27 Jul 2020 Covid-19 resuscitates meal kits – for how long?
Meal kits have had a roller coaster history, whether purchased in-store or by subscription. The recent boom went south before the Covid-19 pandemic which suddenly restored interest — as this article outlines, the only certain thing about meal kits, it seems, is their uncertain future.
The category exploded a few years ago; in the US sales grew 22 percent in 2018 to reach roughly $3.1-billion, according to market intelligence service Packaged Facts.
Yet cracks showed that year, as big players like Blue Apron and HelloFresh failed to turn a profit because of challenges with customer retention and the high costs of advertising, marketing, packaging and shipping.
Darren Seifer, food and beverage analyst for NPD Group, compares the category’s trajectory to the dotcom boom and bust of the early 2000s. “It’s been a whole lot of players jockeying for market share and not thinking about the bottom line,” Seifer said.
In the months leading up to the pandemic, meal kits had flatlined — the number of US adults who said they used one in the past month held steady at five percent, according to NPD.
“Then enter Covid, and all of a sudden, eight percent of consumers are using meal kits,” Seifer said, citing NPD ’s Covid-19 Pantry & Food Strategy Tracker. “It looks like the desire to stay inside and avoid crowds, and still have a meal solution as people find themselves cooking more, helped the meal kit sector at least temporarily.”
Right now, meal kits have become lifesavers for full-service restaurants that have seen an 80 percent decline in traffic, according to April data from NPD Group…..
Full-service restaurants were struggling before the pandemic, as fast-casual enjoyed growing popularity, but Covid has given them a boost in traffic, ironically, as they transform their operations into meal kits and grab-and-go models.
They’re capturing 38 percent of the market (which doesn’t include convenience stores or supermarkets) compared to 17 percent in 2019, based on a survey of more than 5,000 consumers conducted by the data research firm Datassential and the International Foodservice Manufacturers Association.
“Right now it’s about providing solutions while people have to stay home, but can meal kit companies provide other conveniences that consumers find worth the spend?”
“Look at what grocery stores have already been doing — more and more are getting into the food service space, by offering meal kits, but also by having quick-service restaurants within retail,” Seifer said. Meal kits give restaurants a chance to compete for that part of the market.
Seifer doesn’t think the market for shortcuts is going anywhere, as long as people are eating at home. “People are making many more meals at home, but they don’t want to spend more time in the kitchen than they have to,” he said. “Meal kits answer not just what’s for dinner but how do I put this together?”
But he can’t predict if they’ll survive a return to good health; users often cite cost as a reason to abandon them. “Right now it’s about providing solutions while people have to stay home, but can meal kit companies provide other conveniences that consumers find worth the spend?”
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