The chief executive of home meal kits group Marley Spoon says a $30 million investment by Woolworths for a 9.1 per cent stake shouldn’t be labelled as a ”rescue” for a business which was getting to an inflection point where it would soon be profitable.
Marley Spoon chief executive Fabian Siegel said the five-year partnership through a debt and equity deal was the best option for expanding the company, which has been trying to eat into the traditional dominance of the supermarket giants.
Marley Spoon’s Chess Depositary Receipts which trade on the ASX jumped 66 per cent in early afternoon trading to 73¢. Investors piled into the stock on the expectation that a big player with deep pockets would result in the Marley Spoon and Dinnerly brands making more inroads in a fiercely competitive sector where rivals such as HelloFresh have also been competing hard.
It was a welcome rise for a company which had languished at 38¢ in late April, after a $70 million float on the ASX in 2018 with an issue price of $1.42.
“The business is actually at the inflection point where cash burn has been coming down dramatically,” he said.
Woolworths is providing $30 million in debt and equity under a deal where it is set to end up with 9.1 per cent of Marley Spoon. Part of that involves Woolworths spending $4.1 million to subscribe for 8.2 million CDIs at an issue price of 50¢.
Mr Siegel said Marley Spoon had been growing solidly in Australia. It had 44,000 customers at the end of December and that was heading towards 70,000.
“Customers have been switching to us for weeknight cooking,” he said.
The trends were all moving the right way for Marley Spoon, and it could have chosen to replace an $8.6 million debt facility with another one, he said.
“It was not a rescue operation. I think overall that is not the case,” Mr Siegel said.
It had approached Woolworths at the end of the March quarter, and Mr Siegel said he had been pleasantly surprised about how “agile” such a big company like Woolworths had been in moving fast in a new segment.
Over the past year, Mr Siegel has reinforced constantly that it is the customers of big supermarket chains such as Coles and Woolworths that Marley Spoon was chasing, and that home delivery services like Uber Eats weren’t really the enemy.
“We are a manufacturing business, we aren’t a retail business,” he said on Friday.
Woolworths chief executive Brad Banducci said the investment gives the group exposure to the ”high-growth ready-to-cook meal kits segment” as the supermarket chain focused more on health and convenience for its customers.
Marley Spoon also operates its home meal kits subscription business in Europe and the United States.
Marley Spoon was founded in 2014 in Berlin and by April in 2015 expanded to Australia. But it had a stumble in the United Kingdom after launching there in late 2014. The company decided to shut down its UK operations in 2016 after being unable to make the economics work in a crowded British market.
This article was first published by the Australian Financial Review. Read the original here.
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