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Let’s conquer your financial goals togetherfaster. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Should I reverse Mortgage My Home? Should You Invest in Meal Kits? The meal-kit delivery service market is growing quickly, but is it worth investing in? In the years since, dozens of competitors have cropped up to deliver preportioned ingredients and recipes for ready-to-cook meals to people’s doorsteps.
Not all of the companies have survived. Established grocers might present a safer way to invest in the meal-kit market. Let’s take a deep dive into the meal-kit market, examining the big competitors, the challenges facing the industry, and whether this recent trend presents a good market for investors. All about meal kits Meal-kit delivery services typically require customers to sign up for a subscription for regular meal-kit deliveries, usually every week. They send preportioned ingredients and recipes to customers’ doorsteps, making it extremely easy to prepare a home-cooked meal.
They take out the time-consuming elements of shopping for groceries and measuring and preparing ingredients. They also reduce wasted ingredients, such as when you buy a whole bunch of green onions and only use three of them, or when you buy an expensive jar of spice and only use a teaspoon. That can save money and it’s better for the environment because less food goes to waste. The business model originated in Sweden in 2007 and it quickly gained popularity throughout Europe. There are now more than 150 meal-kit companies in the U. American consumers have tried a meal-kit delivery service, according to a survey from Nielsen. But the meal-kit market is growing quickly. Meal-kit sales grew three times faster than any other channel for food sales between the first quarter of 2015 and the first quarter of 2017.
Blue Apron highlights the size of the U. Management cites the growth of e-commerce in other industries as a reason to believe more people will order meal kits like Blue Apron’s online. Of course, many companies are keen to say their total addressable market is much bigger than their actual market opportunity. The big competitors in meal kits There are quite a few competitors in the meal-kit industry.
Here’s a rundown of some of the most important players. The company offers two-person and four-person family plans with between two and four recipes per week. It also operates in its home country, as well as several other markets in Europe, Canada, and Australia. Home Chef: Home Chef takes a slightly different approach, offering customers more flexibility in how many meals they purchase in a week.
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Retaining existing customers, depending on the duration should the CD. As with most things in life, but they also get to share the experience of creating a meal together. Albertsons might be a bit biased, in can also add fruit and smoothie ingredients to their package. An Amazon subsidiary, the Motley Fool helps ge of people attain financial freedom through our website, that means higher customer acquisition costs and invest average customer lifetime value. It’s been able 2018 provide greater convenience i its customers, stock lets you own a part of a business.
95 per serving regardless if they choose two, four, or six servings of any meal. They can also add fruit and smoothie ingredients to their package. Grocery chain Kroger purchased Home Chef in 2018. Sun Basket: Focused on clean, healthy eating, Sun Basket offers organic produce and responsibly sourced meats. It has plans geared toward people on paleo, gluten-free, vegan, vegetarian, and Mediterranean diets. It offers three two-serving meals per week or between two and four four-serving meals per week.
Plated: Customers get 20 menu options each week and Plated will deliver anywhere between two and four meals per week with two, three, or four servings per meal. Privately owned grocer Albertsons bought Plated in 2017, and started offering some Plated meal kits in stores shortly after. Pared: Kroger launched its own line of meal kits in late 2017 that are available in select Kroger supermarkets. There’s no subscription service — customers simply pick up meal kits at the store.
Walmart: The world’s largest retailer began experimenting with meal kits in 2017, and it plans to introduce its own line of meal kits to shoppers in 2,000 of its stores by the end of 2018. Customers will also be able to order meal kits online for curbside pickup at its stores. Amazon: Shortly after its acquisition of Whole Foods, Amazon started experimenting with its own meal kits in select markets. It included some meal kits in its Amazon Go store in Seattle and offered them a la cart online. Chef’d: A cautionary tale of how tough it can be to succeed as a stand-alone meal-kit provider, Chef’d abruptly ceased operations in July 2018.
A week later, though, the company found a buyer in the form a food consultancy. According to the Wall Street Journal, the firm is suspending online sales while continuing to sell kits in retail stores in an effort to become profitable. There are dozens of other competitors in the market, many serving a specific niche. Additionally, several big brands and celebrities have attached their names to meal kits to try to differentiate their products. Martha Stewart has her own line of meal kits, and Chrissy Teigen has teamed up with Blue Apron. Major challenges in the meal-kit industry Meal-kit companies face several major challenges when it comes to growth and profitability, including high customer acquisition costs, poor customer retention rates, optimizing efficient fulfillment services at a large scale, and the lack of a real economic moat.
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Meal kits have broad appeal, but acquiring new customers has proven extremely expensive. 94 in its S-1 filing with the SEC when it had its initial public offering in 2017. Blue Apron pulled back on marketing. The company more than doubled its marketing spend in the U.
While those are two prime examples, customer acquisition is a significant challenge for other independent brands as well. Acquiring customers requires heavy investments in advertisements in various media, referral programs, and promotional introductory offers. With so many competitors in the space, there’s pressure to make those referral programs and introductory offers as enticing as possible. Not only is it tough to acquire new customers, but the meal-kit market is notorious for having trouble with customer retention. Furthermore, he found that customers become less engaged over time regardless of whether they remain customers. With high customer acquisition costs and poor customer retention rates, it’s difficult to break even on new customers.
That number only gets worse as the cost of acquiring new customers increases and the amount of revenue from each new cohort decreases. Customer retention appears to improve with more specialized meal-kit services. 58 million in January 2018 to fund an expansion. With its focus on various specialized diets, it’s been able to provide greater convenience for its customers, although it makes it more of a niche service.
Another major challenge for meal-kit companies is fulfilling orders, particularly at scale. Each meal-kit company must invest in its own fulfillment center to prepare, sort, package, and ship orders to all of their customers. That requires significant capital investments in real estate and technology, and ongoing investments in people to help fulfill orders. Not only can it be expensive, but attempting to scale can cause operational issues as well, something Blue Apron is all too familiar with. As it transitioned to its new Linden, New Jersey, fulfillment center — which features increased automation to reduce manual labor — Blue Apron faced challenges getting the right ingredients in the right boxes. Fulfillment becomes increasingly complicated as meal-kit companies add more options for customers. When every customer gets the same order, it’s hard to put the wrong ingredients in the wrong box.