SOHN Investment Conference: Munro Partners’ Nick Griffin on the grocery stock that’s underappreciated

Nick Griffin has his eye on an “under-appreciated” grocery stock that he tips as the big sharemarket winner of 2021.

Nick Griffin is the founding partner and chief investment officer of Munro Partners. Picture: Aaron Francis/The Australian.

Founding partner and CIO of Munro Partners Nick Griffin has picked “under-appreciated” meal kit delivery service HelloFresh, believing it could come “the next big winner in e-commerce” by pivoting into the online grocery space.

Mr Griffin said that the German-listed company went from a “novelty to a solution” throughout the COVID-19 pandemic as fewer people ventured to supermarkets and started turning to online grocery shopping and food boxes as a way of purchasing groceries, doubling HelloFresh’s sales this year alone.

“It legitimised HelloFresh as a way of ordering your groceries online and what that has done, it has opened up a huge opportunity for them — and that opportunity is grocery sales.”

HelloFresh is the largest meal box provider in the world with $US4bn ($5.5bn) in annual sales, and is well-positioned to expand market share as the total addressable market in groceries is the largest in the world, Mr Griffin said.

The company also has a market share above 50 per cent in the countries it operates in.

Now that the pandemic has established the habit of receiving meal kits weekly for many, Mr Griffin said there is a lot more that HelloFresh could “put in that box” like special dietary products, breakfast and lunch products and essential services like toiletries, pet food and milk.

Although consensus estimates that the company’s active customer base of five million people worldwide will level off next year as the pandemic recedes, Mr Griffin said he believes the new customers won during the pandemic will create “better network effects,” recommending the product to others.

Mr Griffin said HelloFresh could reach 11 million customers by 2025 as it has only penetrated 1.7 per cent of potential households it can reach within its current geography.

“We just don’t need a lot to go right here to get this investment idea to work,” he said.

Mr Griffin said he expected sales to double over the next five years and EBITDA to quadruple from $US500m to $US2bn, representing a value investment as the company trades at less than 30 times earnings — and he expects it to at least triple in value in the coming years.

“If anything, we may have actually undercooked it,” he said