Chef’d has a different recipe for growing its meal kit business

Discussion
Image: Chef'd
Mar 15, 2018

Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.

With consumer behavior in grocery increasingly shifting from ingredient purchasing to meal purchasing, Chef’d is working with major brands, including Nestle and Coca-Cola as well as retailers, to serve as the “buy button” for recipe kits on their websites.

A big difference between some other meal kit delivery companies such as Blue Apron and HelloFresh is that Chef’d doesn’t rely on subscriptions. It instead allows consumers to order whenever they want and whatever they want from a selection of about 1,000 breakfasts, lunches and dinners. Also, the food delivery startup spends relatively little marketing its product, letting its relationships with big CPG and retailer partners create awareness for Chef’d.

“We develop recipes with these companies. Where they’re able to merchandise those recipes and conduct e-commerce on their own websites, they transfer fulfillment data to Chef’d’s back end, where we’re the fulfillment engine,” Sean Butler, retail director for Chef’d, told CPGmatters.

Chef’d has also collected $35 million in investments from Campbell Soup and Smithfield Foods, each of which also has an executive on Chef’d’s board.

Smithfield’s partnership is considered strategic. Chef’d gains access to Smithfield’s product development and sourcing capabilities and leverages Smithfield’s national distribution network and facilities.

Chef’d’s focus with Campbell, in contrast, is in e-commerce. Consumers can “sample new [Campbell] ingredients in our existing recipes, and we create a full feedback loop where we’re collecting information [for Campbell] through our surveys and other ongoing relationships we have with our customers,” said Mr. Butler.

For retailer partners, “We just handle it on the back end. They handle the credit card data management, and we’re able to extend their brand equity all the way on the journey to the consumer by shipping these products in co-branded boxes.”

Enhancing all these efforts, Chef’d’s patent-pending packaging system provides 16 days of life after the point of putting together the recipe, compared to the usual eight days.

“The Chef’d brand is all about freshness and quality,” Mr. Butler said. “It’s not about telling the story of a golden-beet farmer somewhere in the Central Valley of California. That’s not what we do. We deliver the highest-quality product and ingredients fresher than anyone else.”

DISCUSSION QUESTIONS: Should brands and retailers outsource meal kit initiatives or build them in-house? What do you see as the challenges for each side?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I do like the concept of meal kits and whether they are outsourced or done in house, I stick with the more lucrative option of selling them in-store."
"The market for these kits is only so big, and it’s already being overcrowded."
"So many companies have streamlined the meal kit process, I would utilize their expertise for as long as possible."

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11 Comments on "Chef’d has a different recipe for growing its meal kit business"


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Phil Masiello
BrainTrust

The meal kit industry has had several obstacles to scaling.

Efficient supply chain management from point of manufacture to point of delivery. This leads to increased shipping costs and bulky packages

The two plaguing Blue Apron and their model competitors are: marketing or customer acquisition costs which far outweigh the average sale, coupled with low retention rates.

But the biggest issue facing all of the players is convincing middle America of the value proposition. These brands have gotten kit trial with low introductory offers, but have not seen return sales.

To scale these concepts it has to appeal to the mass market. You cannot get the growth traction necessary with only the top 10 percent of the consumer market.

Dave Bruno
BrainTrust

This feels like a win-win-win relationship. Chef’d gets exposure to the retailers’ markets, the retailers can serve emerging market demands without extensive process changes and expenses, and customers get the benefit of meals produced by a company that specializes in meal delivery services. One strong word of caution to retailers: invest in quality control systems to ensure your brand standards are consistently and continuously met …

Lyle Bunn (Ph.D. Hon)
Guest

Outsourcing is the logical choice at this stage of the meal kit business. There is still much to learn and smaller firms learn faster. CPGs should put their eggs in a range of meal kit baskets as a way to accelerate consumer acceptance while streamlining business processes.

Lee Kent
Guest

I do like the concept of meal kits and whether they are outsourced or done in house, I stick with the more lucrative option of selling them in-store. There are just so many obstacles for home delivery and I can only imagine the cost of the Chef’d packaging. Is it sustainable? I know we love convenience however for a single, special meal, I’m thinking I would want to make sure I am getting what I expect. But that’s just my 2 cents.

