Sezzle - FInTech Tracker - September 2023

ModifyHealth CEO Says Food Alone Isn’t Enough to Retain Meal Kit Subscribers

man unpacking meal kit

As meal kit providers look for ways to keep their customers coming back, medically focused subscription service ModifyHealth has found that supporting its food offerings with coaching and monitoring contributes to higher lifetime value.

In an interview with PYMNTS, G.B. Pratt, founder and CEO at the company, which provides meal kit subscriptions tailored to a range of diets for different medical conditions, said this increased level of involvement keeps consumers subscribed for longer.

“When you’re providing meals, along with what we do, which is dietitian support and remote patient monitoring to help people get the outcomes they’re looking for, it really drives retention significantly,” Pratt said.

This retention boost is especially significant, given that food subscriptions tend to face challenges in this area. The PYMNTS Intelligence study, “Subscription Commerce Readiness Report: Bridging the Gap Between Subscription Conversion and Retention,” created in collaboration with sticky.io, which draws from a survey in February of more than 2,200 consumers with retail product subscriptions, found that food and beverage subscriptions slightly overperform in driving customer acquisition, but underperform when it comes to retention.

Yet acquisition, too, is becoming increasingly challenging. ModifyHealth, for its part, is focused on leveraging affiliates, driving doctor recommendations of its product to consumers with health conditions, in an effort to increase sign-ups without dumping more funds into increasingly competitive digital marketing channels.

“[With] customer acquisition costs … pure search and social have gone up,” Pratt said. “If you’re looking at the meal subscription space, you can feel good about yourself growing the top line revenue but if you’re doing that at a high customer acquisition cost and effectively breaking even, you’re not building a higher enterprise value or sustainable business.”

Overall, the meal kit space is changing. Earlier this month, omnichannel food hall company Wonder, founded and led by Jet.com founder Marc Lore, closed its $103 million acquisition of key player in the space Blue Apron. Around the same time, meal kit company HelloFresh said it has entered into the last-mile delivery business, with its company-managed fleet now operating in 19 major metropolitan areas.

Many consumers continue to want meal kits. PYMNTS’ Intelligence’s study last year “12 Months Of The ConnectedEconomy™: 33,000 Consumers On Digital’s Role In Their Everyday Lives,” which draws from responses from tens of thousands of U.S. consumers over the course of a year, notes that meal kit subscriptions were on the rise throughout 2022.

Looking ahead, ModifyHealth aims to drive revenue not only from its direct-to-consumer (D2C) business but also from insurance plans and employers, harnessing providers’ demand to lower consumers’ overall medical bills by offering dietary solutions — a trend the company is already beginning to see, but Pratt expects it will only become more common.

“Insurance plans and employers are starting to pay for meal subscriptions, and they’re doing that because 75% of all healthcare costs today are tied to chronic conditions that are directly impacted by diet and lifestyle. So, it just has to be a part of the healthcare equation,” Pratt said.