excited to be partnering with Michelle and the Chefgood team since we share the same vision of making our customers’ lives easier with easy, tasty, and high-quality meal solutions,” said Marley Spoon Australia Managing Director, Rolf Weber.
Total consideration for Chefgood is $21 million which will be payable in three tranches over the next 18 months via a combination of cash and MMM shares. A further $5.6m may be payable subject to revenue targets being met in FY23 and FY24.
The acquisition will be funded by $11m in debt, $8m in equity and existing cash reserves.
For the three months ended 30 November 2021, Chefgood generated $26m in revenue and is EBITDA positive. Marley Spoon expects the profit contribution to be minimal at first but gradually increase as cost-saving synergies are rolled out from 2022 onwards. These will apply to operations, supply chain, marketing, product development and digital execution.
Earlier in the year, meal delivery company HelloFresh acquired competitor Youfoodz at a 57% discount to their IPO price having listed just 8 months earlier.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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