What’s Killing Meal Kits?

Roamy.
Roamy.
Dec 11, 2018 · 4 min read

In today’s fast paced world who has time to recipe search, grocery shop, and cook? The founders of several meal delivery kit companies have predicated their entire businesses around that question and, while it seems like a simple enough problem to solve, most companies in this space have had major product-market-fit finding challenges. The key to addressing the needs of this market lies in providing the right service and selection, in the right place, at the right time.

Business model

Meal delivery companies tend to follow the same blueprint. Customers sign up (usually receiving a free week of meal delivery for doing so), choose 3- 4 recipes (that change weekly), and then wait for the ingredients to be delivered (in exact portions) to their front door. Once the package arrives, you have everything you need to make the perfect meal- but the desire to prep and cook everything inside the box before it goes to waste- is sold separately.

The year everyone stopped grocery shopping?

In 2011 there were 3 notable brands that started in the meal delivery space. While they were all smart enough to notice the same demand in the market, they clearly didn’t see each other.

Blue Apron was up first and had some powerful backing. Founded by a well known VC named Matt Salzberg and his friend Ilia Papas, Blue Apron started out in New York with the mission of working with local farmers to offer in-season recipes on a subscription basis to customers who wanted great recipes and ingredients to cook with. By early 2012 the founders went looking for an investment, secured 3 million dollars, and by 2014 had scaled to the point of shipping over a million meals a month. These days the company seems to be doing okay, despite their stock plummeting in August of 2018 due to a less than stellar Q2 earnings report. They keep their prices low enough for mass market consumption ($9.99/ meal on average) and keep their rolodex of seasonal recipes up to date.

It is worth noting that Blue Apron only offers two levels of subscription plans: 2 person dinner kits or family dinner kits (that serve 4 people). In order to scale, companies in this industry need to have a firm grasp on their offerings and price margins.

Plated was featured on Shark Tank in mid 2014. The company incorporated in 2012, but had a rough time finding its niche and looked to the Sharks (on ABC’s hit show Shark Tank) for some help. Billionaire Mark Cuban had originally invested but the deal later fell through. Luckily, Mark’s co-Shark Kevin O’Leary was interested in the company and made his own investment. The founders raised over $100 Million to scale Plated but were still unable to cover the high costs of marketing and infrastructure. In 2017, brick and mortar grocery chain Albertsons purchased Plated and, by displaying the meal kits on shelves in their stores, they gave customers what the industry had been lacking until then- convenience.

Just do it for me

Just Add Cooking came on the scene in 2013 (out of New England!) with a new perspective on meal delivery kits. The founder, Jan Leife, was an experienced chef and she wanted to make cooking enjoyable. The company slogan was dinner “in 30 minuets or less” but the meal kit space was getting crowded and VC money was much less accessible to the newcomer than it was to its predecessors. Just Add Cooking ended up raising less than a million dollars to get their capital intensive company off the ground and, after some initial hype, they have stalled out. In late November of 2018, Just Add Cooking announced that they were shutting down. The company has said that while customers loved the product, they didn’t have the time to cook or didn’t always need a meal kit- and as such the company struggled with retention and never quite solved a real problem in the market.

Is meal kit delivery dead?

No one can predict the future with any accuracy, but it is safe to say that any company hoping to survive (never mind flourish) in this era will need to offer immense speed, flexibility, and accessibility. Customers have been clear about their unwillingness wait for delivery, demanding affordability, and wanting a certain level of choice/ customization. These features are hard for companies working on a subscription model to offer because keeping costs predictable and steady is the key to success with that business model.

Roamy Reflection

I think putting the meal kits in grocery stores is the right move because although the kits have a short shelf life, they appeal to time strapped consumers and solve a real problem that they have. As a nation that is only getting busier and busier, I see this arrangement working out nicely in the coming years.

Roamy.

Written by

Roamy.

@RoamyWrites on Twitter and I publish videos on Startup topics I find fascinating; check them out: https://www.youtube.com/channel/UCMuZUKJowkPtq_QeffE6hQA

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