Will meal kit delivery services move beyond niche status?

Discussion
Photo: Blue Apron
Jul 27, 2016

While Blue Apron, HelloFresh and others are gaining buzz, only three percent of the U.S. adult population have tried a meal kit delivery service within the last year, according to a NPD Group study.

But the study details opportunities for growth. Saving time is the primary reason given for using meal kits, which deliver pre-measured ingredients along with a recipe to guide the making of home meals. Beyond making dinner easier to prepare, the kits add variety to meal planning, finds NPD’s study. Young adults in particular are drawn to the freshness of ingredients and overall experience.

Those using meal kits are generally satisfied — two out of three kit users say they are extremely or very satisfied — but price may be a barrier for continued use and adoption by others. While the average cost per in-home dinner meal is $4, the average cost per person for a meal kit is $10, about the cost of a budget restaurant meal, according to the study.

“The outlook for meal kits is uncertain since they’re still in their infancy stages and gaining trial among consumers,” said Darren Seifer, NPD Group’s food and beverage analyst, in a press release. For meal kit providers, the big opportunity is “to market around the reasons their customers are satisfied,” he said. More manufacturers could also launch kits and foodservice operators can “leverage their ability to provide on demand delivery and meal variety.”

Meal kit retailers are taking aggressive steps to encourage trial. Blue Apron is offering $50 off the first offer, equal to five meals.

The NPD report comes in an environment in which funding for on-demand delivery startups is more challenging due to a cooler IPO market and lack of scale. Other popular kit players are Plated, Purple Carrot and Peach Dish, but a new option arrives every day.

Boston Burger Company last week launched BurgaBox, which includes all the ingredients to make the “The Hot Mess,” “The Sophie” and its other signature burgers. The restaurant’s press release reads, “Consider this your cheat day in a box.”

DISCUSSION QUESTIONS: Do you see the potential for broad adoption of meal kit delivery services, or will their appeal remain limited? Do you see meal kits as a bigger opportunity for food manufacturers, restaurants or food retailers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I see too many variables affecting satisfaction to keep any one supplier on a straight-line trajectory."
"Roughly half of people that tried meal kits ordered more than three times, a decent number considering that it is a brand new category."
"The only thing I would add to the majority opinion here is that people who have used these services tell me they do not save time..."

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20 Comments on "Will meal kit delivery services move beyond niche status?"


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Tony Orlando
Guest

The potential for big growth is limited to the high-end areas that might use the service, but we will see how this goes. If the price is competitive, and of course if they offer free delivery with coupons to entice customers in, maybe they can grow, but will they be profitable? Returning customers after the initial offerings are always the test for any new start-up. Many people are struggling today, and this service will be a tough sell for many, as food dollars are shifting to limited-assortment and dollar stores, especially for rural areas. Just like free delivery, the large, denser cities with money will use this service, and if they can break into those areas along with a host of all the other many options there may be a chance for profits, but I am skeptical.

Tom Redd
Guest

I know a few people that use these kits and cook with the kids once a week. I do not think these kits will grow too much. Cost is the number one issue and many families with less time have turned to going out for food or eating junk. Take a look at Americans. You can tell that eating smart is not a priority and eating the right size serving is ignored. So aligning with the size of people trend, the market for kits is small. Unless McDonald’s, Red Lobster or KFC come up with a kit.

Joan Treistman
BrainTrust

There are a few barriers to meal kit delivery that are serious inhibitors to universal appeal.

Some have to do with the actual delivery. How close to meal time do they appear? Are they dropped off inside or outside? What’s the chance for spoilage?

Others have to do with planning for use occasions. What if your personal plans change for where you are at meal time? How much money do you have to commit to when you subscribe? How frequently are the menus repeated? What happens if the meal just doesn’t taste good?

I see too many variables affecting satisfaction to keep any one supplier on a straight-line trajectory.

