Is there a place at the retailing table for meal kit delivery services?

Competition in the food retailing marketplace is heating up (has it ever cooled off?) as the rapidly intensifying option of online sources for groceries and meal ingredients converges with the traditional brick-and-mortar food retailing environment.

Disruption has been well underway, headlined with Amazon’s acquisition of Whole Foods Market, followed by Albertsons’ purchase of meal kit delivery operator Plated and the IPO of another meal kit delivery company, Blue Apron, which then partially fizzles due in no small part to trademark filings relating to meal kit capabilities made by, you guessed it…Amazon.

While meal kit delivery companies have certainly captured the imaginations of investors and the media, consumers are a different story.

Consumers are cautiously reveling in the bounty of seemingly endless choices available to them in terms of where to source groceries, meal ingredients and take-away “ready-meal” foods.

A critical challenge meal kit delivery companies face is consumers’ perceptions that more time and labor are required to prepare a meal kit than a typical weeknight meal. According to The Hartman Group’s Food Shopping in America 2017 report, convenience is still a key need. But much like value, consumers’ ideas of what convenience means have matured.

Consumers’ desire for quick and easy is increasingly matched by an unwillingness to sacrifice flexibility in choice, a positive experience and personal needs. With more products and retailers catering to the demands of the new convenience, from prepared foods to meal kits to click & collect services and online delivery, consumers can factor these into their shopping habits and look for convenience options that also provide enjoyment.

What does convenience in food sourcing mean today?

Our Food Shopping in America 2017 report finds that past perceptions of convenience were about easy (known layout), quick (short lines, plentiful parking) and accessible (easy-to-access location). Contemporary notions of convenience are about flexibility (immediate consumption, spontaneity), experience (atmosphere, staff interaction) and customized designed (grab & go, inspirational, meets my nutrition, taste, portion-size needs).

Awareness and usage

Convenience is not the only benefit of online grocery shopping or a meal kit delivery service. Value, a way to break away from the routine, an alternative source for when you can’t get to the store and a time-saver are notable advantages consumers cite for shopping online or using a meal kit delivery service.

Most online grocery shopping today still centers on the “typical” online stores like Amazon or Walmart.com, usually for supplemental trips. Among online shoppers, using a meal kit, smoothie or snack box delivery service lags far behind these retailers: only 25% of online shoppers have used a meal kit delivery service of some type in the past three month

Who does meal kit delivery services appeal to? Primarily younger shoppers. As the following chart shows, 65% of millennials say they are interested in services that deliver ingredients for meals that they could assemble/prepare at home compared to 50 percent of Gen X and 33% of Boomers.

The biggest hurdle for online retailers (meal kit delivery companies or online grocery retailers) remains overcoming consumers’ perceptions of an overall inability among purveyors to deliver fresh products, with cost a secondary but not unimportant issue. With a bit of savvy and perseverance, however, current online shoppers easily find ways to mitigate these issues. When it comes to meal kits, hurdles include perceptions of increased labor and time spent cooking compared to typical weeknight meals — this hurdle is overcome by making meal kit nights a social affair, where everyone helps cook.  Another hurdle when it comes to meal kits centers on pragmatic assumptions among consumers who say, “I already know how to cook and shop” — which is overcome by recasting meal kit subscriptions as an investment in ways to try new recipes, ingredients and flavor profiles

There is no doubt that technology has opened new avenues for food procurement, but our belief is that these emerging formats — from the local food specialists to smartphone-powered “instant” meal delivery — will not remake food retailing as we know it in the near term. The influence they will have will be more cultural than financial for now.

As CEO of The Hartman Group, Demeritt drives the vision, strategy, operations and results-oriented culture for the company's associates as The Hartman Group furthers its offerings of tactical thinking, consumer and market intelligence, cultural competency and innovative intellectual capital to a global marketplace.

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