Albertsons buys its way into the meal kit business with Plated acquisition

Discussion
Photo: Plated
Sep 21, 2017
George Anderson

Albertsons Companies, the second largest operator of supermarkets in the U.S., announced yesterday that it has reached a deal to acquire Plated’s meal kit service.

Plated will operate as a subsidiary of Albertsons and will continue to sell its meals, currently priced between $10 and $12 a serving, directly to consumers through its online subscription service. Plated meals will also be sold in Albertsons’ stores in the months ahead, making it “the first omnichannel meal kit offering with national scale,” according to a press release announcing the deal.

“Today’s consumer is looking for a variety of personalized shopping alternatives, and this transaction is the latest example of Albertsons Cos. meeting our customers wherever and however they like to shop,” said Bob Miller, chairman and CEO of Albertsons Companies, in a statement. “With Plated, we’ve found a partner who shares our commitment to delicious, affordable food; superior technology and innovation; and world class customer service.”

Plated, which has raised $95 million from venture funds since its start, is one of the top five meal kit providers in the country. Blue Apron, which had a disappointing initial public offering in June, is the largest with a 39 percent share of the market, according to Market Force Information. HelloFresh (30 percent) and Home Chef (10 percent) were the only others with share levels in double digits.

A report by Pentallect puts the size of the meal kit market at $2.2 billion with annual sales growth projected to range between 25 percent and 30 percent over the next five years. The firm estimates fewer than four percent of households have tried a meal kit service.

The potential of the market has prompted companies including Amazon.com, Campbell Soup, Kroger, Nestlé USA, Publix and Unilever to either buy into third-party services or develop their own meal kit offerings.

At least one of meal kit providers sees the Albertsons/Plated deal as a good sign.

“With the Amazon/Wholefoods acquisition and the Blue Apron IPO, our industry has been somewhat frozen and unsure of what lies ahead,” Michael McDevitt, CEO of Terra’s Kitchen, told RetailWire. “This partnership provides significant validation and credibility to the ecom [e-commerce] grocery model.  We have always believed that the grocery industry was going to evolve to a unified world of retail and ecom options for consumers. This helps expedite that merging of these two worlds.”

DISCUSSION QUESTIONS: How will Albertsons’ acquisition of Plated affect its core business as well as that of the meal kit service? How will the acquisition affect other grocers and meal kit service providers?

Braintrust
"This was a very smart move. They didn't buy Blue Apron or Hello Fresh, which would've cost a fortune, but they've got a foot in the meal kit space."
"Albertsons’ acquisition of Plated is a very smart move. Winners build brands on needs and wants and not processes."
"As food prices increase and incomes remain flat, more consumers are eating their meals at home. Grocers need to compete and address this trend..."

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13 Comments on "Albertsons buys its way into the meal kit business with Plated acquisition"


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Phil Chang
BrainTrust

It’s nice to see retailers evolving to fit the consumer’s changing desires. We’ve seen more iteration from retailers in the last year than we have in the previous five years.

Hopefully this isn’t a check box that becomes status quo. Ask any company that acquires another — the easy part is the acquisition and the transition. The pipeline of innovation is where companies stumble.

The online business gives Albertsons access to a lot of households and their kitchens. This should translate into bigger-basket purchases and a larger share of the consumer’s buy dollars, but they’ll need to integrate data and watch what complimentary items pop up to start leveraging this synergy right away. This is a really great option for consumers!

Tom Dougherty
BrainTrust

Albertsons’ acquisition of Plated is a very smart move. Winners build brands on needs and wants and not processes. Albertsons is taking the brand promise beyond the traditional supermarket model and it has a NEED, not just an opportunity, to go there. Bravo.

Max Goldberg
BrainTrust

Albertsons and other large grocers are smart to enter the meal kit business. Meal kits make preparing dinner easy for consumers, saving them time while providing the satisfaction of having made a home-cooked meal. I wonder why Albertsons decided to buy Plated rather than develop meal kits in-house. None of the meal kit companies are doing well financially and, with Amazon’s purchase of Whole Foods, their outlook became bleaker.

John Karolefski
BrainTrust

A smart move. Albertsons hits the ground running in the meal kit race. But a more patient approach would have been to develop their own meal kits, perhaps including their private label products. Loyal shoppers would appreciate that approach and it would serve to boost the Albertsons brand. But I guess the chain couldn’t wait.

