Meal kits: are they really here to stay?

Meal kits: are they really here to stay?

By
Laura Robinson
May 5, 2020

A few years back, if meal kits had a relationship status, it would have been “it’s complicated”.

Sure, many of us liked the idea of getting new, pre-portioned recipes delivered to our door. And so did some of the biggest names in food - with Amazon and Albertson’s jumping on the bandwagon.

But the business model’s thin margins, complex logistics and challenging churn rates left a trail of failed start-ups in its wake, leading Forbes to announce that the meal kit was DOA in 2018.

But the coronavirus crisis changed the rules of the game. Empty retail shelves and restaurant closures tested the limits of our culinary creativity. Suddenly, meal kits had never looked so appetizing – and demand has soared.

Meal kit survivors have since been forced to pause their marketing efforts and hire new staff to keep up with demand. HelloFresh shares are up by 80%. Marley Spoon shares have skyrocketed over 400% since Mid-March. And now countless food service businesses – from leading chains to local gastropubs – are getting in on the action.

So are meal kits truly back to stay? Or is this just a corona-inspired flash in the pan? Let’s take a closer look at what’s driving this trend and what meal kit magnates have learnt from their Darwinian fight for survival.

Trend drivers: healthy convenience and expert-guided variety

Meals kits have proved a hit for affluent, urban young professionals or time-pressed young families who are looking for healthy convenience. Reluctant to order too much takeaway, they want to be confident that their nutritious, home-cooked meals will also be crowd-pleasers. This means that they’re not just buying the kit itself – they’re buying the expertise of the chef or nutritionist who developed the recipe.

Then there are the kit contents themselves. As lockdown led to more limited supermarket choices, meal kits helped customers get their hands on food items that were otherwise hard to track down. The pre-selected and pre-measured ingredients allow uninspired home chefs to break out of their food rut and try out new flavour combinations - without worrying about how to use up the rest of that fermented bean curd or half a jackfruit. They get a fresh culinary experience, with minimal mess and no food waste.

The evolution of meal kits: technology, flexibility and personalisation

Companies that have managed to successfully navigate the choppy waters of the meal kit market over the last few years have become more sensitive to customer pain points along the way.

Price per portion has always been a big barrier to client acquisition and retention, with 47% of customers citing this as the reason for cancelling their subscriptions. A lack of flexibility – of the subscription model or the contents of the kits - was often a close second. Luckily, technological developments have lent a hand here.

Then there’s the issue of consumers’ constantly changing dietary requirements and recipe fatigue. Businesses have responded by launching options for nearly every imaginable diet – from gluten-free vegan to keto converts with a nut allergy. Other brands, like Home Chef, even allow customers to personalise their portion sizes, swap out ingredients or double up the protein.

An opportunity for food service businesses

As many restaurants remain closed, quick-thinking food service business owners recognised the benefits of playing into this growing trend. Chick-fil-A, a US fast food chain, brought back a previously tested and shelved idea by launching kits to prepare their signature chicken parmesan at home. While Pizza Rev targeted bored couples by developing a date night package, complete with craft-your-own pizzas, salads and a bottle of wine.

Some meal kit providers have also sought out win-win collaborations with local food service partners. Easy Cook Asia – a Berlin-based, Asian-themed meal kit provider – has worked with chefs from local restaurants to develop new boxes based on their best-selling recipes. As well as receiving a commission on the kits sold, restaurants can supply the ingredients required, helping them to make money back on unused stock.

Meal kit veterans benefit from the boom: Hello Fresh and Gousto

Hello Fresh – the leading global meal kit provider – was founded in 2011 by Dominik Richter and Thomas Griesel, supported by serial entrepreneur, Oliver Samwer. Inspired by the success of Swedish start-up, Linas Matkasse, Samwer wanted to test if the model worked in other European countries.

