Woolworths is investing $30.05 million in global mealkit company Marley Spoon in a strategic partnership aimed at growing the Marley Spoon and Dinnerly brands.
The five-year deal includes the purchase of $7 million worth of Marley Spoon shares by Woolworths, equating to a nine per cent stake in the meal kit company.
Through the partnership Marley Spoon expects to benefit from Woolworths’ industry experience and large customer base and will work with its sourcing and supply chain teams.
“The partnership gives us access to capital, access to growth and access to synergies,” Fabian Siegel CEO of Marley Spoon told Inside FMCG.
“Woolworths has the understanding of a lot of households in Australia and has the trust of a lot of households in Australia and that can help us to grow both Dinnerly and Marley Spoon but we can also [be] more efficient by looking for synergies on the sourcing and logistics side. “
“Woolworths as a shareholder of course would benefit from it as well… also learning how to build an online direct to consumer subscription service… [Woolworths is] quite interested in learning about that.”
Woolworths will gain valuable insights from Marley Spoon’s manufacturing, distribution and market experience in home-delivered meal kits as grocery spending shifts to online. Meal Kits are now the fastest growing category of online grocery sales according to data from research company IBISWorld.
Siegel describes the two companies as very different businesses and said he is not worried about competition from the supermarket giant.
“The partnership that we’ve agreed to will allow us to continue to operate as independent as in the past; that’s important when a small company works with a very big company. That was part of the ground rules we set in the beginning that there’s really no operational influence whatsoever, Woolworths does not have a Board seat.”
“It’s really about learning from each other, and as a shareholder Woolworths benefits with whatever we come up with in the future. I think that’s a more successful model because otherwise small companies can sometimes be slowed down if larger companies have an influence on the decision making processes.”
Brad Banducci, CEO of Woolworths Group said the partnership aligns with the supermarket’s goal of meeting customers’ needs for healthy and convenient meal solutions.
“Marley Spoon has demonstrated it has a customer focused, innovative and entrepreneurial culture and we are excited to partner with them,” he said in a statement on Friday.
Retail expert Associate Professor Gary Mortimer called the strategic partnership “a smart move by Woolworths”.
“Meals Kits are expected to make up 10 per cent of Australia’s online grocery sales industry and turnover around $320 million this year,”
Mortimer told Inside FMCG.
“These types of products attract those consumers who are looking for convenience, but still want to engage in the activity of cooking. It’s more than just ‘groceries in a box’, with most pre-prepared, portioned with fresh sauces and marinades.”
Mortimer said Woolworths has been proactive when it comes to responding to disruption and change.
“Woolworths stores have already been stocking a similar product in the metro and third generation stores for some time, so this is a natural evolution to grow this category,” he said.
Woolworths recently launch two hour grocery delivery with third party provider Yello, and a restructure of its store model to bring fresh categories to the forefront.
“This demonstrates the supermarket is actively thinking outside the four walls of their stores on customer oriented solutions.”