Why the Meal Kit Market Is Probably Overheated and Overhyped

But that hasn't kept big stars out of the kitchen

How will meal kit companies that want to appeal to the everyday consumer actually do so on a national scale? Linda Pugliese, Marley Spoon
Headshot of Lisa Lacy

Meal kit companies promise to make consumers’ lives easier by eliminating the drudgery of grocery shopping and meal planning, but they also pitch themselves as friendly kitchen companions who can make cooking more exciting and accessible. With chef-crafted recipes and seasonable ingredients that are healthier and ethically sourced—thereby eliminating waste and enhancing sustainability—the world would be a better place, it seems, if we all just ate meal kits.

One of the problems, however, is that there are a lot of them: Blue Apron, Plated, Purple Carrot, Marley Spoon, Green Chef, Chef’d and Home Chef, to name a few.

According to the National Venture Capital Association, VC activity in meal kit companies peaked in 2015 when 25 deals closed totaling $308.1 million. In 2016, 23 deals closed for a total of $252.2 million; last year, the number of deals was down slightly—18—but the capital went up to $273.9 million. That’s a lot of meal kits. But is it worth it?

By the numbers

Per a report from measurement and analytics company Nielsen, in-store meal kits generated $154.6 million in 2017 sales, which marks growth of more than 26 percent year over year. In addition, Nielsen found 9 percent of US consumers have purchased a meal kit in the last six months—and 25 percent said they would consider trying a meal kit in the next six months, which translates to a potential audience of more than 30 million households.

At the same time, Nielsen found 26 percent of meal kit customers classified themselves as gourmet cooks, while 56 percent of consumers disagreed that meal kit services are affordable for everyone.

At least anecdotally, there’s evidence to support this. Meal kit companies offer a variety of plans and services, but they average to about $10 a serving. So how will meal kit companies target the everyday consumer on a national scale?

Sucharita Kodali, vice president and principal analyst serving ebusiness and channel strategy professionals at market research company Forrester, said the meal kit space is a small single-digit percentage of the nearly $1 trillion grocery industry.

“It just doesn’t resonate with a lot of people because consumer tastes are so different,” she added.

Star power

Meanwhile, weight management company Weight Watchers and retailer Walmart recently announced that they, too, will offer branded meals in the name of convenience and health this year.

Weight Watchers will offer its quick prep meal kits for grocery retail in the second half of 2018, which means consumers can simply select meals when the spirit moves them. The company has an existing base of 3.2 million members to theoretically target. Additionally, Weight Watchers has the crown jewel that is Oprah Winfrey—but the weight management company declined to comment on her potential role.

“Celebrities help to amplify the marketing. It’s never a bad thing, especially if it’s a beloved celebrity with broad recognition like Oprah,” Kodali said. “But who knows how involved or not she’ll be [with meal kits].”

Weight Watchers isn’t the only brand with star power. Take Purple Carrot, for example, which is perhaps best known for working with New England Patriots quarterback Tom Brady’s TB12 Sports organization on TB12 Performance Meals, which have plenty of protein, no gluten and limited soy.

According to Andy Levitt, founder and CEO of Purple Carrot, Brady himself eats largely a plant-based diet (example: this Instagram post for Brady’s signature avocado ice cream), making him the perfect face for the line. “I think of Tom as an incredible example of what someone can achieve by incorporating a part-time plant-based diet,” Levitt said. “Tom adds another level of validity to what we’re doing and the importance of eating a plant-based diet.”

The company declined to disclose membership figures or funding to date, only saying that the brand “is on track to ship more than 5 million plant-based meals in 2018” after shipping 3 million such meals in 2017.

And then there’s Marley Spoon, which seeks to eliminate food waste and supermarkets; the company has a revenue-sharing agreement with Martha Stewart in which the lifestyle guru provides recipes and evangelism while Marley Spoon handles manufacturing and logistics.

“She obviously has a big following and talks about the products, she cooks publicly, she goes on TV, she helps to get the word out … on Facebook Live and events,” said Fabian Siegel, founder and CEO of Marley Spoon. Stewart has also helped service attract a broader audience, including older consumers who are perhaps empty nesters, Siegel added.

But Marley Spoon, too, would not disclose subscriber figures, instead noting that at the end of 2017, they recently sent their 10-millionth meal.  Thus, whether Brady and Stewart prove to be a competitive advantage remains to be seen.

The Blue Apron solution

Like Weight Watchers, Walmart is taking its new meal kits straight to store shelves (although they will also be available through its online grocery pickup service). According to Kodali, Walmart is going after the Blue Apron solution—but it’s about three years too late. What’s more, Walmart doesn’t have the advantage of being able to purchase only the inventory it needs. If, however, Walmart comes up with 10 to 20 well-priced meals that consumers consistently buy, Kodali said the retailer will have a decent product line that can drive some incremental margin for each store.

“But it’s not going to transform Walmart’s business, and the meal kit industry isn’t even that attractive of a segment to tackle in the first place,” she added.

That’s because most of the companies in the meal kit space are venture-funded startups that spent a lot of money on marketing and showed rapid growth in a short period of time. “Startups like that chase investor trends, and companies have been trying to crack the online grocery sector for years … for the most part, unsuccessfully,” she said.

Kodali said meal kit companies and grocery retailers alike are reacting to Amazon and Whole Foods. “Everyone in that grocery industry is terrified, and the investment banks and VCs are all goading these poor retailers to do things they’d never do otherwise,” she said. “The banks and VCs are like the bully at the frat party egging on the nerd to take more shots and do keg stands.”

@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.