Meal kits have come a long way since their U.S. debut just five or so years ago. With a wide variety of healthy, diverse food options and cooking guidance while eliminating time-consuming prep work and food waste, meal kits offer abundant benefits for consumers, thus driving the category’s rapid growth. But what about the benefits for meal kit providers?
Customer retention challenges coupled with high costs of production, packaging and delivery of perishable products have proven the original meal kit model to be a logistical nightmare. As a result, meal kit companies are reconsidering their approach, increasingly turning to brick-and-mortar retailer partnerships and acquisitions. (See: Blue Apron and Costco; Plated and Albertsons; HelloFresh and Giant Food; Home Chef and Kroger.)
Retailers such as Raley’s, Walmart and Meijer have also begun launching meal kits of their own, eager to snatch a piece of the rising meal kit consumer base without the commitment of a subscription. According to a recent report by market research firm Packaged Facts, based in Rockville, Md., the U.S. meal kit market had sales of $2.6 billion in 2017 and will grow nearly 22% by the end of 2018 to reach $3.1 billion. The company predicts that the category will continue to grow in the coming years, but as more traditional stores offer meal kits as a product rather than a service, the market will increasingly resemble other premium, convenient grocery products such as fresh-cut, ready-to-eat produce.
As such, retailers and meat suppliers are upping their efforts to offer convenient, creative and healthful meal solutions, further blurring the lines between meal kits, prepared foods and value-added protein products.
Perfecting Portion Sizes
When it comes to meat—which many consider to be the most important meal kit component—providing profitable portion sizes can be a challenge. While other components, such as produce and spices, are already available in precut and prepackaged formats that can easily apply to meal kits, the meat industry has consistently prioritized selling large quantities of meat by the pound and must learn to adapt to offering flexible package sizes.
“What’s interesting about meal kits is, logistically, those retailers and manufacturers are struggling with getting all of these different products in one box or package, and that’s why the first place that meal kits came to be was in a [vertically integrated] subscription model,” says Jonna Parker, principal with Chicago-based IRI’s Fresh Center of Excellence. “The meat industry plays a critical role in making sure that the right portion of the right protein is available in that kind of package size. And that’s an increasing trend in value-added that we’re going to see demand for, whether it goes in a kit itself.”
Indeed, breaking down a whole animal into precise portion sizes is challenging for suppliers striving to provide meal kit products while also remaining price competitive. “Meal kit companies quite often are very focused on hitting an exact size,” says Jefferson Heatwole, EVP of sales and marketing for poultry producer Shenandoah Valley Organic, based in Harrisonburg, Va. “If you’re going to cut something down to a small portion size, what do you do with the rest of that product?”
Projecting demand and avoiding spoilage also pose challenges for meat suppliers seeking to provide items for meal kits, particularly when offering a variety of meal kits on a regular basis, says Catherine Golding, business development manager for Washington, D.C.-based True Aussie Beef & Lamb, a subsidiary of Meat & Livestock Australia. The company provides market research for the Australian red meat and livestock industry, promoting the consumption of beef, lamb and goat meat for foodservice and retail applications, including meal kits.
“From a supplier standpoint, ensuring consistency is important,” Golding says. “Meat cuts must be similar in size, shape and appearance to avoid shoppers from sorting through inventory for the ‘best’ choice.”
From a retailer’s perspective, merchandising meal kits in strategic areas of the store is essential to increase shopper exposure and encourage new customer acquisition. Raley’s Family of Fine Stores, based in West Sacramento, Calif., recently launched its own line of subscription-free chef-created meal kits, including full kits, quick kits, creative kits, sides and meal components. The retailer displays the line on front endcaps in about 75 of its stores while merchandising them in the prepared foods department at its remaining locations.
For complete article follow this link.