People take many things into account when planning their meals for the week. Flavour, dietary requirements and personal preferences all play a part, but for many people, convenience is king. While many of us enjoy cooking, busy lives mean that planning and cooking a fresh, delicious meal from scratch every night isn't always possible. Meal kit companies like Blue Apron and Hello Fresh seek to solve this problem, delivering convenient pre-prepared groceries and recipes to millennial couples and time-poor families alike.
This idea has captured the attention of consumers, and the meal kit industry reached $5 billion in sales by July 2017. For meal kit companies though, it isn't necessarily a case of 'if you build it, they will come'. While 89 percent of Blue Apron’s customers have made repeat purchases from Blue Apron alone, customer retention and loyalty in the meal kit space isn't always as rosy. According to a 1010data report, after 13 weeks, less than 20 percent of customers of the big three - Blue Apron, Hello Fresh and Plated - are still ordering meal kits.
Loyalty is still an issue
With well over 100 meal kit companies in the United States, competition for customers is fierce. For consumers who are drawn in by the convenience of meal kits, the high quality on offer from each company and the hefty sign-up discounts mean that loyalty isn't necessarily a concern. For meal kit companies, the high cost of attracting and retaining customers is. When quality, price and range of meals are broadly similar across the board, how do they stand out and cultivate loyalty? Many meal kit companies offer menus that are suitable for particular dietary requirements. Sun Basket offers a Lean and Clean option, while Green Chef has created a Keto plan, and Marley Spoon is leveraging the power and influence of the celebrity chef by partnering with culinary giant Martha Stewart. Perhaps the most important consideration for consumers when deciding to give up on their meal kit subscription is price. With meals costing from around $10 per person, the meal kit option often isn't affordable for families longterm. Dinnerly (also by Marley Spoon) aims to solve this issue by offering family-friendly meal kits at an affordable price of $5 per person.
It's early days, but it seems Marley Spoon may have cracked the issue - a one size fits all approach is not the answer when it comes to customer retention. Undoubtedly there is a market for the $10-per-plate meal kit model that so many companies currently follow. A study by Morningstar suggests that 19 million Americans will have tried meal kits by 2021, with 11 million people making regular orders by that time. Loyalty will come from offering consumers what they really want - and what consumers really want depends on everything from their values to their spending power and family status. What Marley Spoon offers is a choice. Premium celebrity chef-designed recipes will attract consumers who want to create trustworthy, restaurant-quality dishes in their own home, whereas the low-cost, family-friendly meal kits will capture the attention of busy families with picky eaters who want to spend less time in the supermarket and more time together.
Retailers are embracing meal kits
Another avenue meal kit companies are pursuing is partnering with grocery stores. In an industry that is designed to remove shoppers from grocery stores, this may seem like an odd decision, but it's a mutually beneficial one. Faced with a 'retail apocalypse', retailers are exploring innovative add-ons that will excite and engage customers, driving them into the store. According to Cardlytics, meal kit subscribers spend 28% more in-store than the average food shopper, which makes them incredibly valuable to grocery retailers. For meal kit companies who face huge customer acquisition costs, selling in grocery stores represents an opportunity to reach thousands of shoppers in search of fresh, delicious and convenient ways of cooking. Retailers themselves are getting in on the act. Albertsons has acquired Plated and Kroger has launched its Prep+Pared range of meal kits. And with Amazon testing its own range, potentially with a view to offering them for sale both online and in Whole Foods Market, it's clear that the meal kit industry is far from dead. The question is, who will solve the loyalty issue? Only time will tell.