Woolies-Marley Spoon deliver a meal tie-up

Woolworths has taken an ­equity stake in Marley Spoon to enter the expanding meal home delivery sector.

Woolworths has taken an equity holding in Marley Spoon.

Woolworths is banking on an ­equity stake and marketing alli­ance with Marley Spoon, Australia’s second-largest meal kit delivery service, to give it a fast track into the expanding meal home ­delivery sector.

The tie-up put a rocket under Marley Spoon, lifting its shares more than 80 per cent as it ­announced that Woolworths, through a complex investment and loan deal, would eventually emerge with a 9 per cent stake in the group. Marley Spoon closed yesterday up 30c, or 68 per cent, at 74c, which is well down from its high of about $1.30 when it listed in July last year.

The company was handed a crucial lifeline in January when a US venture capital fund provided cornerstone funding of $US11.4 million ($16.3m).

Woolworths and Coles have long watched the $500m meal kit delivery sector, which is growing at more than 10 per cent a year and in Australia is led by Hello Fresh.

Marley Spoon operates in the US and Europe as well as Australia, where it has CHESS depositary interest shares listed.

The Marley Spoon partnership with Woolworths includes a $30m investment in Marley Spoon made up of a senior secured convertible note ($23m) and an issue of Marley Spoon shares ($7m).

Marley Spoon closed up 30¢ at 74¢

The share issue will result in Woolworths ultimately owning about 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 first tranche of shares issued to Woolworths will secure a 5.52 per cent stake at an issue price of 50c a share.

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

Companies such as Marley Spoon and UberEats are shaking up the food service market as time-poor diners prefer to order online and have their meals delivered to their home or work. The partnership will see the two companies work collaboratively to expand both Marley Spoon and its Dinnerly brand in Australia, and to build operational synergies, with an initial exclusive term of five years.

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

Woolworths chief executive Brad Banducci said the partnership aligned with Woolworths’ 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,’’ Mr Banducci said.

Marley Spoon chief executive Fabian Siegel said that as grocery spending shifted online, home-delivered meal kits would 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,” Mr Siegel said.

“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.”