Some Assembly Required

Manhattan resident Linda Fischer will be the first to admit that she is not a gourmet cook, but still likes to dabble in the kitchen. However, her busy schedule running the Minted Prose and Traitor Dachshund publishing companies allows her little free time to go grocery shopping. So, when a friend invited her over for a Blue Apron “homecooked” dinner in 2013, she was not only floored by the taste and quality – she quickly joined the service.

“We had the vegetarian plan for two years and then I changed it to include normal proteins,” she says. “I find they help save time. In addition, Blue Apron inspired me to cook. Now I enjoy clipping recipes and trying them.”

Initially, Fischer was getting three meals a week, but has since scaled back to one or two a month. “I made some myself and I had great help from friends, some of whom were chefs. From watching, I learned about cooking,” Fischer says. Still, Blue Apron has had an impact on her trips to Jubilee and Zeytuna, the nearby specialty markets where she normally shops, along with Costco, where she buys her proteins. “If I order Blue Apron, I won’t buy much in bulk at the store, and I’m interested in a narrower range of items,” she adds. 

Blue Apron, presently the leader in the direct-to-consumer meal kit industry, creates original recipes every week, featuring fresh, seasonal ingredients.
“Our customers can choose the recipes they would like to receive from each week’s menu, and we deliver those to their doorstep along with the pre-portioned ingredients required to cook them,” says Allie Evarts, communications manager at New York-based Blue Apron, adding that the service has customers in 48 states, with the top ten states accounting for 54 percent of its business.

“Our customers can plan their orders to complement their individual tastes and lifestyles,” Evart explains. “Some prefer to let our recipe recommendation algorithm choose their recipes based on the food preferences they have provided to us, while others actively choose, up to six weeks in advance of delivery, which recipes to receive.”

Blue Apron’s recipes are accompanied by printed and digital content, including how-to instructions and the stories of its suppliers and specialty ingredients. It also sells wine to pair with the meals and the kitchen tools needed to prepare them. Last year, Blue Apron introduced such exotic fare as fairytale eggplant, pink lemons and purple daikon radishes to its customers. The only ingredients they might need to make a trek to the supermarket for are salt, pepper and olive oil.

“We deliver unique and specialty ingredients to our customers,” Evart says. “Because we eliminate the middleman and days from our supply chain, we can deliver ingredients that are often fresher than those found in traditional and online grocery stores. We believe our meals offer compelling value when compared to purchasing similar ingredients at grocery stores in the amounts necessary to recreate a given week’s menu, after taking into accounts costs related to delivery and food waste.”
Competitor Peach Dish offers a similar service.

“We provide fantastic recipes and all of the ingredients to prepare them,” Judith Winfrey, president of Atlanta-based Peach Dish tells Grocery Headquarters. “Our customers like to cook, but don’t have a lot of extra time. Most are between ages 25 and 45 and live in dual income homes. They value experience and health, as well as time at home,” she says.

“Each week we offer between eight and 12 different dishes; at least four are unique every week,” notes Winfrey. “We ship directly to our customers’ homes anywhere from four to 12 servings. We are also on the shelves of select grocery stores.”  

Amazon Moves In

In addition to Blue Apron and Peach Dish, dozens of other competitors have popped up in recent years, with more expected to come. 

“Right now, meal kits are an incredibly hot and incredibly crowded space,” affirms Paula Savanti, a research analyst with Rabobank’s North America Wholesale Group, based in New York. “There will be a few survivors, but many won’t.” 

Some of those may be brought down by Amazon, which is in the process of acquiring Whole Foods. In a July 6 trademark application, an Amazon subsidiary called Amazon Technologies, revealed its intentions to develop “prepared food kits composed of meat, poultry, fish, other seafood, fruit and/or vegetables…ready for cooking and assembly as a meal.” It then registered the tagline: “We do the prep. You be the chef.”

“Direct-to-consumer meal kits are a growing market that has just about doubled in size in the last two years,” says Erik Thoresen, principal at Grocery Headquarters’ sister Chicago-based Technomic division.

Acosta, the Jacksonville, Fla.-based sales, marketing and retail merchandising solutions firm, asked consumers about meal kits in its annual “The Why? Behind the Buy” and “The Why? Behind the Dine,” recent studies and found among the 1,500 participants, usage doubled to 16 percent in 2016, from 8 percent a year earlier. “The growth was primarily driven by Millennials and GenXers, showing Millennials ordered meals more than the rest of the population. They were also used more by higher income households,” says Marianne Quinlan-Sacksteder, director of insights for Acosta’s Center of Shared Business Intelligence.

For the first time, Acosta asked participants about their order frequency with the kits. “About one-third ordered six or more kits in the past three months, which is pretty significant, while another third ordered only once or twice. So there is sort of that dichotomy of trial,” observes Quinlan-Sacksteder.

Thoresen notes that although annual sales are approaching $2 billion, meal kits are still only a drop in the bucket in the $1.5 trillion spent annually on food in the U.S. “At this point,” Thoresen believes “meal kits are really more of a signal that there is an opportunity for both restaurants and supermarkets to think differently about how they do business.”

Meal kit services “are a disrupter that have been recognized by both the retail grocery and foodservice industries,” says Angela Fernandez, VP, retail grocery & foodservice at GS1 US, based in Lawrenceville, N.J. “We are seeing some of the larger retailers continue to innovate to compete,” she says, citing Publix and Kroger, which is testing a Prep Prepared meal kit option in select stores. 

