Meal Kits

Meal kit services have grown substantially in recent years in large urban areas. These kits contain pre-measured, pre-cut and pre-washed ingredients with easy recipes buyers can cook at home. U.S. sales for meal kit delivery services were estimated at $1.5 billion in 2016, and the segment is expected to grow into a multibillion-dollar market by 2021[1], creating a potential new competitive challenge for the restaurant industry.

Millennials are the biggest fans of meal kits that can be ordered online or with a smartphone app. These ready-to-make kits provide the experience of a restaurant-quality meal that can be prepared easily in the comfort of one’s own home. A recent Harris Poll found meal kits appeal to those who don’t believe they are good at cooking, don’t have the time, or don’t enjoy the experience.[2]

Some leaders in the meal kit industry are Blue Apron, Plated, Home Chef and HelloFresh. Blue Apron launched its subscription meal kit service in 2012 and now delivers more than 8 million meals a month.[3] With more than 100 meal kit delivery operators in the market today, consumers have a wide selection of entrees, with some companies catering to niche markets such as vegan, paleo and Southern cooking.[4]

Despite the hype over meal kits, Harris Poll found only 3% of consumers have tried them.[5] Meal kits are available in a limited number of urban areas where younger, wealthier consumers reside, but companies such as Amazon and Wal-Mart are mobilizing to offer meal kits more broadly across the country. Amazon has partnered with Tyson Foods to offer Amazon Tastemakers through its Amazon Go stores, which will debut this spring.[6]

In response, some restaurants have entered the market by offering their loyal customers grab-n-go meal kits of their signature dishes. These restaurateurs know their reputations are on the line each time, so they advocate entering the market slowly and carefully. They caution that meal kits are a very different business model compared to running a restaurant. Recipes must be tested and tasted to make the preparation foolproof by amateurs. Inventory ordering can become more complicated, as ingredients must be fresh and sales volume can vary widely.

[1] “Meal Kit Delivery Services Usher in New Era of Culinary Convenience,” press release from Packaged Facts, May 17, 2016. Available at: http://www.prnewswire.com/news-releases/packaged-facts-meal-kit-delivery-services-usher-in-new-era-of-culinary-convenience-300267767.html

[2] “Meal kit growth not hurting restaurants – yet,” by Bob Krummert, Restaurant Hospitality, July 25, 2016. Available at: http://www.restaurant-hospitality.com/consumer-trends/meal-kit-growth-not-hurting-restaurants-yet

[3] “Amazon, Tyson Partner in ‘Meal-Kit’ Market (AMZN),” by Prableen Bajpai, CFA, Investopedia, May 17, 2016. Available at: http://www.investopedia.com/articles/investing/051716/amazon-tyson-partner-mealkit-market-amzn.asp

[4] “Trendinista: Restaurants enter the meal kit space,” by Liz Barrett, Restaurant Hospitality, Aug. 9, 2016. Available at: http://www.restaurant-hospitality.com/trendinista/trendinista-restaurants-enter-meal-kit-space

[5] “Meal kit growth not hurting restaurants – yet,” by Bob Krummert, Restaurant Hospitality, July 25, 2016. Available at: http://www.restaurant-hospitality.com/consumer-trends/meal-kit-growth-not-hurting-restaurants-yet

[6] “Amazon, Tyson Partner in ‘Meal-Kit’ Market (AMZN),” by Prableen Bajpai, CFA, Investopedia, May 17, 2016. Available at: http://www.investopedia.com/articles/investing/051716/amazon-tyson-partner-mealkit-market-amzn.asp

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