It turned out that it did: Hello Fresh now operates in 13 countries, from Austria to Australia. After years of focusing on growing its customer base and improving its margins, the company is experiencing rapid lockdown-fuelled growth - expecting first-quarter sales of between 685 and 710 million euros compared with 420 million in 2019. In fact, the company is now valued at a similar level to many of Europe’s leading grocers, like Morrisons and Sainsbury’s.

Back in 2012, Tim Boldt was a 26-year-old finance executive who didn’t have time to go food shopping. Recognising the potential of meal kits, he quit his job and launched Gousto from his living room. In autumn last year, the company was still loss-making but growth-focussed, delivering over 250,000 meal kits a month and continuing to recruit.

This strategy paid off. Now, Gousto is not only profitable – they’re delivering four million meals across the UK and have just closed a £33 million funding round. Boldt plans to reinvest in technology to further personalise customer experience and streamline logistics. This will mean that they can drop their average price per meal to just £2.98 – tempting new price-sensitive consumers on board and bringing them closer to their goal of delivering 400 million meals by 2025.

So what’s next for meal kits?

Interestingly, the very aspect of their model that critics focussed on in the past – sourcing their own ingredients rather than using a marketplace model – has left meal kit companies uniquely placed to grow during the corona storm. But the jury’s still out on whether they can keep customers on board once lockdown is over.

This will depend on how successfully they can offer a genuine alternative to affordable but tedious grocery shopping and the pricier pleasure of out-of-home dining. My guess is that companies that develop economies of scale to keep quality high but portion prices low and offer a seamless and unique culinary experience to a niche target group are most likely to emerge victorious as the post-corona dust settles.

Takeaways

  • Restaurant closed? Try connecting with local meal kit companies to explore recipe collaborations or sell on surplus ingredients.

  • Already collaborating with a meal kit provider? Consider offering virtual workshops or tutorials to add value to your partner’s offer and build brand awareness.

  • Thinking of producing a meal kit? Pick a specific target group and focus obsessively on their needs. While some customers will relish the convenience of disposable oven trays that mean speedy dinners and no washing up, others will be looking for organic ingredients and 100% recycled packaging.

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A few years back, if meal kits had a relationship status, it would have been “it’s complicated”.

Sure, many of us liked the idea of getting new, pre-portioned recipes delivered to our door. And so did some of the biggest names in food - with Amazon and Albertson’s jumping on the bandwagon.

But the business model’s thin margins, complex logistics and challenging churn rates left a trail of failed start-ups in its wake, leading Forbes to announce that the meal kit was DOA in 2018.

But the coronavirus crisis changed the rules of the game. Empty retail shelves and restaurant closures tested the limits of our culinary creativity. Suddenly, meal kits had never looked so appetizing – and demand has soared.

Meal kit survivors have since been forced to pause their marketing efforts and hire new staff to keep up with demand. HelloFresh shares are up by 80%. Marley Spoon shares have skyrocketed over 400% since Mid-March. And now countless food service businesses – from leading chains to local gastropubs – are getting in on the action.

So are meal kits truly back to stay? Or is this just a corona-inspired flash in the pan? Let’s take a closer look at what’s driving this trend and what meal kit magnates have learnt from their Darwinian fight for survival.

Trend drivers: healthy convenience and expert-guided variety

Meals kits have proved a hit for affluent, urban young professionals or time-pressed young families who are looking for healthy convenience. Reluctant to order too much takeaway, they want to be confident that their nutritious, home-cooked meals will also be crowd-pleasers. This means that they’re not just buying the kit itself – they’re buying the expertise of the chef or nutritionist who developed the recipe.

Then there are the kit contents themselves. As lockdown led to more limited supermarket choices, meal kits helped customers get their hands on food items that were otherwise hard to track down. The pre-selected and pre-measured ingredients allow uninspired home chefs to break out of their food rut and try out new flavour combinations - without worrying about how to use up the rest of that fermented bean curd or half a jackfruit. They get a fresh culinary experience, with minimal mess and no food waste.