However, delivery services like Seamless may expedite trial and satisfaction by teaming with restaurants who offer comparable meal kits (as described in the article). I think a delivery strategy can overcome some of the success-reducing variables listed above.

Max Goldberg
Guest

Meal kit delivery services are in a bind: They offer convenience but are expensive, especially for families of more than two people. Cost alone will limit their adoption rate. If local retailers could find a way to bring the costs down, they might succeed in this space. Plus they have the added credibility of being a recognized local brand.

Anne Howe
Guest

If meal services can find a way to profitably serve the demand for people who eat alone, versus two people or four, I think the market can grow. It’s also really difficult to “gift” the service to others given many of the services offer subscriptions for three meals per week for multiple weeks. Perhaps they should consider an easier way to gain trial.

Ian Percy
BrainTrust
I, for one, don’t get it. For four reasons: Why is it so difficult to go to the store and get your own stuff? It’s a LOT cheaper and you get more choice. If on a particular day you’re tight for time, most stores can give you a meal to take home. What message does this convey to your kids? Apparently mom and dad can’t even get their own food and have to be told what and how to cook. Seems to me the not so hidden message is “you don’t have to think and act for yourself, find other people to do it for you.” This pretty well eliminates creativity. Even if I experience a great food item and manage to get the recipe for it (like Tony Orlando’s lasagna recipe) my inclination is to see what else we can do with the recipe. More and more chemical-free farms are providing a big box of seasonal locally grown vegetables and fruits every month or whatever schedule you want. They don’t tell you what to… Read more »
Ross Ely
Guest

The meal kit is an interesting innovation, but its appeal is limited to the time-starved high-income shopper. Furthermore, there are no barriers to entry for traditional food manufacturers and retailers to provide meal kits. In particular, food retailers are well-positioned to offer meal kits to their discriminating shoppers. Retailers should be able to out-maneuver the dedicated meal kit providers with superior pricing, assortment and customer service.

Ken Cassar
Guest
Ken Cassar
Principal, Cassarco Strategy & Analytic Consultants
5 years 10 months ago

Using our e-commerce purchase panel at Slice, we saw extraordinary levels of trial in the meal kit delivery space in 2015, funded by significant venture capital financing during the year. You can read the report here. Roughly half of people that tried meal kits ordered more than three times, a decent number considering that it is a brand new category. Long-term, though, we will need to see those repeat numbers grow. The biggest opportunity that we see is for a player that comes in with a much more competitive price point than the $10 to $14 range per meal than we typically see. At current pricing levels, this service will only appeal to niche affluent customers, particularly Millennials and younger Gen-Xers.

Dr. Stephen Needel
BrainTrust

I’m betting this doesn’t go very far unless the price tag comes down — way down. The menu is a big deal too. Having two friends who tried these (different services) they said they really liked about two-thirds of the meals. That was too little for them to continue.

Warren Thayer
BrainTrust

The only thing I would add to the majority opinion here (which I agree with) is that people who have used these services tell me they do not save time and they are over-packaged. One person who had subscribed to Blue Apron didn’t like it and gave me one of his meals. Perhaps it was just this particular meal, but unwrapping everything and following all the directions took an inordinate amount of time, and the meal was only so-so. IMHO, it was faster/easier/tastier/cheaper to just hit the supermarket meals section on the way home.

Ralph Jacobson
Guest

This is not the first time retailers have offered these services/products. Most trends come and go, and I can easily remember when physical stores offered kits/”home meal replacements.” I’m a bit surprised 3 percent of households have tried this recently. I would think the number would be even lower. There are inherent limitations to these offerings regarding product variety and also challenges with costs — purchase price versus individual (DIY meals) and costs for logistics to assemble and ship these products. I think the potential market may be large enough to sustain itself, across multiple entities, including CPG direct-to-consumer, restaurants, physical supermarkets and others.

Camille P. Schuster, PhD.
BrainTrust

When I tried to sign up for one I was asked if I had food allergies. When I said yes, I received a message saying that the service could not be provided for people with allergies. How many people have allergies or some kind of food restriction? If the services can not manage those restrictions they will never be mainstream.

