6 Things to Ponder When Partnering With Meal-Kit Services

Press enter to search
Close search
Open Menu

6 Things to Ponder When Partnering With Meal-Kit Services

By Randy Hofbauer - 10/20/2017

Meal kits are a big business, rocketing to $5 billion in sales today, according to market researcher Packaged Facts. And the Rockville, Md.-based firm expects solid continued growth in the space.

But with an oversaturated market for delivery services and grocers rolling out kits of their own – along with Amazon planning its own kits and likely to sell them at Whole Foods Market, which it now owns – it’s becoming vital for delivery services to seek added exposure and captive audiences inside brick-and-mortar stores, especially as shoppers seek to purchase products wherever, whenever and however they desire.

This has made the market ripe for acquisitions. In September, Boise, Idaho-based Albertsons Cos. acquired meal-kit service Plated, advancing a shared strategy to reinvent the way consumers discover, purchase and experience food. Additionally, the CEO of Green Chef has said that he’s open to accepting offers for his company, while another service, Home Chef, has hired bankers to explore a possible sale, signaling an opportunity for them to be snatched up by an interested retailer. Further, Blue Apron shedding 6 percent of its workforce leaves industry speculators wondering if it, too, will soon be scooped up.

However, more strategic partnership deals between grocers and meal-kit services have been inked in recent times, including Southern California grocer Gelson’s with Chef’d, and Whole Foods with Purple Carrot (the latter of which wound down earlier this year). Moreover, eMeals – which doesn't individually package portioned ingredients in kit format, but still essentially functions as a meal-kit service – has added Walmart, Kroger and AmazonFresh to its list of grocers willing to offer click-and-collect (and, in AmazonFresh’s case, delivery, too) shopping for its meal-building program.

Purple Carrot, which makes kits for plant-based meals, and Whole Foods Market complemented each other's better-for-you image by partnering to sell the kits in Whole Foods stores.

Consider These

But with so many meal-kit services out there to choose from for a partnership, how should grocers know which one to partner with?

“It’s … critical for grocers to realize that while they may see similarities in looking across meal-kit brands, there are critical differences that can materially alter the customer experience,” says Rich DeNardis, chief revenue officer of Chicago-based meal-kit service Home Chef.

When looking to partner with meal-kit services, food retailers should examine these six things:

  • The common, clear goal of a partnership: Working with a meal-kit service can’t be a one-way street. For the partnership to be successful, both parties must get something out of it to make everything worthwhile. These goals will usually reside in the driving of either revenue or profit, says Mike McDevitt, CEO of Baltimore-based meal-kit provider Terra’s Kitchen. Understanding what’s expected of a partnership – for example, how one defines success – helps ensure that all parties are heading in the same direction.

    Additionally, “the left hand needs to understand what the right hand is doing, and look for ways to assist and learn from that process while allowing each party to focus on, and be accountable for, their core competency,” McDevitt says.
     
  • The service’s ability to provide choice: Michael Lippold, founder and CEO of FreshRealm – a Ventura, Calif.-based platform that helps grocers deliver fully prepped meals and meal kits online or in stores – notes that he has seen how important choice is to consumers in driving success and retention of meal-kit programs: As people begin to adopt meal kits as a regular part of their lives, they want variety in the menu to maintain interest and avoid product-selection fatigue.

    “In addition, consumer tastes vary season by season, region by region, even community by community,” he notes.

    Bring special diets and allergies into the mix, and variety is even more necessary. eMeals prepares recipes with ingredients necessary to create meals that are diabetic-friendly, heart-healthy and vegetarian. But when a grocer partners with a service that offers many choices, it must make sure that the service has the requisite sophistication in its infrastructure and supply chain to be sustainable. Many current meal-kit companies offer limited to no choice in their menus, due to this complexity.
     
  • Similar values and culture: Successful companies often have their pillars, the promises they make to their customers that they’ll always fulfill, Terra’s Kitchen’s McDevitt notes. Each party must understand and agree with its partner’s pillars.

    “At Terra’s Kitchen, we promise health, convenience and sustainability,” he asserts. “This is what our customers expect of us, and this is what we would look for in a partner to be able to enhance these values for both brands’ customer base.”

    Other examples include Gelson's with Chef'd and Whole Foods with Purple Carrot. Encino, Calif.-based Gelson's, already known for its gourmet, foodie-focused model, chose to work with Chef’d because of the service’s commitment to providing gourmet meal kits with recipes developed by renowned chefs and organizations. And Austin, Texas-based Whole Foods, known for its better-for-you image and natural and organic products, selected Purple Carrot as a partner because the service's focus on kits for plant-based meals complemented its own better-for-you image.
SoCal grocer Gelson's chose to partner with Chef'd due to Gelson's focus on high-quality gourmet foods, and Chef'd's partnership with renowned chefs and organizations to develop kits for gourmet meals.
  • Their own fresh program: Arguably, the most important quality of a meal kit is its freshness. Therefore, the grocer must first be trusted to have a top-notch fresh program, says Nicole Peranick, director of global thought leadership with Stamford, Conn.-based brand strategy and consulting firm Daymon.

    “The success of a meal-kit program is closely linked to the overall strength and reputation of fresh foods at the retailer,” she stresses. “If I don’t trust the freshness of your meat or produce, I’m going to be very leery of a meal kit.”
     
  • The service’s ability to keep things simple: When a grocer looks at a meal-kit service’s offerings, ingredients shouldn’t be too many; recipes shouldn’t be too complicated, or have vague or missing instructions; and the dish that results should reflect its picture and description.

    Additionally, if a grocer is one that truly seeks to empower its customers – even those who aren’t kitchen-savvy – then it needs to make sure that the service offers kits that can be prepared by anyone, regardless of skill level. For example, Home Chef’s DeNardis notes that his company engineers its recipes for easy preparation and appeal to cooks of all capabilities.

    “As convenience is critical to the meal-kit customer, a great deal of effort is required to test and hone recipes that are sure to be easy to execute,” he says.
     
  • The service’s experience with making retail-ready kits: Making meal kits for brick-and-mortar retail differs from making them for a subscription mail-order service, notes Kyle Ransford, founder and CEO of El Segundo, Calif.-based Chef’d. From tiny things such as creating barcodes, to greater things like inventory management, making meal kits to sell at retail can be more difficult to plan.

    "
    Most of the people in the meal-kit space have very limited inventory management, because they bring it in on a Monday; they package it up on Wednesday; and they ship it out in that cadence,” Ransford explains. “They don’t inventory that stuff. If it’s left over, they send it to the food bank or throw it away.”

    They also have to have the ability to continually look at and manage the meal-kit category at store level according to what’s selling well and what isn’t. For instance, while a kit with meatballs might sell well at one store, one with tuna might sell better at another location.

    "
    Retailers should be looking to continually change, update and refresh what is in this category, and they should be thinking about it at a store-level way,” Ransford suggests. “Therefore, do they have a fulfillment partner that can help them there?”