(Photo: Flickr user Wicker Paradise)
From restaurant and retail giants that are household names to small, regional brands that aren’t known throughout the whole industry, subscription services are becoming a big part of the food and beverage space. Services like Amazon Prime and Blue Apron are increasingly finding favor among consumers with busy lives, so what does this mean for the traditional retail and restaurant players and the food industry as a whole?
In addition to major brands Amazon and Blue Apron, the current market for meal and food subscription services includes companies like Plated, Purple Carrot, Freshology and Carnivore Club. And the field is only getting bigger, according to Tom Caporaso, CEO of Clarus Commerce. He said that last year alone, venture capitalists invested more than $1 billion in food technology businesses, a category that includes subscription services, and such services cater to almost every palate, dietary plan and budget imaginable.
“Not only is it similar to the growth trend in investments for subscription businesses, overall, but in an increasingly service-oriented economy, food and meals are an obvious, enduring category of consumer interest,” Caporaso said.
Subscription services appeal to consumers due to their convenience, quality, ease and affordability, according to Caporaso, and they allow consumers to save time in their busy schedules and, in some cases, save money in their tight budgets.
“On an individual basis, happy subscribers will begin to rethink their usual shopping and/or dining choices,” Caporaso said. “Collectively, if enough people start changing their habits and behaviors, the traditional providers, i.e., local grocers and restaurants, will see an emerging threat to their bottom lines and adjust to it by revising or completely redesigning their offerings and/or their entire business models.”
The ease and convenience of subscription services, and the fact that consumers can now get individual ingredients and even full meals delivered right to their doors is putting pressure on restaurants and food retailers to increase their value in consumers’ eyes and make trips to their establishments worthwhile, according to Caporaso.
“There will always be a place for restaurants and local grocers…but if companies like these can consistently deliver quality food and groceries at affordable rates, they can take a portion of revenue away from brick-and-mortar grocers and restaurants,” he said of subscription services.
However, there are advantages that traditional restaurant and food retail companies have over subscription services, if they choose to seize the opportunity, Caporaso said. Not only do they already have the physical space and customer base to establish their own versions of subscription services, but they also have industry knowledge, finances and other elements that would allow traditional restaurants and retailers to perfect and grow a subscription service.
Traditional restaurant and food retail companies also have the means to be competitive with subscription services without the actual subscription part, according to Caporaso. Because many subscription services offer specialty products like organic or artisan foods, grocers could entice shoppers to buy those products in their stores by expanding their offerings and enhancing their marketing efforts to educate consumers about their selection of such items.
But it’s not all about competition when it comes to subscription services and traditional food and beverage companies.
For Carnivore Club, which sends members premium packages of cured meats from different companies in the U.S., Canada and Europe, the relationship with the brands that provide the meats is a partnership.
“We really tell the story about the artisan and their products and how they’re made,” said Tim Ray, CEO and founder of Carnivore Club. “It’s a really cool discovery process for both the artisan and the consumer. We’re helping them find new products that they wouldn’t find otherwise.”
Through Carnivore Club, artisan cured meat makers that are often small, regional companies gain national brand exposure to consumers who are interested in their products, Ray said. And because Carnivore Club pays the meat companies for their products up front, working with the subscription service is a “risk-free” way to grow their cured meat customer bases, he said.
“This is a really good way to sample your product to a couple thousand people who love cured meats…and the only way they can get the product again is if they go to the website and repurchase,” he said.
Ray said subscription services fit into the food and beverage space as another piece of the marketing equation for the types of small companies that Carnivore Club works with, in addition to bigger, more well-known brands. But no matter how restaurant and food retail companies work with subscription services, they’re pretty much a permanent fixture in the food and beverage industry, he said.
“The subscription model is here to stay,” Ray said. “Whether it’s meat in the mail or wine or cheese or your music, the subscription model is a way for businesses to offer more value to the consumer than just paying on a per-use basis.”
Caporaso added that the market for food subscription services will likely grow, especially if grocers, restaurants and pureplay subscription services continue to tap the busy family demographic.
“If a company or entrepreneur can find a scalable way to do that, it could upend both the grocery and the restaurant markets,” he said. “Food is a universal need — everybody eats — so the options run as wide as people’s tastes.”
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