Is the Rising Popularity of Meal Kits a Food Processor’s Opportunity or Threat?
Meal kit delivery services were invented by Kicki Theander in 2007 in Sweden. Her company Middagsfrid (Dinner Peace, in English) was the world’s first meal kit company. The concept involved delivering pre-portioned ingredients for a number of meals every week, where customers use only the ingredients and the provided recipes to create a home-cooked meal.
The concept quickly exploded, and in 2015, Goldman Sachs research expected the meal kit industry to grow to between $3 billion and $5 billion by 2020.
What Challenges Does the Sudden Popularity in the Meal Kit Market Hold for Logistics in the Food Processing Industry?
- Quality: With fresh produce, meal kit delivery companies rely on efficiency more than ever. They simply cannot afford to deliver food late or under par. Convenience is key—if meals cannot be delivered on time, when scheduled, then the main reason the customer subscribed to the service in the first place disappears. To succeed, meal kit delivery services should remove the need for customers to visit the supermarket; otherwise, why subscribe to this service at all?
- Loyalty: Loyalty runs hand-in-hand with quality and service, as fresh products delivered on time, coupled with excellent service, usually equate to a great user experience. This can gain customer loyalty, though excellent recipe instructions are also essential!
- Responsibility: Every food producer or processor has responsibility for ensuring their product meets all standards. Nowadays, with instant social communication, feedback, and reviews, a customer can instantly voice their dissatisfaction if a brand fails to deliver as promised. This requires processors, manufacturers, and logistics divisions to work seamlessly together, considering the impact of every step on the user experience.
- Service: For any subscription-based business, great customer service is key to success. If service falls short, plenty of competitors are ready to take up the challenge. The last step, often the most memorable to the customer, is the face at the front door. It’s a missed opportunity to ensure satisfaction if the delivery experience is poor, even if every other part of the process was excellent.
- Speed: Meal kits merge the food processor’s cleanrooms, the grocer’s storerooms, and the restaurant’s culinary flair, all wrapped around an online service that bridges the gap between shopping and meal provision. However, food processing standards must still apply.
- Competition: The rise of third-party delivery services like UberEATS has disrupted the food delivery space, much like Uber and Airbnb reshaped taxi and hotel services. Many industry experts suggest that full-service restaurants may suffer from these third-party providers, as some believe that “foodservice outlets are now at the mercy of third-party delivery companies.” Yet others argue that services like UberEATS support full-service restaurants by enabling online home delivery of fully prepared meals—a market previously unavailable to them.
In 2015, there was a 118% growth in home delivery sales for full-service restaurants in the US, a trend expected to continue. Globally, over 170 meal kit businesses are operating, including niche providers.
- Meal kit delivery services generated over $1 billion in sales in 2015, with the US accounting for 40% of this.
- According to Technomic Research, meal kit subscribers are typically older millennials, equally split among genders, with 47% having a household income over $125,000 and 40% being parents.
- More than 150 meal kit delivery services operate in the United States.
Regulatory challenges are unprecedented in this space. The kitchen where final preparation occurs is often not subject to regulation or audit, nor is the transporting vehicle. Recently released 2016 data from CGA Peach shows that over half the British adult population has had a takeaway meal delivered in the last six months—about 28.6 million people!
A recent US-based article noted that millennials spend more on food outside the home than any other generation, averaging US$50.75 per week. Competition is emerging from angles unanticipated a few years ago, emphasizing the urgency of maximizing operational efficiency, minimizing costs, and reducing waste and energy consumption.
As Brad Banducci, Woolworths CEO, said, “What was quick a few years ago is no longer quick today.”
Why wait?