There were a handful of Canadian IPOs in 2017, but the excitement was lacking compared to many red-hot U.S. IPOs, mainly because many Canadian companies going public weren’t exactly high-growth names in rapidly emerging industries. As we head into 2018, there are IPOs that could deliver next-level growth, and no, I’m not talking about more up-and-coming cannabis producers; I’m talking about meal-kit delivery companies, like Chef’s Plate, which could be one of the hottest Canadian IPOs in a while.
Meal-kit delivery services are a huge time saver for Canadians who would rather not spend time looking for new recipes and hunting for the ingredients at their local supermarket. With meal-kit platforms, all it takes is a click of a mouse, and perfectly portioned ingredients with recipes are delivered straight to your door in time for dinner.
For many meal-kit subscribers, the convenience offers them huge value, especially for millennials, who have embraced new technology and healthier eating habits. Many meal-kit platforms also cater to the individual preferences of its subscribers.
If you’re vegetarian, you can set your preferences once, and the platform will only send you veggie-friendly meals without needing any input from you after activating your subscription. In many years from now, there’ll likely be an AI that can learn your tastes and send you what you’d be pretty much guaranteed to love! If you’ve got the taste for avocados and quinoa, like many millennials, meal-kit platforms of tomorrow can get you exactly what you want, when you want it.
Investors in Canada’s grocers have mainly been worried about Amazon.com, Inc. (NASDAQ: AMZN) and its entry into the Canadian grocery market, but it’ll be the meal-kit delivery firms popping up from across the board that’ll be the stealthy disruptors in the Canadian grocery space. These up-and-coming platforms certainly have the potential to put a dent in the top line of grocers across the country over the next few years.
Metro, Inc. (TSX: MRU) has recognized the rising trend of meal-kit services early, and that’s a major reason why the company chose to buy a majority stake in MissFresh, a meal-kit delivery service with roots in Quebec. I believe the move will offset most of the pains that the emerging meal-kit industry will cause.
Should investors buy the Chef’s Plate IPO?
The meal-kit industry is projected to grow to US$10 billion in sales by 2020, and right now, Chef’s Plate has a front-row seat to this opportunity in the Canadian market. While Chef’s Plate appears to be one of the front-runners, it’s worth noting that its moat is very narrow, as subscribers could jump ship very easily since there are no contracts involved with meal-kit subscriptions.
The red-hot meal-kit industry is going to be really competitive, and the real winners will be the ones that can give subscribers a reason to stick around. Chef’s Plate has what it takes to be a major disruptor, but competition heats up, and as Canadian grocers become more involved with the technological shift, I suspect pricing pressures will intensify as subscriber growth surges.
I think investors should exercise caution when investing in Chef’s Plate, as with any red-hot IPO. There’s bound to be a tonne of volatility in the first year, so just make sure you only invest what you’re willing to lose.
Stay hungry. Stay Foolish.
