Making the meal kit work is a challenging undertaking for a variety of reason. There’s a lot of competition — though, perhaps, less now than there once was — and it can be hard for firms to distinguish themselves. Everyone claims to have the best ingredients, everyone delivers, and the pricing is not quite identical but certainly similar across the board.
These days, players are increasingly dropping the ‘subscription’ part of the subscription meal kits — in favor of doing something new, or at least new-ish. They’re going to grocery store shelves. That’s no small irony since, when meal kits first came to call, the question was whether they would ultimately disrupt grocery shopping as we know it. Why go out and buy all the ingredients when the ingredients can come pre-prepped, measured and ready to incorporate?
However, though meal kits proliferated, grocery raised the level of its game and became the vertical that every mega-player wanted to capture. Walmart will bring a same-day grocery order to one’s car, Amazon will deliver it to their door for no additional charge on top of the already-paid-for Prime membership, Target will do both — and have the person doing the shopping call the customer from the store to confirm data about the purchase.
Perhaps, since grocers are working double time to reach out and touch customers directly, it should come as little surprise that meal kit makers are now looking to get into the grocery store’s good graces. As of last week, HelloFresh joined Chef’d and Blue Apron in putting its kits on the shelves of a supermarket — in the hopes of capturing more customers than with just its subscription business alone.
HelloFresh is going a bit bigger than its counterparts, most of which are primarily associated with a single chain of stores from with to sell. Blue Apron, for example, is found exclusively at Costco, but HelloFresh has struck a deal with the massive global grocery company Ahold Delhaize, which will put its kits on the shelves at 600 Giant Food and Stop & Shop stores owned by the firm.
HelloFresh Chief Executive Dominik Richter said the move isn’t really away from subscription, which the firm will still rely on as their sales driver. Rather, he said, the move is about exposure and finding a larger customer audience for its meal kit product.
“It’s for customers that don’t have the ability to preplan as much,” Richter said in an interview. “We think this is an offering that is very complementary.”
The company is in talks with other retailers to sell its kits in their stores, he noted. However, those “other stores” might be something of a tricky proposition for HelloFresh, simply because having an in-house meal kit company to call one’s own is becoming popular among grocery chains.
Kroger bought up Home Chef last month to enhance its store-branded boxes. The grocer said last month that it was buying Home Chef to offer its meal kits alongside store-branded boxes. Albertsons bought Plated last year to bring its kits to store shelves.
Vice President of Retail and Shopper Insights for Kantar Consulting, Diana Sheehan, told The Wall Street Journal that the move is simply explained — meal kit companies that want to survive must diversify their offering beyond home delivery. Otherwise, finding profitability might be too steep a challenge.
“They sustain a much better chance of being profitable in the grocery store than outside,” said
Nielsen says subscription are the sales driver today, but in-store purchases are where the big growth was for these firms, shooting up 27 percent to around $155 million in the last year.
“Retailers are looking for the right partner to make the economics work,” Richter said. “This is still a quickly growing category.”
Growing, but ever competitive and crowded. HelloFresh racked up $215 million in revenue last year and about 1.2 million customers in its most-recent quarter. But, notably, HelloFresh counts all customers — even those in a free trial period — as customers, so it is unknown exactly how many paid subscribers it has at present. It is the market leader by sales, though there is some question if former market leader Blue Apron (which does not count trial members as members) might have a similar-sized customer base.
Holding on to the lead in this market is not easy work, though HelloFresh’s big move with a big global grocery will certainly put it in front of most customers than its rivals. It remains to be seen if consumers will be sold.