Woolworths tips more money into meal kit player Marley Spoon

Woolworths to tip another $4m into Marley Spoon as it builds its presence in the fast-growing home delivery sector.

A Marley Spoon meal kit.

Woolworths has tightened its equity and joint venture partnership with meals delivery service Marley Spoon by agreeing to tip another $4 million into the company.

Marley Spoon announced that Woolworths and private equity investor Union Square Ventures would increase their current investments in the German-based business by $4 million each.

Woolworths will extend a senior secured commercial loan of $4.04 million to Marley Spoon. The loan is for six months and has a fixed interest rate of 7 per cent.

The move reflects Woolworths added hunger to get into the meals delivery sector.

In June, Woolworths unveiled its 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.

The additional $4 million investment in Marley Spoon will not increase Woolworths’ equity stake in the meals business. That will stay at the 9 per cent level, as announced in June. Rather, the $4m loan by Woolworths is to help grow the business in Australia.

The food delivery and meals service is a fast growing sector in Australia and overseas, with both Woolworths and Coles eyeing opportunities in the segment, as well as the challenges to its bricks and mortar grocery stores.

Woolworths and Coles have long watched the $500m meal kit delivery sector, which is growing at more than 10 per cent a year. Coles is piloting a joint venture with Uber Eats while Woolworths has hitched its wagon to Marley Spoon.

Woolworths’ original tie up with Marley Spoon included a $30m investment made up of a senior secured convertible note ($23m) and an issue of Marley Spoon shares ($7m).

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 secured it a 5.52 per cent stake at an issue price of 50c a share.