Appeasing the ‘Demanding King’

“The consumer is king, and the consumer is getting very demanding these days,” Fernandez continues. “We are in a very different marketplace. Our traditional offering and channels of delivery have proven they no longer work. The industry is going to have to continue to be innovative to create new and better options to please the consumer.”

One of the more innovative concepts is coming from The Fresh Market, which has instituted its “Little Big Meal” program in all of its 176 stores. Introduced in 2014 as a weekly Thursday pasta meal, the grab-and-go meal program was expanded in 2016 to a new recipe each week, offering satisfying solutions to the perennial “What’s for dinner?” question every day, says Stephanie Lower, public relations manager for the Greensboro, N.C.-based chain. 

“Each ‘Little Big Meal’ recipe is tastefully curated with the finest quality, hand-picked ingredients of the season and offers a quick and easy wholesome meal for four – available throughout the month for $25 or less! Guests can visit The Fresh Market any day of the week to pick up simple and delicious meals.”

Items include things like four gourmet store-made, ready-to-grill specialty burgers along with crisp corn and either macaroni or potato salad, or Roasted Chicken Roll Ups with Vegetables available in four flavor combinations.

Peeling Into a New Realm

Other retailers may wish to team with FreshRealm, which has developed an infrastructure allowing retailers to play in the perishables home delivery space, along with meal kits that they can offer in-store.

Ventura, Calif.-based FreshRealm provides retailers with a three-prong platform of supply, fulfillment and technology that allows them to offer meal kits in their stores, supplied from warehouses in Sacramento and Riverside, Calif.; Indianapolis; and Swedesboro, N.J., says Michael Lippold, CEO and co-founder. It also offers the proprietary Fresh Porter temperature-controlled shipping container that allows meal kits to be delivered to the consumer’s doorstep.

“Our fulfillment centers take perishable products in, leverage our proprietary technology to pack them into either the Fresh Porter or fresh meal kits that then get delivered to retailers to sell in their stores,” Lippold explains. “With our system, customers can go online to the retailer’s website and pick any meals they want and either have them delivered or pick them up at the store.”

Lippold says FreshRealm spent more than 15,000 hours of thermal lab time to develop Fresh Porter, which maintains an optimal temperature range of 32.5-41 degrees. After consumers unpack the Fresh Porter, they simply peel off the mailing label to reveal a return address sticker and it is picked up by either UPS or FedEx. The entire unit is fully recyclable up to 100 times, he adds.

“With Fresh Porter, we basically turn every UPS or FedEx truck into a refrigerated truck,” Lippold says. “These trucks go everywhere, so we can ship fresh prepared foods to 95 percent of the country.”       

Circular Plan

Every retailer has a meal kit offered right in their weekly circular, says Lauren Mills. She is the CEO and founder of The Dinner Daily, a Westford, Mass.-based service that works with consumers and businesses to create meal plans based on what is on sale during a particular week at the local supermarket. “Our whole model is taking people’s food preferences, their family size and the primary fresh foods specials at their local grocery store and providing our users with a comprehensive turnkey meal plan solution that works for them individually and helps them get the dinner done,” Mills says. 

The Dinner Daily works off the circulars of dozens of chains including Stop & Shop, Shaw’s, Market Basket, Hannaford, Price Chopper, Winn-Dixie, Publix, Safeway, Kroger, Hy-Vee and Aldi, with Smith’s recently added. “We have a very comprehensive roadmap of adding chains for the remaining months of the year that will get us coverage of 70 percent of the country,” Mills says.

When consumers sign up they state their food preferences and primary store. A plan featuring five meals and five side dishes is then e-mailed to the consumer with recipes that can be printed out or downloaded to a cell phone. 

“We provide a way for people to get the job of dinner done at a fraction of the cost of the dinner-in-a-box model while still using their favorite grocery store,” relays Mills. “It works incredibly well for the consumer, and is a great value-add for the store because they now have a way to compete with the dinner-in-a-box model.”
Supermarkets may need that extra edge because it looks like direct-to-consumer meal kits are here to stay.

“Meal kits are transforming a lot of different industries,” says Mackenzie King, director of design research and insight at Lextant, a “human experience firm” based in Columbus, Ohio, that works with leading companies to help them understand what consumers want and need out of their products and services. “We have even spoken to real estate developers about meal kits. One said, ‘meal kits are transforming the way we design our lobbies.’ From that perspective, they need more refrigeration and space in the lobbies of apartment buildings,” she asserts.

Further, adds King, “We have had some appliance manufacturers come to us as well. They were trying to understand the meal kit trend because people are getting these giant boxes with little packages inside and they are putting them in the refrigerator in a way that is different from how they traditionally shop for groceries.”      

Managing the Hype

But supermarkets need not fret too much, according to several industry observers.

“It is easy to get caught up in the hype of these things,” says Nicholas Fereday, a research analyst at Rabobank’s North America Wholesale Group. “If you talk to some of these providers, this is a revolution, it is a disruption and the supermarkets are going to be out of business. But there are a lot of opportunities for supermarkets to fight back.”

Fereday cites Kroger, which is testing the Prep Prepared meal kits in three stores in Cincinnati. 
“The meal kits are definitely going to be around, but they are not going to take over the market. It is going to remain a niche, given the price of these things,” Fereday says.