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FreshRealm helps make meal kit economics work

Illustration of a hundred dollar bill-shaped box filled with produce

Illustration: Sarah Grillo/Axios

FreshRealm wants to be the platform that helps meal kit delivery providers build sustainable business models, one acquisition at a time.

Why it matters: The platforms have struggled with high operating costs and variable margins, making the industry ripe for consolidation.

Driving the news: This week, FreshRealm said it would acquire the operating assets and supply chain infrastructure of meal kit provider Marley Spoon for $24 million.

  • Concurrently, Marley Spoon is acquiring BistroMD, a ready-to-eat meal provider for weight management.

Catch up quick: FreshRealm acquired the operating assets of Blue Apron for $50 million last year.

  • Blue Apron sold to Marc Lore's Wonder Group for $103 million in November, taking the company private after its share price lost significant value.
  • FreshRealm will continue to operate Blue Apron's back-end operations through an exclusive, long-term agreement.

What they're saying: Meal kit companies face an uphill battle — especially when they do everything from building facilities to managing supply chain operations in-house, CEO Michael Lippold says.

  • "The infrastructure was built wrong," he says, adding what FreshRealm aims to do is turn them into an asset-light business.
  • By bringing various parts of the back end under one roof, "they end up getting a business model that has better economics," he says, with lower fixed costs, better cash flows, and a clear path to product innovation, he says.

How it works: FreshRealm handles everything in the back of the house: product development and commercialization, supply chain management, manufacturing, and fulfillment.

  • This leaves companies like Marley Spoon or Blue Apron to handle everything on the front end, from digital marketing to e-commerce to customer support.

Context: In 2022, FreshRealm raised $200 million, allowing the company to build its facilities, diversify and expand its revenue streams in other product categories, like its ready-to-eat product production, and make acquisitions.

  • The company has raised $400 million to date.
  • Lippold declined to comment on the future capital runway.

What's next: The company will look for similar opportunities to absorb the back-end operations of meal kit companies.

  • It also plans to invest in its supply chain.
  • FreshRealm, which also delivers its prepared meals to grocery retailers, can serve well in other channels and categories, such as in club and convenience stores, and performance, medical meals and restaurants, Lippold says.
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