Despite the sharp growth of food delivery apps, home cooking is resurgent thanks in part to the increasing popularity of specialty meal kit providers.
Research by Peapod found 73% of adults currently make dinner at home at least four nights a week, with 41% saying meal kits are a valued shortcut for those homemade dinners. These time-strapped home cooks are why meal kits are expected to grow 41% this year, and its estimated the meal-kit industry will grow to $11.6 billion by 2022.
A trip to the grocery store can be a chore. Yet, with a meal kit, making dinner becomes interactive entertainment, allowing consumers who are obsessed with watching cooking shows and swiping through the #foodporn hashtag on Instagram a way to express their inner Bobby Flay.
Opening up a meal kit box and setting out all the ingredients is the next best thing to being a contestant on “Chopped”—without all the work or the pressure.Although many meal kit providers initially focused on mainstream American fare, a surge of specialty meal kits have made adhering to new health and wellness trends significantly easier. Greenchef offers a Keto box, and Sun Basket caters to a wide range of healthy eating options, while Blue Apron revived their partnership with Whole 30.
With an average price point of $10-$12 per person per meal, meal kits provide healthier eating options compared with dining out, and a lower price tag.
Despite their success, the future of meal kits isn’t a sure thing. A recent survey found that 19 percent of U.S. adults have tried a meal kit service, but only 38 percent are still subscribers.
The same survey also found that consumers are not willing to commit to these services long-term—39 percent of respondents who tried a service only used it once, and 26 percent used it for under a month. Only 9 percent said they subscribed for half a year or longer.
Opening up a meal kit box and setting out all the ingredients is the next best thing to being a contestant on “Chopped”—without all the work or the pressure.
This retention problem is currently playing out in the industry, with Blue Apron reporting that customers fell by 24% in the second quarter, reversing gains made in the first quarter.
The number of consumers purchasing its meal kits dropped 9% from the first quarter. The average order value increased to $57.34, up from the first quarter, but decreased from $58.81 YOY.Other meal kit providers are also struggling to grow their subscriber base from the small set of early adopters who are apt to sign up—and stick with—such programs.
Price causes customers to hesitate, with 59% not finding the price-per-box affordable. Further, consumers outside of major metro areas are finding it difficult to find meal kit services that deliver in their areas.
With 100+ meal kit providers, it’s hard to stand out. But their biggest competition may be from specialty grocery stores and delivery services. For many busy professionals, it’s been several years since they went to a store in person to do weekly grocery shopping, thanks to grocery delivery services Instacart (now available to 70 percent of all households across the country) and Good Eggs.
You can order groceries online and choose delivery within the one-hour window of your choosing. You could also take advantage of Google Shopping or Amazon Fresh delivery of Whole Foods within two hours.
And unlike with meal kit services, you can choose what you’re craving right now, instead of choosing meals a week or two in advance.In addition to grocery basics, these services also feature specialty food items, including meal kits, farm fresh crates, and snack boxes that give customers convenient options to plan and prepare meals. The Food Marketing Institute (FMI) estimates this specialty market is likely to reach $100 billion by 2025, accounting for 20 percent of the grocery retail market.
As a plus for conscious consumers, locally produced meal kits that are purchased in-store are delivered within an hour via local delivery. There’s no need to package their kits and their individual components to withstand sitting outside or traveling in a delivery truck for 24 hours.
That means they typically come without the often-criticized packaging waste (the amount of plastic, ice packs, and huge boxes with non-recyclable insulation).
Will online grocery delivery kill subscription meal kit services before they have a chance to gain a firm footing?—It depends on how they optimize supply chain to increase their speed and decrease costs to enable them to reach more consumers, more quickly.
The costs of meal kit delivery logistics are so overwhelming that it's not financially viable to go it alone. Despite their initial success, supply chain expert Brittain Ladd noted Blue Apron's supply chain, logistics, and manufacturing operations are still unable to reduce unit costs to the lowest possible levels.
No meal kit company can succeed without reducing unit costs and implementing an optimized supply chain.One way meal kit companies are decreasing their costs while increasing their reach is through brick-and-mortar partnerships.
Blue Apron has partnered with Costco, which will offer its meal kits at 80 locations and at a 30% discount off the subscription price. Not to be left out, Walmart is now selling individual meals from several specialty meal kit services including Gobble, Sun Basket, and Home Chef. We’ll be sharing our insights into how meal kit services are addressing their supply chain and logistics challenges over the coming weeks.