Food Biz

These Companies Want to Save You From the Grocery Store

May 10, 2016

The meal kit delivery service Chef'd—which already has exclusive partnerships with over 90 chefs, companies, and brands (Dominique Crenn, the James Beard Foundation, and All Recipes among them)—is adding another high-powered player to their ranks: The New York Times. (Maybe you've heard of it?)

Starting this summer, you'll be able to order and receive all of the ingredients you need for a Times recipe in 48 hours (à la carte) or to register for a subscription service. According to Bloomberg News, it's the Times' latest effort to diversify its revenue sources amidst the "uncertain future of newspapers."

But is the future of the meal kit delivery service—which seems to be mushrooming by the minute—more promising than the future of newspapers?

Everyone, it seems, is entering the meal kit delivery game: Beyond the major players (Plated, Hello Fresh, and Blue Apron), there are—as the Times itself reported in an April article—over a hundred regional businesses. Heck, your great aunt Tilda just got funded, and just a few weeks ago, we at Food52 announced the advent of Grey Apron (okay, so that was a joke—but a conceivable one).

So just how much money is there to mine? In June of last year, the food-industry consulting firm Technomic projected that the meal-kit sector would grow to between $3 and $5 billion in the next ten years; in January, based on research of 4500 consumers across seven global markets, they changed their prediction to something a bit more aggressive: a global market of $10 billion by 2020, about half of which will be in North America. Considering Technomic doubled its projected numbers, the forecast is looking good.

But even if Technomic's highest estimates turn out to be true, that's still a drop in the bucket of the $600 billion in grocery store sales. "This is a very niche option that is barely even showing up in the data," Darren Seifer, a food and beverage analyst at the market research company NPD Group told Fast Company this past June. And when I talked to him late last week, trying to gauge how progress in the past year has updated predictions, he held fast: "I don't think we've necessarily seen a course correction. [...] I have a feeling that [this new model is] not going to fully replace how we get our groceries and how we prepare our foods."

Yet even if the meal kit delivery business is still a teensy segment of the grocery industry (and an even teensier segment of the $1 trillion food economy), the buzz that it generates is (sometimes) deafening. "The interesting thing," Darren told me on the phone, "is that I get lots of questions about these companies from folks like you all the time, but they're still a very small player overall in terms of where we source our food from." Our interest in these companies is disproportionate to their share of the marketplace.

But why? For starters, many meal kit delivery companies see themselves in a unique position not just to provide the harried and hungry the best option for home-cooked food, fast, but also to challenge the very way most Americans think about shopping for food. According to C.E.O. Tri Tran, Munchery's biggest challenge is winning over the people who are used to grocery shopping and cooking from scratch: "the number one pattern engrained in people since they were kids." While Tran says that Munchery can "save customers from the supermarket," the habit of going shopping is deeply ingrained—even though "the only thing you can do well is pick exactly the produce you want"; other than that, Tran sees no advantage to the traditional shopping model.

And the leadership of HelloFresh and Plated echo Tran's sentiments. In an email, Ed Boyes, C.E.O. of HelloFresh, wrote to me that their competition is not other meal-kit makers but rather "the status quo—the way customers have shopped for groceries for the last few decades. This is something that has yet to be fundamentally challenged or improved in any way by dynamic new businesses." Nick Taranto, Plated's co-founder, tries not to obsess over competitors: "The opportunity here is so large," he wrote, "that we just need to focus and execute."

So one reason for the fascination with meal-kit delivery is that it floats the almost unbelievable idea that trips to the grocery store might be a thing of the past (this is especially shocking when we think of sourcing fresh, pre-measured, and/or prepared ingredients; as Seifer of NPD reminded me, Omaha Steaks has been shipping frozen meat around the country for decades). And we're also giving meal kits unduly attention because the businesses have become more sophisticated at broadening their audiences. What started out as "a niche enterprise for young urbanites" aimed at other young and busy city-dwellers has ballooned to attract a diverse group of eaters.

Who do meal kits appeal to? Well, to people who, facing the alternative (planning and shopping for dinner), might not have cooked at all—but also to people who would have cooked but might have been inconvenienced by it; to people who are concerned with where their produce and protein comes from—but also to people who are not so concerned that they aren't ready to relinquish some control; to people who want to hone some of their cooking skills—but also to people who don't care if the onion comes pre-chopped; to single people who don't want to buy a whole jar of harissa—but also to families trying to juggle busy schedules.

