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[12 comments]

Are DIY meal kits a threat to grocery?

May 14, 2014

Meal kits — subscription services that bring ready-to-cook dinners to home cooks — have intrigued the food blogging community over the last year and are now apparently gaining the attention of venture capital funds.

Last week, Blue Apron, a New York startup, secured $50 million in another round of funding, valuing the company at $500 million, according to The Wall Street Journal. The funding comes as GrubHub, the online leader in restaurant pick-up and delivery, recently had a wildly successful IPO.

Claiming to be "reinventing the grocery supply chain from the farm to the dinner table," Blue Apron said it now delivers over 600,000 meals per month to customers, up from 100,000 per month in August 2013. Subscribers pay $10 per meal, per person with the meals coming in two-, four-, and six-person portions. Six options are available weekly, with the current week featuring:

  • Korean Stir-Fried Beef Chapcha
  • Chicken Supremes
  • Salmon Roll Sandwiches
  • Sweet Potato Vermicelli
  • Fried Green Tomatoes
  • Smothered Two-Cheese Grits
  • Tahini-Glazed Baby Eggplants.

It offers only dinners. Subscribers typically get three meals a week for a party of two.

For subscribers, Blue Apron takes over the chore of planning and shopping and supports healthy eating. Its "experts" promise to find the best seasonal ingredients directly from farms, importers and family-run purveyors. They then offer exact measurements of the ingredients with easy-to-follow recipes for home cooks. A particular benefit is stimulating home cooks to experiment.

"They allow you to have a 'restaurant' quality meal at home for much less money, and you won't have to stock your pantry with unfamiliar spices that you might never use again," Keri Gans, R.D., author of "The Small Change Diet," told LearnVest of the overall meal kit subscription services.

For its part, Blue Apron claims to benefit by buying specific weekly ingredients in bulk without any going to waste.

Blue Apron faces competitors such as Plated.com, Chefday.com and many other start-ups across the country. For subscribers, recipes can be a challenge for finicky eaters since altering recipes can be complicated. Skeptics believe Blue Apron will eventually need to provide more than six options per week.

But Matt Salzberg, Blue Apron co-founder and CEO, believes his company is making home cooking accessible to everyone. He said in a statement related to the new funding, "We hear from customers daily that we're changing their lives — they're learning to cook with new ingredients and techniques, they're trying new cuisines, and they're spending more time in the kitchen having fun with family and friends."

Discussion Questions:

What do you see as the business opportunity for meal kit subscription services? Do you see the potential for some grocers (Whole Foods, Wegmans, etc.) to co-op the concept for themselves?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Are meal kit subscription services more of an opportunity or threat for supermarkets?

Comments:

Opportunity always exists for anyone venturing into this business, and demand will probably grow if the food quality is outstanding and simple to make. This is a niche business, and could do well in cities that have time-starved, higher income families. This is becoming a crowded field, and if the product is outstanding, than they will do well. I went to the website, and delivery is free, at this point.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Getting the right set of ingredients for a varied consumer audience with allergies, food restrictions (salt free, gluten free), or food preferences (vegan, organic) can be a challenge when trying to create mass appeal. If that can be managed, then there will continue to be an increasing audience with many consumers thinking that 30 minutes prep time is the equivalent of a traditional Sunday dinner.

The idea is similar to the Boston Market idea of having a prepared meal in a convenient format except that delivery makes it even more convenient. Boston Market took grocery stores and food manufacturers by surprise. Those businesses need to begin experimenting with alternatives and watch the fate of these companies carefully or they risk being surprised and losing more market share.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

It is -- at best -- a limited market.

Those of us with a few silver hairs may remember when the Home Meal Replacement (HMR) tsunami swept across the supermarket trade show circuit spawning everything from the supermarket incarnation of meals-ready-to-eat to "kits" which essentially pre-staged the mise en place.

The problem?

It wasn't (and isn't) that Americans didn't have enough things to cook. The problem is that Americans don't cook -- punta.

The idea of kit subscription (if executed properly) will work for foodies and -- yes -- some supermarkets will be able to sell some subscriptions to some customers, but it's not a scalable mass concept.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Food is a multi-sensory experience and these meal kit subscription services allow the novice to dabble and enjoy making the meal as well as the meal itself. The idea of not having to buy unique spices or ingredients for a one-time meal is attractive as are the fool-proof recipe proportions. All this translates to convenience and a positive culinary experience.