The evolution of meal kits: technology, flexibility and personalisation

Companies that have managed to successfully navigate the choppy waters of the meal kit market over the last few years have become more sensitive to customer pain points along the way.

Price per portion has always been a big barrier to client acquisition and retention, with 47% of customers citing this as the reason for cancelling their subscriptions. A lack of flexibility – of the subscription model or the contents of the kits - was often a close second. Luckily, technological developments have lent a hand here.

Then there’s the issue of consumers’ constantly changing dietary requirements and recipe fatigue. Businesses have responded by launching options for nearly every imaginable diet – from gluten-free vegan to keto converts with a nut allergy. Other brands, like Home Chef, even allow customers to personalise their portion sizes, swap out ingredients or double up the protein.

An opportunity for food service businesses

As many restaurants remain closed, quick-thinking food service business owners recognised the benefits of playing into this growing trend. Chick-fil-A, a US fast food chain, brought back a previously tested and shelved idea by launching kits to prepare their signature chicken parmesan at home. While Pizza Rev targeted bored couples by developing a date night package, complete with craft-your-own pizzas, salads and a bottle of wine.

Some meal kit providers have also sought out win-win collaborations with local food service partners. Easy Cook Asia – a Berlin-based, Asian-themed meal kit provider – has worked with chefs from local restaurants to develop new boxes based on their best-selling recipes. As well as receiving a commission on the kits sold, restaurants can supply the ingredients required, helping them to make money back on unused stock.

Meal kit veterans benefit from the boom: Hello Fresh and Gousto

Hello Fresh – the leading global meal kit provider – was founded in 2011 by Dominik Richter and Thomas Griesel, supported by serial entrepreneur, Oliver Samwer. Inspired by the success of Swedish start-up, Linas Matkasse, Samwer wanted to test if the model worked in other European countries.

It turned out that it did: Hello Fresh now operates in 13 countries, from Austria to Australia. After years of focusing on growing its customer base and improving its margins, the company is experiencing rapid lockdown-fuelled growth - expecting first-quarter sales of between 685 and 710 million euros compared with 420 million in 2019. In fact, the company is now valued at a similar level to many of Europe’s leading grocers, like Morrisons and Sainsbury’s.

Back in 2012, Tim Boldt was a 26-year-old finance executive who didn’t have time to go food shopping. Recognising the potential of meal kits, he quit his job and launched Gousto from his living room. In autumn last year, the company was still loss-making but growth-focussed, delivering over 250,000 meal kits a month and continuing to recruit.

This strategy paid off. Now, Gousto is not only profitable – they’re delivering four million meals across the UK and have just closed a £33 million funding round. Boldt plans to reinvest in technology to further personalise customer experience and streamline logistics. This will mean that they can drop their average price per meal to just £2.98 – tempting new price-sensitive consumers on board and bringing them closer to their goal of delivering 400 million meals by 2025.

So what’s next for meal kits?

Interestingly, the very aspect of their model that critics focussed on in the past – sourcing their own ingredients rather than using a marketplace model – has left meal kit companies uniquely placed to grow during the corona storm. But the jury’s still out on whether they can keep customers on board once lockdown is over.

This will depend on how successfully they can offer a genuine alternative to affordable but tedious grocery shopping and the pricier pleasure of out-of-home dining. My guess is that companies that develop economies of scale to keep quality high but portion prices low and offer a seamless and unique culinary experience to a niche target group are most likely to emerge victorious as the post-corona dust settles.

Takeaways

  • Restaurant closed? Try connecting with local meal kit companies to explore recipe collaborations or sell on surplus ingredients.

  • Already collaborating with a meal kit provider? Consider offering virtual workshops or tutorials to add value to your partner’s offer and build brand awareness.

  • Thinking of producing a meal kit? Pick a specific target group and focus obsessively on their needs. While some customers will relish the convenience of disposable oven trays that mean speedy dinners and no washing up, others will be looking for organic ingredients and 100% recycled packaging.

