Dominik Richter is the founder and CEO of HelloFresh, the premier DTC meal kit company that delivered 1 billion meals to over 7 million active global customers in 2021 alone.
We sat down with Dominik to dive into his experience of building one of the largest names in F&B over the last decade. We cover topics including:
- The three stages of growth for HelloFresh — and key lessons from each
- Why he’s backing Skio, as the head of a subscription-based service
- How young DTC companies can diversify their marketing mix
“Ten years ago, we had to build everything in-house and hack together solutions. It’s incredible, a decade later, to see young brands have a way to start with modules straight out of the box. It’s become a far less painful process.”
Ten Years of Growth, Three Key Lessons
As Dominik tells it, the first 3 to 4 years of HelloFresh were a true startup story.
This mainly involved finding product-market fit and articulating value prop and product functionalities for the customer frontend, especially since meal prep and kit services were not an established vertical in F&B or broader eCom at the time.
And much like the average early-stage company, the HelloFresh team was frequently strapped for cash, with enough runway for 6–9 months.
In retrospect, he would note that any decisions made within such a short time frame, especially while you’re burning through runway, will likely be unsustainable for the long run.
As such, he’d advise any founders in similar circumstances to keep this in mind when potentially establishing fundamental practices or frameworks for the company.
However, he also looks back at this phase of growth as one that positively kickstarted a capital-efficient and data-driven culture at HelloFresh.
Growth on an International Scale
As the company started in Berlin, once the HelloFresh team had nailed their product-market fit, they entered an aggressive growth stage and internationalized dramatically, expanding to other European countries, the U.S., Canada, and Australia.
By that point in time, the company’s category was also more broadly established — which brought both pros and cons as HelloFresh began to see intense competition from a handful of companies who’d also attracted hundreds of millions in funding.
In response, they went all-in on growth efforts, particularly honing in on deploying marketing spend to the most efficient channels and further clarifying product benefits to audiences.
Looking back on this period, Dominik would summarize the company’s mistakes as threefold:
- Because they had just come out of a phase of intensely limited cash flow, the team was hesitant to make bold, but likely necessary, investments.
- Growing like a rocket ship while running on unoptimized margins, just meant that they overspent significantly on some cost line items likely to the tune of tens of millions — because they hadn’t optimized processes proactively
- At that point, it was also clear that all technology and architecture was not prepared to handle that volume and the company had to redesign large parts of its services landscape from scratch
Operating at Scale & Looking Forward
This brings us to HelloFresh at its present state: operating at scale over the last three years, growing the company from a run rate of $1 billion to roughly $7 billion.
In Dominik’s words, learning to operationalize that run rate has mainly entailed pressing the advantages of HelloFresh against competitors in an ever-growing market, as well as diversifying products and expanding to more demos and countries.
“I’d definitely consider optimization and scale early on, especially if you’re a startup seeing rapid growth. We made some influential decisions too late, which cost us millions because we were simply unprepared for so much business.”
Optimizing Subscription Functionality
When asked about subscription, Dominik described the early days of HelloFresh, when subscription tooling out of the box was essentially nonexistent.
As a result, all of HelloFresh’s early subscription functionality was manually hacked together, on top of a classic eCom shop framework.
In Dominik’s words, the software team essentially piggybacked on top of existing digital commerce systems while attempting to insert subscription logic into them: basically running normal eCom orders and then rewriting them as recurring purchases on the backend.
They had to make do with this structure for roughly 3–5 years, and naturally ran into a series of implications for this makeshift solution, such as:
- How would they charge payments on a recurring schedule?
- How could they communicate with the user within a CRM?
- How would live order data live in their internal system?
Put simply, Dominik knew this approach wouldn’t be sustainable, especially given the immense strain it placed on engineering resources to make a non-subscription backend seem subscription-friendly on the frontend.
“The way we hacked subscriptions together was just not scalable. The backend couldn’t handle it at all. So brands today being able to manage subscriptions from end to end without the painful experimentation — it’s pretty great.”
Diversifying Your Marketing Spread
In terms of advice for founders of young DTC companies in 2022, Dominik would strongly encourage diversifying your mix of marketing channels — something the HelloFresh team has long prioritized in order to avoid dependency on Facebook, Instagram, Google, etc.
Although countless brands on the American market have been able to achieve great scale while relying on just a few popular channels, there’s always the likelihood of your advantage being competed away on certain platforms, as well as the current reality of soaring CACs.
Dominik recommends an experimental approach to marketing channels, which might look like:
- Setting aside a budget to learn about a new platform early on — even if initial returns don’t seem scalable — in order to gain an advantage just by having shown up first
- Returning to a more traditional channel which has gone down in price as costs for operating on modern platforms balloon
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