Dive Brief:
- HelloFresh plans to shut down its distribution center in Newnan, Georgia, on July 10 as the German meal kit company grapples with reduced demand for its products, a spokesperson for the company confirmed on Thursday.
- The closure of the plant will cost 727 employees their jobs.
- HelloFresh has seen its fortunes decline as the strong demand it experienced during the COVID-19 pandemic has dissipated, leaving the company with excess capacity in the U.S., which accounts for more than half of its global business.
Dive Insight:
When Georgia’s governor announced in August 2020 that HelloFresh would be bringing its first distribution center in the Southeast to Newnan, meal kit sales were surging as people stuck at home because of the coronavirus crisis sought ways to bring variety to their dining tables.
But while HelloFresh declared at the time that the new facility was part of a long-term plan to expand in the U.S., the company said yesterday that it is now facing an entirely different reality.
“As the meal-kit segment has stabilized, we are now focused on diversifying our offerings and optimizing our operations network to best serve our customers and grow profitably,” the spokesperson said in an emailed statement, adding that it decided to shutter the facility southwest of Atlanta “following an extensive analysis of our production network and business needs.”
The company said it determined that it needed to streamline its capacity and take advantage of facilities “where we have invested in the latest technology and automation capabilities to best serve both new and existing customers.”
The spokesperson said the company intends to offer “financial support and relocation opportunities for eligible employees” who are losing their jobs as a result of the closure, without providing further details.
Workers impacted by the layoffs hold a variety of production and administrative roles, according to a public notice HelloFresh filed about the planned job cuts.
“The closure of the facility is not a reflection of the local teams’ performance and we are grateful for their contributions,” the spokesperson said.
HelloFresh is moving ahead with the closure and layoffs even as it reported its best-ever quarterly revenue for the first quarter of 2024. The company’s stock price, however, has plummeted in recent months and is now off by more than 90% since hitting a multi-year high of more than 94 euros ($101) in November 2021.
HelloFresh’s retrenchment follows rival Blue Apron’s move to lay off a fifth of its corporate workforce last summer as it looked to cut costs. Later in 2023, Blue Apron agreed to be acquired by Wonder Group for a fraction of what it was worth when it went public in 2017.