A few years back, if meal kits had a relationship status, it would have been “it’s complicated”.

Sure, many of us liked the idea of getting new, pre-portioned recipes delivered to our door. And so did some of the biggest names in food - with Amazon and Albertson’s jumping on the bandwagon.

But the business model’s thin margins, complex logistics and challenging churn rates left a trail of failed start-ups in its wake, leading Forbes to announce that the meal kit was DOA in 2018.

But the coronavirus crisis changed the rules of the game. Empty retail shelves and restaurant closures tested the limits of our culinary creativity. Suddenly, meal kits had never looked so appetizing – and demand has soared.

Meal kit survivors have since been forced to pause their marketing efforts and hire new staff to keep up with demand. HelloFresh shares are up by 80%. Marley Spoon shares have skyrocketed over 400% since Mid-March. And now countless food service businesses – from leading chains to local gastropubs – are getting in on the action.

So are meal kits truly back to stay? Or is this just a corona-inspired flash in the pan? Let’s take a closer look at what’s driving this trend and what meal kit magnates have learnt from their Darwinian fight for survival.

Trend drivers: healthy convenience and expert-guided variety

Meals kits have proved a hit for affluent, urban young professionals or time-pressed young families who are looking for healthy convenience. Reluctant to order too much takeaway, they want to be confident that their nutritious, home-cooked meals will also be crowd-pleasers. This means that they’re not just buying the kit itself – they’re buying the expertise of the chef or nutritionist who developed the recipe.

Then there are the kit contents themselves. As lockdown led to more limited supermarket choices, meal kits helped customers get their hands on food items that were otherwise hard to track down. The pre-selected and pre-measured ingredients allow uninspired home chefs to break out of their food rut and try out new flavour combinations - without worrying about how to use up the rest of that fermented bean curd or half a jackfruit. They get a fresh culinary experience, with minimal mess and no food waste.

The evolution of meal kits: technology, flexibility and personalisation

Companies that have managed to successfully navigate the choppy waters of the meal kit market over the last few years have become more sensitive to customer pain points along the way.

Price per portion has always been a big barrier to client acquisition and retention, with 47% of customers citing this as the reason for cancelling their subscriptions. A lack of flexibility – of the subscription model or the contents of the kits - was often a close second. Luckily, technological developments have lent a hand here.

Then there’s the issue of consumers’ constantly changing dietary requirements and recipe fatigue. Businesses have responded by launching options for nearly every imaginable diet – from gluten-free vegan to keto converts with a nut allergy. Other brands, like Home Chef, even allow customers to personalise their portion sizes, swap out ingredients or double up the protein.

An opportunity for food service businesses

As many restaurants remain closed, quick-thinking food service business owners recognised the benefits of playing into this growing trend. Chick-fil-A, a US fast food chain, brought back a previously tested and shelved idea by launching kits to prepare their signature chicken parmesan at home. While Pizza Rev targeted bored couples by developing a date night package, complete with craft-your-own pizzas, salads and a bottle of wine.

Some meal kit providers have also sought out win-win collaborations with local food service partners. Easy Cook Asia – a Berlin-based, Asian-themed meal kit provider – has worked with chefs from local restaurants to develop new boxes based on their best-selling recipes. As well as receiving a commission on the kits sold, restaurants can supply the ingredients required, helping them to make money back on unused stock.

Meal kit veterans benefit from the boom: Hello Fresh and Gousto

Hello Fresh – the leading global meal kit provider – was founded in 2011 by Dominik Richter and Thomas Griesel, supported by serial entrepreneur, Oliver Samwer. Inspired by the success of Swedish start-up, Linas Matkasse, Samwer wanted to test if the model worked in other European countries.