Did they pick the right meal kit service to buy? That’s debatable and entirely subjective. But I have tried five different meal kits and Plated is not one of my top three favorites.

Adrian Weidmann
BrainTrust

The Amazon acquisition of Whole Foods obliterated the already blurring lines of demarcation between retail, grocery and retail. As food prices increase and incomes remain flat, more consumers are eating their meals at home. Grocers need to compete and address this trend — particularly in light of the growing acceptance and success of click and collect services offered by QSRs. The digitally-empowered shopper has disrupted the status quo across all retail. New trends in culture and lifestyles are driving change and retailers need to change and innovate in order to remain relevant.

Ken Cassar
BrainTrust

This was a very smart move by Albertsons. They didn’t buy Blue Apron or Hello Fresh, which would’ve cost a fortune, but they’ve got a foot in the meal kit delivery space. I’d advise Albertsons to focus the current Plated mail order business on serving niches of customers with narrow dietary needs (vegan, low fat, Paleo, etc. … ) and target less expensive, more mass-oriented meals to store shoppers.

Larry Negrich
BrainTrust

This could be a good acquisition for Albertsons if they can find ways to share some of their infrastructure, beyond inside the store, to power their Plated business. With locations in neighborhoods and distribution centers for support, this should give Plated the ability to service their customers and take advantage of existing infrastructure. Like everything else in retail though, this will come down to execution excellence.

Doug Garnett
BrainTrust

I’d feel far better about their future if Albertsons was focusing these high profile efforts and investments in their stores.

Consumer satisfaction and increased shopping cart size comes in far more traditional ways — putting the right products in the store, creating a smart in-store shopping experience and delivering exceptional customer service.

There IS a market — a small market — for meal kits. But the market hasn’t proven profitable and is incredibly saturated. Worse, making it work involves decisions tangential to what would make stronger.

Shep Hyken
BrainTrust

Albertsons is smart. It knows that there is competition in this area and the acquisition gives it a position it needs to hold onto customers.

Dan Raftery
BrainTrust

By bolting on a proven provider, Albertsons does two things: eliminates the risks associated with the “bleeding edge” position and swallows a pesky competitor. Right move. Right time.

Craig Sundstrom
Guest

Although I didn’t see a price mentioned, if we assume if was some sensible figure — a few tens of millions … maybe less if they used their Club Card — then this seems like a good move. An insurance policy for the off chance that the “meal kit” segment turns into something, and an R&D write off if it doesn’t.

Ken Morris
BrainTrust
Consumers have been shifting more and more of their food budget from grocery stores to dining out. Several studies indicate that consumers now spend more on eating out than on grocery. A lot of this is driven by consumers’ busy lives and desire for convenience. The meal kit model is kind of a blend of dining out and grocery shopping. It provides the convenience of avoiding the time and energy to make a trip to the store to buy ingredients and offers delicious pre-defined recipes that make restaurant quality food available in your home. While it does require some time for food prep, it is probably less overall time than going out to eat. It is all about convenience. The continued expansion of meal kit services either online of via grocers will put pressure on other grocers to offer similar service to address this growing trend. The national presence of Albertsons creates a number of interesting opportunities for supermarkets to emulate. They have an opportunity to leverage their real estate investment, their prepared foods offerings… Read more »
Tony Orlando
BrainTrust

At our Ohio grocers convention, we took a poll of who actually uses this. There were 10 people, and only one continues to use the service. Others said it was OK but not worth the price after the initial $30 discount ran out. The quality was fine but the portions were small. This small batch of folks may be skewed but value still must be there or consumers will bolt. This will continue to evolve and I believe someone, probably Walmart or Amazon, will end up owning a company that provides this with everyday low prices. Then maybe we will see the growth they expect.

wpDiscuz
Braintrust
"This was a very smart move. They didn't buy Blue Apron or Hello Fresh, which would've cost a fortune, but they've got a foot in the meal kit space."
"Albertsons’ acquisition of Plated is a very smart move. Winners build brands on needs and wants and not processes."
"As food prices increase and incomes remain flat, more consumers are eating their meals at home. Grocers need to compete and address this trend..."

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