Retail

Feeding Consumers' Growing Appetite For Digitally Enabled Dining

meal kit

The COVID-19 pandemic has made consumers hungry.

Literally.

According to data from digital bank Current on how those who have received their federal stimulus funds have spent them, about 45 percent of the funds have been spent, and food was the preferred spending category. Sixteen percent bought food directly from restaurants and takeout locations, while another 9 percent spent the funds at grocery stores. Another survey of consumer plans for their stimulus dollars indicated over a third of consumers intend to spend those funds eating more.

And that increase in appetite for consumers now several weeks into social distancing and perhaps beginning to become a bit weary of their staple set of home cooking favorites has become an opportunity for a variety of businesses looking to help customers find new ways to fill the hole.

Early meal kit innovator Blue Apron noted that its Q1 2020 revenues were up 8 percent on Q4 2019, while its customer base increased 7 percent during the same time period. That lift was largely credited by Blue Apron CEO Linda Findley Kozlowski to the effects of COVID-19, specifically with stay-at-home orders that have dramatically limited customer menu choices.

“As planned, we have started to deliver on the first stage of our growth strategy with sequential quarter-over-quarter growth in both net revenue and customers, along with continued strength in certain other key customer metrics, which we saw even prior to the impact of COVID-19,” Kozlowski said.

“As we move into the second quarter of 2020, we are focused on driving customer retention and establishing longer-term consumer habits out of the heightened demand we have been seeing as a result of the impact of COVID-19, including stay-at-home and restaurant restriction orders and other changes,” she said.

Those changes included increasing fulfillment capacity to meet the increase in demand by reducing menu options (to streamline preparation) and expanding their staff. Those additions have been made on top of what the brand called “enhanced daily cleaning and disinfection policies.”

Blue Apron and its CEO, have long affirmed the power potential of the meal kit industry — despite setbacks that have plagued Blue Apron since going public in 2017. As recently as a year ago, the emerging conventional wisdom on the entire meal kits concept  was that it was too crowded, too easily taken advantage of and too inherently unprofitable to justify the massive investments that had been made in the industry since Blue Apron’s early days in 2012. These days, however the meal kit’s potential is looking a lot more powerful — and to a wider array of players.

Restaurants nationwide have embraced meal kit offerings as an alternative to carry-out delivery to keep their business alive during the pandemic, and in a few high-profile cases some restaurateurs have determined that the switch will likely become permanent. Fat Rice, a popular Chicago establishment much beloved by locals for its delicious food, was forecast to be in the running for a Michelin star or two.

But now more, Fat Rice is closed, and according to its Beard Award-winning founder and chef Abe Conlon, it won’t be reopening as a restaurant ever again. Instead, it will be making the switch to becoming the Super Fat Rice Mart, selling Asian and Portuguese pantry items, wine and beer, and meal kits with ingredients and recipes so that customers can make their own Fat Rice dishes at home.

“The restaurant for the foreseeable future is dead,” said Conlon told The New York Times. “We need to face the reality that we can’t exist in the future as it looks now. People are not going to feel comfortable being in close quarters or being in a cramped dining room.”

According to their site,  a meal kit priced at $99.99, will feed two hungry adults for two days, with leftovers. If that sounds a bit rich for one’s blood, on the other end of the spectrum, Denny’s is looking to offset its lost restaurant dining revenue with meal kits as well. Denny’s kits start at $12.99, are portioned to feed four people and come in a variety of offerings. Selections include a complete Breakfast Kit with bacon strips, eggs, milk, biscuits, and fruit; a Picnic Sandwich Kit with turkey, ham, Swiss cheese, cheddar cheese, one loaf of 7-grain bread, lettuce, whole tomatoes, red onion, mayo and mustard packets; or a Slow-Cooked Pot Roast Meal Kit with pot roast and gravy, broccoli, mashed potatoes, hoagie rolls and garlic spread.

And while restaurants are embracing the market and meal kit model, supermarkets are embracing the world of prepared foods on offer — and meal kit expansions. SpartanNash grocery stores are testing the sale of meals from restaurants in western Michigan as a way to both boost their shopper count — and offer hard hit local businesses a new outlet for their products.

“This is a win-win partnership for West Michiganders and local restaurants hit hard by the COVID-19 pandemic,” Lori Raya, executive vice president and chief merchandising and marketing officer at SpartanNash, said in a statement. “Restaurants are bringing team members back to work, while families can enjoy some of their restaurant favorites, discover new ones and help their local struggling restaurants.”

H-E-B is piloting a similar program, offering meals from local restaurants in some of its Texas stores, according to the company. That program rolled out a week ago, and has already seen an enthusiastic response from consumers — who’ve bought up the full supply of both the meal kits and the full prepared fresh meals now being offered within hours of hitting the shelves.

Because, though the data indicates that consumers may not be quite ready to head back to restaurants as of yet — given how strongly felt their health concerns remain even on the eve of the phased re-opening of businesses in some U.S. states — they demonstrably have a literal appetite for eating something other than a meal they prepared from scratch.

This means meal kits may have found the path to profitability that has so long eluded the crowded sector, as they can offer something uniquely suited to a post-COVID-19 world — the novelty of eating something new, with the safety of serving it in one’s home kitchen.

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