Jennifer McDermott
Guest

A clever move that lets all parties focus on what they are good at, with everyone getting a piece of the pie instead of edging each other out. I’d like to see more of this collaboration than the aggressive move-towards monopoly of others. As idealistic as that may be.

Harley Feldman
BrainTrust

Definitely outsource. Chef’d has a complete process for creating the recipes, assembling fresh ingredients, packing for 16 days of shelf life, delivery, etc. Brands and retailers would have a difficult time duplicating this feat even if they had the skills in-house. Having tried Chef’d, I can attest to the freshness and quality of the ingredients. The challenges for Chef’d are maintaining the quality of the meals and keeping their costs aligned with the amount customers will pay. The challenges for the retailers are to distinguish their offerings from the competition and to be able to provide the kits at a price their customers will pay. The consumer convenience has to be worth the additional cost.

Allison McGuire
BrainTrust

Chef’d is a well-oiled machine and until a retailer’s volume is at a point where sourcing and packaging all of the ingredients is financially beneficial, outsourcing is the best option. My company partnered with Chef’d for a holiday baking campaign and to see the management required to keep the ingredients safely stored and organized was overwhelming and impressive.

So many companies have streamlined the meal kit process, I would utilize their expertise for as long as possible.

Cate Trotter
BrainTrust

As with most things, I don’t think there is a one-size fits all approach to meal kits. However, Chef’d’s approach seems like a great way for brands to leverage this trend, without having to do too much heavy lifting. To date the meal kit industry seems to be more about the provider’s brand, rather than the big name food-and-drink brands that consumers look for in supermarkets. Using their products as ingredients, and leveraging their brands, could help build traction (plus the feedback to the brand will prove valuable in product development). It might also help capture a new audience for meal kits — people who don’t want to be tied into a regular subscription or receiving meals and ingredients that they don’t like.

Ryan Mathews
BrainTrust
I’m not sure it makes sense to generalize about this. My local independent supermarket, Holiday Market, has initiated its own meal kit program, but then again it also operates a pretty healthy “meals to go” business, its own smokehouse and a cooking school. For other less creative folks, outsourcing may be better. Lots of the specific challenges have been addressed already, but let me add that the biggest — from both sides — is customer demand and acceptance. The market for these kits is only so big, and it’s already being overcrowded. Those of us with enough grey hair to remember the Home Meal Replacement craze may recall that the real reason it failed wasn’t because of products or execution — it was because it was a solution to the wrong problem. The issue was not — and is not — that people don’t already have enough cooking options. It’s that they don’t — en masse — have the time, interest or inclination to cook in the first place. At Holiday, for example, the kits… Read more »
Craig Sundstrom
Guest

“Chef’d is working with major brands, including Nestle and Coca-Cola as well as retailers, to serve as the “buy button” for recipe kits on their websites.”

And they have a rep from Campbell’s Soup on their board for good measure. Huh?

For a brand that proclaims “it’s all about freshness and quality,” this seems — if not an out right conflict of interest, then a curious strategy. Dare I suggest that more than a few people willing to lay out the (relatively) big bucks for meal kits will have their doubts.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
3 years 3 months ago

The Chef’d model is interesting in that it allows each party to focus on their core strength while Chef’d brings the various pieces together for the consumer. I don’t believe we’ve seen the one approach to meal kits to rule them all yet. We see a variety of approaches because no one has found the critical mass of consumers yet to sustain large revenues. Customer acquisition has been difficult for the subscription-based services, presumably because the special offers they run are sufficient to attract “taste testers” to the service, but not many stay as long-term customers. This causes high marketing and acquisition costs that are difficult to sustain long-term.

Brands have an even harder time producing meal kits as they may have the raw ingredients, but they may lack other distribution aspects or the right direct-to-consumer marketing. Teaming through Chef’d makes sense for brands to get into the meal kit game. Eventually, we’ll see which model wins out, but for now, I’m not sure how real this market will be.

wpDiscuz
Braintrust
"I do like the concept of meal kits and whether they are outsourced or done in house, I stick with the more lucrative option of selling them in-store."
"The market for these kits is only so big, and it’s already being overcrowded."
"So many companies have streamlined the meal kit process, I would utilize their expertise for as long as possible."

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