I'm describing a huge number of potential customers (keeping in mind that meal kit delivery services cannot reach everyone and that even if they did, the price point would be a barrier for many), and that broad reach is evident in the accounts of Food52ers who use meal delivery services. On an article outlining the various services, Niknud commented that she likes "being able to get [her] family to sit down and eat together when [she doesn't] have 90 minutes to shop and prep for a meal during the week," and MRubenzahl, who considers himself a foodie-cooking-enthusiast, wrote that Blue Apron's clever and sophisticated recipes and techniques are making him a better cook: "Surprise!"

Essentially, they're perfectly suited to a culinary culture that wants it both ways: good-tasting, healthful food without much work; the feeling of accomplishment that comes from cooking without having to wait in line at the grocery store or measure ten different spices. We're demanding it all—to have fresh food, to be involved in cooking, and to have this fit into our daily schedules with minimal energy and minimal cost—and is there something so wrong with that? Is it entitled to ask for the benefits of cooking without the drudgery—especially if it means more people are eating food that they've been involved in the making of?

Maybe, despite all the attractive aspects of meal-kit deliveries—and the wide range of people they theoretically appeal to—there's something about it that still feels off. Because when we asked our Twitter audience how often they order from one of these businesses, a surprising number said "never had, never will":

Why is that? Is it the creative control that planning a meal and carefully selecting a recipe affords? Is there something about the physical trip to the grocery store that, though sometimes miserable, many people would miss? Do home cooks feel stranded—left with a certain number of ingredients and a specific set of instructions and less opportunities to riff and play? Do the meal kits come in not enough varieties ("we're bored") or do the options change too quickly ("we want something comfortingly familiar")? Do the recipes just not appeal?

Or are we—as would argue many of the C.E.O.s of these companies—just not ready to give up the status quo?

Regardless of these conflicting feelings—and of quantitative and qualitative data that generate more questions than answers—meal-kit delivery companies are not going anywhere, and many have big plans for staying ahead of the curve as the market continues to grow.

Here's what we can expect to see in the industry going forward:

  1. More customization and personalization.
    Nearly every C.E.O. or representative I corresponded with said that their business was moving towards meeting the diverse needs of their audiences: personalized menus built around seasonality, particular occasions, and dietary preferences.
  2. Reach will expand to a greater and more diverse audience.
    Erik Thoresen, Advisory Group Senior Principal at Technomic, said that the initial focus on young couples and professionals has shifted: More and more companies are focusing "on a broader consumer set of families and older consumer groups who might not be willing to pay $12 per meal."

    For Munchery's Tran, the ultimate goal is to "make real food accessible to everyone, everywhere" rather than to serve only particular demographics. Munchery expanded to cover suburban areas (their serviceable reach is 23 million—up from 8 million in January); Marley Spoon will be available nationwide within the next month; and Plated has seen its biggest growth in the middle of the country.
  3. Price points will drop.
    But as price points drop, we can also expect to see some companies that may not put as much emphasis on the sourcing of ingredients. Entrants into the industry, Thoresen explained, "are finding that food is not a high-margin business to begin with and the complexity of having distribution that works well from a single- or double-production facility makes it hard to make money in the space."

    As companies aim to lower the price of meals for consumers, they have to cut costs in other ways, and in some cases that might be a detriment to the integrity of the ingredients. Seifer of NPD predicts that many companies will face challenges operating outside of large metropolitan areas, where it's hard to deliver large amounts of perishable items quickly and where brick and mortar retailers can easily beat their prices.
  4. Expect consolidation and shakeout.
    As the smaller bootstrap companies find it difficult to make the economics work, the larger, well-funded companies will have opportunities to acquire specialized players and consolidate the industry. Seifer also predicts that we may see that some larger grocery chains purchase meal-kit delivery businesses and use them to operate their delivery arms.
  5. More subscription and à la carte options will be available.
    There's growing flexibility around trying services and pausing subscriptions. This fine-tuning of the business model might help these companies better engage customers who may be scared of all-or-nothing commitments. And for those who are ready to go all-in, there will be benefits to incentivize consumers to invest for longer: For $8.95 a month, Munchery offers a membership that gets you 20% off entrées.
  6. New solutions to counter the waste problem.
    Even for a company like Marley Spoon, which prides itself on reducing the amount of food waste (which, Head of Brand, Anjali Grover, told me, is built into the supermarket system), consumers are raising concerns about the amount of trash meal kits generate (and the amount of energy it takes to get perishable food delivered to their doors). It's "a big place where the entire industry has to focus over the next several years," says Grover, be that making the packaging 100% biodegradable, compostable, or reusable, "and we're at the tip of the iceberg in terms of what's possible."
  7. Grocery stores are bound to enter the mix.
    While most of the meal-kit delivery services I spoke to cited grocery stores as their biggest competition (whether conceptually or tangibly), Thoresen told me that for the large retailers (think Walmart, Costco, Kroger's, Safeway) themselves, "it represents a missed opportunity rather than a competitive threat—an emerging market that they could play in and that's compelling to them."

