Marley Spoon shares skyrocket as Woolworths takes 9pc stake

ELI GREENBLAT
JUNE 7, 2019
The Australian

A new alliance between Woolworths and meal delivery group Marley Spoon is set to shake up the burgeoning at-home service and could help change the nature of supermarkets whose prime attraction has been their bricks and mortar stores.

It could also challenge UberEats and other delivery services.

The nation’s biggest supermarket chain has leapt into the fast-growing $500 million meal kit delivery sector, where time-poor shoppers choose to have ready to cook meals delivered to their homes rather than chase around ingredients at the stores, by forging an equity and marketing alliance with market leader Marley Spoon (MMM).

It will give Woolworths (WOW) a 9 per cent stake in Marley Spoon, the second biggest player in the meal kit market that last year sold more than 15 million meals in its markets of Australia, Europe and the US.

Shares in Marley Spoon have shot up more than 70 per cent this afternoon on the back of the deal and equity alliance with Woolworths.

Under the deal announced this morning, Woolworths has entered into a strategic partnership in the Australian market with Marley Spoon AG which is itself part of a global subscription-based meal kit provider.

It is the first example of a leading Australian supermarket joining forces with a meal kit delivery business, with the new fast-growing delivery service often seen as a threat to traditional supermarkets as it steals customers from their stores.

Companies like Marley Spoon and food delivery outfit UberEats are shaking up the food service market, especially as time-poor diners prefer to order online and have their meals delivered to their homes or places of work rather than step into a store.

Marley Spoon’s partnership with Woolworths includes a $30m investment in Marley Spoon by Woolworths, via a senior secured convertible note ($23m), and the issue of Marley Spoon shares ($7m). The issue of shares will result in Woolworths owning approximately 9 per cent of Marley Spoon and the convertible note is structured to allow Woolworths to participate in the growth of the Australian business.

The partnership will see both companies working collaboratively to grow both the Marley Spoon and Dinnerly brands in Australia, and to build operational synergies, with an initial exclusive term of five years.

Woolworths said in an announcements to the ASX it will gain valuable insights from Marley Spoon’s market experience as it looks to complement its current customer offering online by promoting Marley Spoon’s meal kits service through the partnership.

Brad Banducci, CEO of Woolworths Group said: “This partnership gives Woolworths exposure to the high-growth ready-to-cook meal kits segment and aligns with our ongoing goal of meeting our 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.”

Fabian Siegel, CEO of Marley Spoon, said: “As grocery spending shifts to online, home-delivered meal kits will play an increasingly large role in helping consumers save time with their weeknight meals. We see this partnership delivering important benefits to both Marley Spoon and Woolworths, with both parties incentivised to grow Marley Spoon’s business in Australia.

“We have chosen to partner with Woolworths because it’s clear they understand what scale-up businesses need. Despite their size, they have a genuine partnership mentality, offering us support to grow the business whilst empowering us to run our own race.”