Kruse Company president Nancy Kruse says the meal kit industry is similar to an earlier trend.
It’s understandable, Bret, if the hubbub over the meal kit industry seems like déjà vu all over again.
As you know, these businesses deliver ingredients accompanied by step-by-step recipes to subscribers. Its emerging leader is New York City-based Blue Apron, which delivers about three million meals a month and, after securing its latest round of funding, is valued at the tune of a hefty $2 billion.
It is being chased by competitors like HelloFresh and Plated, which are also headquartered in Gotham, and deliver a broad menu of familiar favorites and ethnic specialties weekly. There are a number of other players around the country, too, like PeachDish, which is based in Atlanta and offers many Southern specialties, and Just Add Cooking, which is based in Boston and emphasizes Northeastern foodstuffs.
The feeling that we’ve been through this before may derive from the fact that it comes barely a decade after the take-and-make segment created a similar uproar in the food world.
In that model, meal-assembly centers like Dream Dinners or Super Suppers offered kitchen space, raw ingredients and recipes to consumers, who were invited to come in with their friends, swig a little wine and put together a batch of family meals that would be taken home and frozen until needed.
Early on, Mintel projected revenues of $1 billion by 2010, but in 2008 The New York Times ran an article titled “It’s on to Plan B as a Hot Trend Cools Off,” which reported that growth estimates had been way too optimistic, and that the remaining operators had largely ditched the meal assembly piece and switched to selling fully prepared frozen meals. Super Suppers, which had boldly forecast 600 stores, has six, according to its website. The Times post mortem cited lack of consumer interest in pre-planning their meals a week or two in advance and quoted rueful operators who had succumbed to irrational exuberance.
The current crop of meal kit purveyors shares some fundamental commonalities with the take-and-makes. Both aim to provide convenience by assuming meal planning and grocery shopping functions.
There are, however, important differences. The most obvious is that meal-kit services bring the raw materials right to the customer, who is free to swig wine while prepping in the comfort of his or her own kitchen. A second is that the recipes are heavily promoted as chef-created, and the ingredients can be edgily ethnic, like the epazote or vadouvan that pop up in Blue Apron’s recipes. They are also invariably characterized as fresh and seasonal, often locally sourced and/or sustainable. In fact, many company websites offer great detail on cooperating farmers, their families and their fields.
The tech piece is critical, too, as transactions are conducted solely online. Competitors are popping up faster than sustainable mushrooms, and capital has been flowing freely. Technomic forecast that the meal kit segment will reach $3 billion to $5 billion in the next decade. This assumes, of course, both consistent, ongoing use of the services by current customers and substantial growth of new users — basic success requisites that bedeviled the take-and-makes.
There’s also a sense of déjà vu around the growing drumbeat of concern about the impact on the restaurant industry. After all, if you can create your own chef-inspired, high-quality meal at home, why go out? The ingredients are pre-portioned, sometimes already sliced and diced, and some recipes promise a finished dish in as little as 20 minutes. Meal cost varies by service and number of servings, though most analysts peg it somewhere between the cost of homemade and restaurant prepared. Blue Apron’s family plan, for example, serves four people for $8.74 per person, while the two-person plan is $9.99 per person.
We’re at the place where I hand this off to you, Bret, and I am curious to get your take. Let’s say the segment does reach $3 billion in sales, which I think is a pretty iffy proposition. Do you think it poses a threat to foodservice? I suspect it will settle in as a niche business with a small band of well-capitalized, well-managed survivors. What do you think? And since you’re based in New York City, the epicenter of meal-kit providers, do you plan to try any of them before the bubble bursts?
Meal kits hardly a threat to restaurants
The following is NRN senior food editor Bret Thorn’s take on meal kit services.
Well, Nancy, the National Restaurant Association puts annual restaurant industry sales at $709.2 billion, which means a massive meal kit industry of $3 billion would put it at less than half of 1 percent of total foodservice sales — 0.42 percent to be more precise. That’s hardly a threat.
Also, it’s not a threat because ingredients and a recipe are not competitors for a restaurant experience.
Let me count the ways in which they’re not:
1. The recipes are chef-inspired? Who cares? Ingredients and a recipe don’t make a meal made by a chef. Chefs know how to cook. They understand the idiosyncrasies of their equipment and the nuances of specific pieces of protein. They know when vegetables are cooked the way they want them to be cooked. Cooking is an art; recipes — particularly recipes for home cooks — are more like paint-by-numbers. If the restaurant industry were threatened by recipes my desk wouldn’t be cluttered with all the cookbooks written by chefs that are sent to me — even from chain restaurants. Without craning my neck I see one cookbook from True Food Kitchen and another from California Pizza Kitchen.
2. Restaurants are about more than not cooking. They’re about getting out of the house, socializing, having people bring you stuff, especially at dinner, which I assume is when these meal kits are most likely to be prepared. That meal period has been particularly resistant to limited-service occasions, which is why even the robust fast-casual segment is more successful at lunch. I was recently speaking to John Gilbert, the CEO of the casual-dining chain Romano’s Macaroni Grill, which last year implemented a Kitchen Counter fast-casual-style service at lunch and recently expanded it to dinner. Gilbert said it boosted sales at lunch, but people still want to be waited on at dinner.
3. Ah, but what about take-and-bake chains such as Papa Murphy’s, you might ask. They have seen success by preparing food for people to finish at home. True, but tossing a pizza in the oven is a far cry from taking out a skillet, turning on a burner, stirring things and washing dishes.
4. Washing dishes. I think that deserves a bullet point of its own.
5. Not all restaurant occasions are service-focused, it’s true, and many drive-thru windows do robust business. But a drive-thru dinner is an occasion when convenience is paramount. Meal kits might be more convenient than planning a menu and going grocery shopping, but it can’t compare to a drive-thru window.
About 10 or 12 years ago the Washington Apple Commission asked consumers why they didn’t eat more apples, and a common response was that apples weren’t convenient enough. That’s one reason you can buy pre-sliced apples now, and it illustrates that when people are looking for convenience, a meal kit is not what they’re thinking about.
That doesn’t mean there’s no future in meal kits. I’ve been looking at consumer research that indicates that Millennials in particular — people in their 20s and early 30s — are willing to take an extra step or two to make their meals better, even if they’re not about to cook the whole thing from scratch. “Better” can mean a lot of things — tastier, better for them, more wholesome or authentic, or some other nebulous notion that helps to put them at ease. Meal kits seem perfect for that. They probably give their customers a feeling of taking better care of themselves or their families, and of being more involved with their food. Those are attributes that many Americans, particularly younger ones, are looking for these days.
But they’re still busy, and they still like restaurants. Meal kits will likely be improvements, in theory at least, of other types of home-cooked meals. And when consumers don’t feel like cooking, restaurants will be waiting, as they always have been.
Nancy Kruse, president of the Kruse Company, is a menu trends analyst based in Atlanta and a regular contributor to Nation’s Restaurant News. E-mail her at [email protected].