There’s no doubt that meal kits have gained a lot of attention in the past few months. Since the launch of Blue Apron in 2012, the variety of meal kit service offerings has skyrocketed, increasing by 311% from 2014 to 2015. It’s projected that meal kit sales could reach $1.3 billion this year with an optimistic $36 billion in annual sales within the next ten years. It’s no wonder that Amazon has taken notice. With the one-two punch of the purchase of Whole Foods in June and the subsequent launch of meal kits, Amazon is poised to take largest market share of this booming category. As marketers, we know that when Amazon takes on a category, another major disruption is about to take place.
It’s been estimated that after subscribing to a meal kit service, subscribers decreased their traditional grocery spending by 6% and their restaurant spending by 4.2 percent. In fact, in-store meal kit sales rose 6.7% to $80.6 million in the U.S., which translates into one in four adults purchasing a meal kit (in-store or delivery) in the past year. (Learn more from the Nielsen report)
Meal kits seem like the perfect fit for Conscious Consumers. They offer not only convenience but also the promise of fresh ingredients and sustainability. In fact, 81% of meal kit consumers feel that these services are healthier than other prepared options at the grocery store. Many are satisfied with the quality of produce and meat included, which has typically been a criticism of frozen entrees and other packaged meals. Plus, new and healthy recipe alternatives give Conscious Consumers a break from their normal meal routines. Sounds like a perfect fit, right?
Unfortunately, like any growing disruptor, there are challenges that surface that could derail momentum if adjustments aren’t made. The biggest issue of the meal kit category is consumer churn. An independent marketing tracking firm found that only half of Blue Apron customers stick around after the first week of service and only 10% are still subscribing within six months of starting. This sounds an alarm for most marketers who know that the high cost to attract a new customer can quickly eat away profitability and growth.
But perhaps the biggest issue that resonates with Conscious Consumers is the level of meal kit waste. Meal kits individually wrap each ingredient so that everything is measured perfectly to take the guesswork out of cooking. However, this creates an abundance of packaging to recycle or throw in the trash. In fact, nearly 20% of consumers who have purchased meal kits state that too much waste was a significant drawback to the service. Not surprisingly, 71% also stated that the kits were too expensive. A meal for two people from a grocery store meal kit can range from $14-$16, while a meal kit subscription service can cost up to $48 per week.
From our Conscious Consumers research, meal kits seem to fit the role of “coaching” to help Conscious Consumers find new ways to improve their diets, explore healthy cuisines and provide incentive to expand their menu options. With some slight reconfiguring of price and reduction of waste or the inclusion of recyclable materials, meal kits could serve as a long-term player in capturing more grocery dollars. To keep Conscious Consumer attention however, meal kit providers might consider charitable giving initiatives to further strengthen loyalty in an already crowded market place.