It turned out that it did: Hello Fresh now operates in 13 countries, from Austria to Australia. After years of focusing on growing its customer base and improving its margins, the company is experiencing rapid lockdown-fuelled growth - expecting first-quarter sales of between 685 and 710 million euros compared with 420 million in 2019. In fact, the company is now valued at a similar level to many of Europe’s leading grocers, like Morrisons and Sainsbury’s.

Back in 2012, Tim Boldt was a 26-year-old finance executive who didn’t have time to go food shopping. Recognising the potential of meal kits, he quit his job and launched Gousto from his living room. In autumn last year, the company was still loss-making but growth-focussed, delivering over 250,000 meal kits a month and continuing to recruit.

This strategy paid off. Now, Gousto is not only profitable – they’re delivering four million meals across the UK and have just closed a £33 million funding round. Boldt plans to reinvest in technology to further personalise customer experience and streamline logistics. This will mean that they can drop their average price per meal to just £2.98 – tempting new price-sensitive consumers on board and bringing them closer to their goal of delivering 400 million meals by 2025.

So what’s next for meal kits?

Interestingly, the very aspect of their model that critics focussed on in the past – sourcing their own ingredients rather than using a marketplace model – has left meal kit companies uniquely placed to grow during the corona storm. But the jury’s still out on whether they can keep customers on board once lockdown is over.

This will depend on how successfully they can offer a genuine alternative to affordable but tedious grocery shopping and the pricier pleasure of out-of-home dining. My guess is that companies that develop economies of scale to keep quality high but portion prices low and offer a seamless and unique culinary experience to a niche target group are most likely to emerge victorious as the post-corona dust settles.

Takeaways

  • Restaurant closed? Try connecting with local meal kit companies to explore recipe collaborations or sell on surplus ingredients.

  • Already collaborating with a meal kit provider? Consider offering virtual workshops or tutorials to add value to your partner’s offer and build brand awareness.

  • Thinking of producing a meal kit? Pick a specific target group and focus obsessively on their needs. While some customers will relish the convenience of disposable oven trays that mean speedy dinners and no washing up, others will be looking for organic ingredients and 100% recycled packaging.

A few years back, if meal kits had a relationship status, it would have been “it’s complicated”.

Sure, many of us liked the idea of getting new, pre-portioned recipes delivered to our door. And so did some of the biggest names in food - with Amazon and Albertson’s jumping on the bandwagon.

But the business model’s thin margins, complex logistics and challenging churn rates left a trail of failed start-ups in its wake, leading Forbes to announce that the meal kit was DOA in 2018.

But the coronavirus crisis changed the rules of the game. Empty retail shelves and restaurant closures tested the limits of our culinary creativity. Suddenly, meal kits had never looked so appetizing – and demand has soared.

Meal kit survivors have since been forced to pause their marketing efforts and hire new staff to keep up with demand. HelloFresh shares are up by 80%. Marley Spoon shares have skyrocketed over 400% since Mid-March. And now countless food service businesses – from leading chains to local gastropubs – are getting in on the action.

So are meal kits truly back to stay? Or is this just a corona-inspired flash in the pan? Let’s take a closer look at what’s driving this trend and what meal kit magnates have learnt from their Darwinian fight for survival.

Trend drivers: healthy convenience and expert-guided variety

Meals kits have proved a hit for affluent, urban young professionals or time-pressed young families who are looking for healthy convenience. Reluctant to order too much takeaway, they want to be confident that their nutritious, home-cooked meals will also be crowd-pleasers. This means that they’re not just buying the kit itself – they’re buying the expertise of the chef or nutritionist who developed the recipe.

Then there are the kit contents themselves. As lockdown led to more limited supermarket choices, meal kits helped customers get their hands on food items that were otherwise hard to track down. The pre-selected and pre-measured ingredients allow uninspired home chefs to break out of their food rut and try out new flavour combinations - without worrying about how to use up the rest of that fermented bean curd or half a jackfruit. They get a fresh culinary experience, with minimal mess and no food waste.