Ian Percy
BrainTrust

Odd (if not foolish) that they wouldn’t just say that in the first place! Right where you sign up.

Kai Clarke
BrainTrust

This is a solution looking for a problem. Cost is a major deterrent here, and this model and very expensive. There is a reason that so few people have tried this and why the repeat business is not being continued after trial. Cost. Convenience is a factor, but since you still have to assemble and cook a meal kit, the real time convenience is clearly not large enough to overcome the cost.

Patricia Vekich Waldron
Staff
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
5 years 10 months ago

While there are many vocal advocates for meal kits, longer-term growth will require more variety, lower costs and quality to bring in (and retain) new groups of consumers.

Dan Raftery
Guest

Pretty hard to be optimistic about a business model that delivers convenience over price in these times where even well-off consumers have been conditioned to look for the lowest price. But in some metros, maybe this “Meals on Wheels” for the skateboard set will find a niche.

Dave Wendland
BrainTrust
Localized, real-time delivery of “meal kits” and more may be in our future. Let’s look at the realities of current meal kit delivery services: On the positive side, consumers want convenience, quality, and affordability. On the negative; cost, timing, reliability, service areas, etc. The future? Imagine a retail grocer who offered a meal kitting service from their local brick-and-mortar supermarket. A consumer orders the meal they are looking to prepare, a supermarket employee bundles up the necessary ingredients (in the right quantities so we’re likely talking a deli associate), and this is either delivered to the home or ready for pick up. This model makes a great deal of sense to me … and it applies to other classes of trade. Looking to replace your sink? A local hardware retailer would “package” up the ingredients and then deliver it to one’s home for the project. What about an individual released from the hospital following hip replacement? Wouldn’t a “kit” of supplies be more useful than an individual shopping list? What the meal kit delivery model… Read more »
Lyle Bunn (Ph.D. Hon)
Guest
Lyle Bunn (Ph.D. Hon)
Strategy Architect – Digital Place-based Media
5 years 10 months ago

The battle for share of $1.5 trillion in annual food spending in North America is fought at every meal and snack time. Revenue is about evenly split between between food services outlets and grocery. The competition causes hybrid approaches and cross-over (i.e. deli counter, convenience stores, delivery, etc.) with consumer buying power determining market share shifts and the success of new entrants.

“Uber-izing” food supply makes sense where the economies of sourcing, preparation (i.e. commissary) and admin can maximize the return on investment.

The food truck phenomenon (which follows street cart vending) offers the core lesson that while “boutique” offerings offer reasonable return, increasing the scale of these approaches is a challenge on the best of days. Sustained revenues are realized by suppliers while vendors endure the risks at the point of purchase.

Are industries built on cottage industry and boutiques. No, not unless aggregation at the points of customer experience is an option.

Lee Kent
Guest

I love the idea as a substitute for TV dinners, but the cost is just too high. I also agree that if the grocer could figure out how to offer this type of “service” for their customers and at a reasonable/comparable price to TV dinners, that could be a winner!

For my 2 cents.

Carlos Arambula
BrainTrust

Unless cost-dependent variables change and labor costs can be spread over large customer base, I can’t see the broad adoption of meal kit delivery services.

Maybe a different format — a family-customized format of fresh ingredients for cooking and prepared foods — will be easier to digest (pardon the pun) for the family food budget.

I do see the service as an opportunity for grocers, caterers, or restaurants to succeed in this arena, but the same aforementioned cost variables will still be an issue. The need for the service exists, so the category is ripe for innovations to make it work

wpDiscuz
Braintrust
"I see too many variables affecting satisfaction to keep any one supplier on a straight-line trajectory."
"Roughly half of people that tried meal kits ordered more than three times, a decent number considering that it is a brand new category."
"The only thing I would add to the majority opinion here is that people who have used these services tell me they do not save time..."

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