No reason why grocers could not create their own signature meals and take advantage of this burgeoning opportunity. There is no limit to how they can do so while leveraging their stores and associates as culinary advisors.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

There will be a niche market for such meal kit subscription services, assuming that sufficient variety is available. I think the food retailer opportunity to develop and enhance such offerings is very real. However, I would not limit to the grocers already doing meals, like Whole Foods and Wegmans. This is a terrific opportunity for the more traditional food retailer to transform the deli from lunch meat, salads, rotisserie chicken, etc. to a bona fide meal solution center, offering not only the meal kits, but also artisan breads, deserts, etc. to make for a tasty, nutritious, convenient dinner for which the preparer can take credit.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Tony O's comments above are spot on ... and who should argue with a grocer when commenting about a the grocery market? Lots of potential here ... but I see the market being limited for the current players (see Tony's comments).

However, there is no reason the Whole Foods, Wegmans and others couldn't learn from this. It's just another way of leveraging your existing network and resources. The question is, will they be able to deliver a high quality experience consistently?

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Kevin Graff, President, Graff Retail

1. This business concept/idea is timely and great. However, once someone has one of these meals, and likes it, I don't think that they'd be the type to go out to their local grocery to get the ingredients to make it another time (so this concept is more of a threat to grocers).

2. The idea of Whole Foods, Wegmans, etc. co-opting the concept for themselves makes sense, as it would help them get back potentially lost business. But then they will need to worry about setting up the overall system (of choosing recipes and ingredients, accessing ingredients, packaging the ingredients in proper measure, taking and fulfilling orders, collecting money, and deliver...etc., etc., etc.). Think about what sort of costs would be involved.

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Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

Meal kit subscriptions are now in fashion with the food blogging community in urban areas and that has created a money-craving hunger with venture capital funds. That sounds rather familiar.

This is a niche business requiring that one's devotion to cooking remains constant among high-rise inhabitants who historically have shunned kitchen excitements.

Wegmans and other grocers can co-opt the concept in New York, but not Newfoundland. It is not a scalable concept, rather it's a hula hoop thing in sky kitchens whose time and turn have come for itchings.

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Gene Hoffman, President/CEO, Corporate Strategies International

"Service" is replacing and/or augmenting the "product" in virtually every aspect of our lives. This idea obviously has a market and any retailer OR CPG brand could partner with this service.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Grocers may not be providing whole food kits, but they are already providing quick and easy meal solutions. Most produce departments have pre-cut and seasoned vegetables packaged and ready to cook along with fruit salads or trays. The meat departments offer pre-seasoned or marinated meats, pre-made meat loaves or stuffed pork chops. Their delis have plenty of side dish options along with whole roasted chickens or rib slabs. The bakeries offer you-bake breads ready to pop into the oven and mouth watering desserts.

Meal kit subscriptions services may serve a niche market, but grocers are already doing a good job of offering their customers quick and easy meal solutions. I don't see any need for them to get into the subscription business.

'RetailRetell'

This is a great business opportunity for venture capital firms to invest money. Fortunately for them, VCs only need a 5% success rate to be successful. I'm not certain there's enough appetite from consumers for the long-term success of meal kits.

1. Comparing to restaurant meals: I don't see that there's a desire to replace restaurant meals (either sit down or take out). There's something to the experience of a) going to a restaurant to eat or b) having someone else make a meal for you to take home. Meal kits satisfy neither of those feelings.

2. When fresh items like meat are included, shipping is expensive. Like, fairly ridiculously so. Even if the shipping is "free", it's still part of the overall price. Comparing the cost to take out, it's a poor value.

3. People who like to cook ... like to cook. They actually enjoy the process of making a meal. That's the audience who are going to spend money on prepare-at-home meals. Meal kits may simplify the chore to a point where it removes the enjoyable part of meal making for many.

4. Some people feel a need or desire to cook -- whether to make ends meet by preparing food more economically or because they feel it's a way to nuture their family (or both). There's still some annoying things about cooking at home. I don't think that coming up with recipes or finding the right spice or seasoning is a part of the problem. (After all, Hamburger Helper and similar products have been solving this problem for decades -- and that model generates profit without VC investment.)

I like how Wegmans has approached this. Many meal-makers find it annoying to chop vegetables. Who enjoys chopping onions? You can have a custom blend of fresh veggies cut to order at service counters like the one in their new Chestnut Hill, MA store. It takes an annoying step out of cooking, allows a consumer full control over what they are getting, and incorporates perfectly into favorite recipes that every home cook already has. I've seen some shoppers use salad bars for this purpose -- and Wegmans is taking that a full step further.

Scott Sanders, Director of CPG Analytics, Pivotstream

I think there is a huge opportunity. I have a company Called PeachDish. We have a slightly different take then Blue Apron, we are southern and ship from Atlanta. There is also Plated, and the first to the US, HelloFresh.

In Sweden, a company called " linasmatkasse " does over 20,00 shipments a week and over 1$ of the swedish population enjoys meal kits. I think that retailers will change their model, to use less real estate and adopt a model like chronodrive from France.

Hadi Irvani, Founder, PeachDish

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