The evolution of meal kits: technology, flexibility and personalisation

Companies that have managed to successfully navigate the choppy waters of the meal kit market over the last few years have become more sensitive to customer pain points along the way.

Price per portion has always been a big barrier to client acquisition and retention, with 47% of customers citing this as the reason for cancelling their subscriptions. A lack of flexibility – of the subscription model or the contents of the kits - was often a close second. Luckily, technological developments have lent a hand here.

Then there’s the issue of consumers’ constantly changing dietary requirements and recipe fatigue. Businesses have responded by launching options for nearly every imaginable diet – from gluten-free vegan to keto converts with a nut allergy. Other brands, like Home Chef, even allow customers to personalise their portion sizes, swap out ingredients or double up the protein.

An opportunity for food service businesses

As many restaurants remain closed, quick-thinking food service business owners recognised the benefits of playing into this growing trend. Chick-fil-A, a US fast food chain, brought back a previously tested and shelved idea by launching kits to prepare their signature chicken parmesan at home. While Pizza Rev targeted bored couples by developing a date night package, complete with craft-your-own pizzas, salads and a bottle of wine.

Some meal kit providers have also sought out win-win collaborations with local food service partners. Easy Cook Asia – a Berlin-based, Asian-themed meal kit provider – has worked with chefs from local restaurants to develop new boxes based on their best-selling recipes. As well as receiving a commission on the kits sold, restaurants can supply the ingredients required, helping them to make money back on unused stock.

Meal kit veterans benefit from the boom: Hello Fresh and Gousto

Hello Fresh – the leading global meal kit provider – was founded in 2011 by Dominik Richter and Thomas Griesel, supported by serial entrepreneur, Oliver Samwer. Inspired by the success of Swedish start-up, Linas Matkasse, Samwer wanted to test if the model worked in other European countries.

It turned out that it did: Hello Fresh now operates in 13 countries, from Austria to Australia. After years of focusing on growing its customer base and improving its margins, the company is experiencing rapid lockdown-fuelled growth - expecting first-quarter sales of between 685 and 710 million euros compared with 420 million in 2019. In fact, the company is now valued at a similar level to many of Europe’s leading grocers, like Morrisons and Sainsbury’s.

Back in 2012, Tim Boldt was a 26-year-old finance executive who didn’t have time to go food shopping. Recognising the potential of meal kits, he quit his job and launched Gousto from his living room. In autumn last year, the company was still loss-making but growth-focussed, delivering over 250,000 meal kits a month and continuing to recruit.

This strategy paid off. Now, Gousto is not only profitable – they’re delivering four million meals across the UK and have just closed a £33 million funding round. Boldt plans to reinvest in technology to further personalise customer experience and streamline logistics. This will mean that they can drop their average price per meal to just £2.98 – tempting new price-sensitive consumers on board and bringing them closer to their goal of delivering 400 million meals by 2025.

So what’s next for meal kits?

Interestingly, the very aspect of their model that critics focussed on in the past – sourcing their own ingredients rather than using a marketplace model – has left meal kit companies uniquely placed to grow during the corona storm. But the jury’s still out on whether they can keep customers on board once lockdown is over.

This will depend on how successfully they can offer a genuine alternative to affordable but tedious grocery shopping and the pricier pleasure of out-of-home dining. My guess is that companies that develop economies of scale to keep quality high but portion prices low and offer a seamless and unique culinary experience to a niche target group are most likely to emerge victorious as the post-corona dust settles.

Takeaways

  • Restaurant closed? Try connecting with local meal kit companies to explore recipe collaborations or sell on surplus ingredients.

  • Already collaborating with a meal kit provider? Consider offering virtual workshops or tutorials to add value to your partner’s offer and build brand awareness.

  • Thinking of producing a meal kit? Pick a specific target group and focus obsessively on their needs. While some customers will relish the convenience of disposable oven trays that mean speedy dinners and no washing up, others will be looking for organic ingredients and 100% recycled packaging.

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