Are there any companies that are already changing the game? When I followed up with Nina F. Ichikawa, Policy Director of the Berkeley Food Institute, who was skeptical of pricey meal-kit delivery services last year ("I'm betting that much of this hype is investor-led," she told Fast Company—"I certainly can't afford the stuff"), she pointed me to "one bright spot that has arrived on the horizon": Cooking Simplified, a start-up devised by Berkeley grad students that sells a kit that is under $5 per meal. "They're thinking really innovatively about cost and waste," Ichikawa wrote to me, "two of the most vexing issues in this field."

With all these improvements—both in the works and on the ground—will people be more open to meal kit services? Even as interest grows, will this new model remain a small sector of the mammoth food industry? My guess is that by 2020, the poll of our Twitter followers will look pretty different.

If you could give up meal planning and grocery shopping most nights of the week, would you? Tell us in the comments below!

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8 Comments

Aubree H. May 7, 2017
I use a Canadian based meal-kit service and I'm a professional cook. I don't use it for every meal, and I often use the ingredients from set meals to incorporate into my own creations if I feel the need, I don't find it limiting at all. The recipes given also provide me with inspiration, and make coming home to cook much easier and less labour intensive.
 
alida May 11, 2016
This is just a trend where fast people grab the moment of fast technology to make money.For now,partially,it is replacing industrial packaged food that got people sick,with ready ingredients measured and chopped for you and instructions how to cook.The predictions of marketing researcher and industry consultants are only assumptions based on theory that once something starts it will grow.But,what if in five years we will have very high energy prices? How the food will be delivered and how much it will cost? We are witnessing this craze of grabbing the moment in everything thanks to technology,we don't have time to think or do anything,just to work hard all day and somebody else is out there to make our life easier.Does those predictions involve the process of transforming the humans into something else?!
 
btglenn May 11, 2016
For those on a food budget, or those with dietary restrictions meal kits are probably not a very good alternative.
 
Chef L. May 11, 2016
Perhaps I have the luxury of time and passion for the process, but (unless disabled) would not consider a meal kit alternative to visiting the grocery store. I prefer to touch, feel, smell what I purchase. In the process, I discover new products foods. This being said, I find this article very interesting and most likely a glimpse of the future.
 
epicharis May 10, 2016
My biggest issue with food prep services is the way they remove the emotional component from meal preparation. I know it's a lot of romanticizing drudgery, but the meals I had from my mother and grandmother are always going to feel more meaningful to me than the meal-o'-the-day from Chef'd. By focusing so much on technique and eliminating room for error, it seems like we're fetishizing pretty plates and perfect Instagrams over all the happy (and messy!) accidents that make cooking so much fun.
 
Smaug May 10, 2016
There seems to be a major push to bring restaurant (and coffeehouse) prices into the home kitchen. And why not? In a country where housing, medicine and medical care, and education have essentially become luxury items, how can food be far behind?
 
Fredrik B. May 10, 2016
In Sweden, most large grocery chains offer meal kits, meaning that select stores just pick food of their own shelves and pack it together with a meal-plan. Personally, I actually enjoy buying groceries. Free samples, finding interesting brands, lingering way too long at the deli and staring wistfully at cheese; it's sort of fun, really.
 
latenac May 10, 2016
Are you guys planning on getting involved in a meal kit business? There seems to be a lot of articles about them on your site.<br /><br />Overall I like meal planning and do it for the whole week. So if I were going to do it, I would need a whole weeks of meals for it really to have an impact on what I do now. But overall the meal kits I have looked out tend to have things people in my family won't eat and also limited amount of leftovers which we tend to depend on for lunches. The expense and packaging waste are also big issues for me. If we ate out a lot, I could see maybe trying them as a replacement for that. The other issue is we do a CSA so integrating that into 3-4 nights of a meal kit would present other challenges.<br /><br />Supermarkets already market meal ideas together. All they need to do is tighten it up and they're offering the same thing as the meal kits but if done correctly there will also be more flexibility in the components.<br /><br />I think give things another year and see where it is. I'm already seeing peak interest in people I know who have been doing Blue Apron for a few months now.