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Growth comes from being on trend, and meal kits are a hot one

by Steve Bishop

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Meal kits are certainly not for every consumer, but every grocer should be paying attention to them today. The new flood of ad-hoc and subscription meal services isn’t just another set of competition to manage around - their very existence signals that important market forces are at work. These solutions are on trend today and if you unpack their layers, they have alot going on below the surface.

What’s for dinner? is an important question, with lots of potential answers

Meal services focus on current needs, and they check a lot of boxes for shopper challenges and desires today. They all offer variations on the same model: Pay a fee for a box of food that arrives at your doorstep with premeasured prepicked and (in some instances) precut and prepped ingredients. Heat up the stove, and Presto! you’ve got a “home cooked” dinner.

Keep in mind that retailers are actively involved in the food service business. This is increasingly important as the battle for “share of stomach” is heating up.

Americans are eating differently – fewer meals together and more meals on the go – and they are also looking for “real” food that’s less processed. These trends and desires actually raise the value and importance of “home cooked meals.”  For grocers, meal kits can provide an on-trend offering that increases the appeal and ease to eating at home. For shoppers, they serve needs and solve problems in lots of ways:

  • Time savings for the time-starved – so limited planning, prep and shopping
  • New ideas for those with limited meal repertoires ­– most people have just 4 to 5 go-to meals
  • Step-by-step directions for those with limited kitchen skills – the art of cooking isn’t being passed down generationally 
  • Portion-sized ingredients that encourage eating the right amount of food – this saves money and reduces waste
  • Eating heathier, fresher food – shoppers can choose from meals of many types, including specialized meals like gluten-free.

Meal kits also appear to align strongly with the fastest growing consumer segment, Millennials, but their appeal isn’t limited to 18 to 35 year olds. A 70+-year-old married woman I know was intrigued with the idea of a meal kit, and not at all put off by the price point.  The higher cost per meal is a negative, but it also generates higher margin dollars for the grocer.

Grocers today need to find ways to stay relevant to how people want to shop for and eat food. Those with the right value proposition will be ready, willing and able to answer the question, “What am I going to make for dinner tonight, and how I am I going to squeeze that into all that I have to get done?”

Solutions looking for customers

From the perspective of retailers that sell food, the meal kit model has many attractive features. The subscription model enables better demand forecasting and planning, it locks in shopper commitments for extended time frames, and membership fees represent a potential new revenue stream.  The ad-hoc model taps into a growing trend and generates higher margin dollars.

It tells you something that VC investors like this picture a lot. Domestic and international, meal services are popping up all over. They are expanding their offerings and appeal, and targeting shopper need states and increasing shopper awareness by running all sorts of promotions, including Groupons and tie-ins with Uber. Here are just some of the players today.   

Most widely known services:

  • BLUE APRON. Launched in 2012, it raised $58 million and delivers more than two million meals a month.
  • PLATED. Launched in 2012, it raised $21.6 million and claims to be doing twice Blue Apron’s volume.
  • HELLOFRESH. Launched in 2011, it’s currently valued at $1.1 billion with plans to go public as early as October, 2015. They report 250,000 regular subscribers and claim to deliver 4 million meals monthly to customers in the US, Germany, Great Britain and the Benelux countries (the Netherlands, Luxembourg and Belgium.)

Lifestyle-focused options tailored to specific needs:

  • MARLEY SPOON for the creative and curious
  • PURPLE CARROT for the vegan
  • FRESHOLOGY for the heath-focused
  • PEACHDISH for southern-inspired cuisine

There’s even a multiple-meals option.

  • The HANDPICK app offers 3-meal bundles with themes like Ranch to Table, Garden Harvest, and Flavors of Asia and full-sized grocery products and prices starting at $5.50 per meal. They call it “smart grocery.” (For now, Handpick only delivers in CA.)  

Catch the wave: This is a trend, not a fad

It’s early days in this space, and hard to guess how big the business will get. The food-industry firm Technomic predicts the meal-kit service segment of the market will grow to between $3 billion and $5 billion during the next 10 years based on current adoption rates. At Brick Meets Click, we’re also seeing hybrid concepts popping up in grocery stores that could drive this estimate higher:

  • PANTRY STORE located in Boston provides a new kind of grocery experience. Their mission is (per the website), “to help our customers put the joy back into cooking by taking the hassle out of planning and shopping. Choose from one of our chef-designed recipes, and take home exactly what you need to prepare them for as many people as you’d like. There is no waste, because you buy exactly the amount you need. We provide detailed and simple instructions with beautiful photography and video available online. No need to go to multiple stores, or even multiple aisles. Everything is in one spot, …” ()
  • Several HEB grocery stores host pick-up locations/kiosks for ready-to-heat healthy meal provider My Fit Foods.
  • PUBLIX APRONS, a simple meals program offers in-store demos, recipe cards, shopping lists and step by step cooking instructions. All the products are located in one convenient spot to streamline shopping.   
  • EATALY offers many ready-to-eat or ready-to-cook options that are aligning with the changing consumer consumption habits.
  • MARIANO'S is doubling down on food service in-store dining and prepared foods. They’ve hired their first executive chef and vice president of culinary, a position that could play a big role in meal kit service in the future. 

Convert the threat into an opportunity

The traditional store is vulnerable to losing sales as shoppers test out and learn more about the expanded meal kit options as availability, diversity of features, and affordability improve.  

So what can grocery retailers do?

  • Work with recipe and shopping list services like PlateJoy and emeals that make shopping the store easier.
  • “If you can beat ‘em, join ‘em.”  Create an own-brand meal kit service - the good news is this an entirely new market that can be entered and cultivated.
  • Leverage the power of omnichannel to tap into the benefits of subscription selling (meal kits or other categories that lend themselves to repeat buying). 

Related Posts

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> Blue Apron lures food shoppers out of the store

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BlackBeltBrian Numainville said:
Clearly meal kits offer a solution-oriented approach which is catching on for many. Retailers can clearly take advantage of this trend by creating and branding their own meal solutions so as not to lose these sales to dedicated meal kit services like those mentioned. Consider fun ways to co-create with shoppers like engaging them in deciding on different offerings and meals. Showcase meal kits on social media. Going forward, it will be important to find ways to keep these sales rather than allow them to go to those offering dedicated meal services.
BlackBeltMichael Sansolo said:
This is a really important concept and one would hope that Steve's blog is generating a lot of discussion for retailers everywhere.
As he explains, shoppers think about meals, not ingredients, so any way of easing that process can lead to shopper satisfaction and increased sales. (Not to mention that family meal time--however it happens--is always seen as serving a major societal good.)
I'd recommend readers visit www.ccrrc.org for the Coca-Cola Retailing Research Council of North America's study on this very topic. Our 2010 study on how to get consumers to eat in more often looked at simple solutions to win the competitive battle at breakfast, lunch and dinner. The ideas offered in that study, like those posited by Steve's blog, are simple, straightforward and easily accomplished.
The key seems to be thinking in the way people buy and eat, not the way we have traditionally merchandised items.

Meal Kits is a fabulous idea and this blog is must reading.

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