ROCKVILLE, Md. – Chef’d, an El Segundo, California-based meal kit company, abruptly ceased operations on July 16 making it a casualty of the capital-intensive meal kit business. Despite the cautionary tale that Chef’d represents, the segment still has enormous potential, demand will continue to grow and acquisitions of meal kit companies by brick-and-mortar retailers will support this upward trend, according to market research firm Packaged Facts.
“The potential synergies between meal kits and grocery stores are undeniable,” said David Sprinkle, research director for Packaged Facts. “If meal kits are sold at grocery stores and are available for order online with a full suite of other groceries, customers are more likely to remain customers. Additionally, most meal kit companies would benefit by being able to take advantage of the grocer’s supply chain for fresh ingredients.”
A tie-up between players in both camps makes sense, according to Packaged Facts’ report “Meal Kits: Trend and Opportunities in the U.S., 3rd Edition.” The subscription-based model employed by traditional meal kit companies isn’t working well for them because of costs related to delivering a variety of fresh ingredients from limited distribution points nationwide while maintaining reasonable prices for customers.
Additionally, competition from brick-and-mortar stores and online grocery services is heating up. So, grocery stores and convenience stores have the most potential to develop meal kits and increase sales, according to Packaged Facts.
“A growing number of meal kit companies see acquisition by a grocery store as an opportunity not only for survival, but also for expansion,” according to the report. “Meal kit companies can be integrated with store infrastructure for sales whether in a store or for e-commerce fulfillment. Even when a grocery store is only offering online purchases with a third-party delivery service such as Instacart, meal kits can benefit since many customers want to be able to order all of their groceries through one platform.”
Grocery stores also have an advantage in meal kit production, the report continued. Dedicated food preparation employees would be available to gather ingredients for meal kits and package them in-store providing maximum freshness. Also, less packaging is needed because meal kits can be displayed and stored in refrigerated cases eliminating the need for boxes with cooling or insulating elements.