Now, meal kit companies are facing an onslaught of competition from newcomers and big food brands alike. Turning a profit has proven elusive. And somewhat..
When they started operating in the U. S. about five years ago, meal kit companies looked big, disruptor-sized, poised to transform the way people eat entirely. They were even seen as a potential thorn in the side of the massive U. S. grocery industry, which racks up about $650 billion in annual sales.
Now, meal kit companies are facing an onslaught of competition from newcomers and big food brands alike. Turning a profit has proven elusive. And somewhat embarrassingly, it looks like meal kit companies need to emulate the brick-and-mortar groceries and online retailers they once criticized for overwhelming shoppers with choices. To go truly mainstream, they need to diversify their offerings.
It’s not a path that founders, or their investors, imagined at the outset.
At the advent of meal kit services, the idea was to keep it simple– package up already measured ingredients with a recipe card, and ship these to subscribers’ doors. Meal kits would spare customers annoying lines at the grocery store, and teach them a few culinary skills along the way. Meanwhile, the companies planned to collect data about consumers’ dining preferences.
Sun Basket meal kit ingredients.
Kevin Diestel of Sapphire Ventures explains the appeal of his own portfolio company, Sun Basket, and other meal kit makers by comparing them to earlier subscription services that used big data to drive their business success. “They’re riding the same wave in grocery that Netflix did in video and Amazon did in e-commerce,” he said.
Based on the number of meal kit delivery companies to receive meaningful rounds of funding, it’s clear that other investors agree. Notable players in the space operating stateside include early pioneers Plated, Blue Apron and Hello Fresh , along with Home Chef , Peach Dish , Purple Carrot , Gobble, Marley Spoon , Green Chef and Chef’d.
Even e-grocers like Fresh Direct and Good Eggs are starting to offer meal kits now. Meanwhile, traditional groceries or specialty food markets like Publix , and Ahold’s Giant-Carlisle are selling meal kits in their brick-and-mortar stores.
Purple Carrot’s vegan “TB12” meal kits were created with the NFL’s Tom Brady.
Each company puts a different spin on the meal kit. Chef’d sells them a la carte while others require a subscription. Purple Carrot offers vegan fare and “performance meals” recommended by pro-athletes, starting with Tom Brady. Sun Basket sells gluten-free meal kits and kits for adherents to paleo and vegetarian diets. Gobble’s meal kits can be prepared in 10 minutes.
Altogether, U. S. meal kit delivery startups have raised more than $650 million in venture capital to date, according to research from Packaged Facts. Rumors are swirling that Blue Apron is now readying for a 2017 IPO.
They’re certainly producing revenue. Meal kit companies sold between $1 billion and $1.5 billion in 2016, according to industry estimates from MarketResearch and others. The potential for growth is there, still.
