Fresh Meal Kits Delivered… Are They Worth the Hype?

Meal delivery kits have grown more and more popular over the years with consumers of all ages, especially Millennials. You cannot check your social media, watch TV or even listen to the radio without stumbling upon yet another Hello Fresh or Blue Apron ad. As the trend of fresh, ready-to-cook meals delivered straight to your door seems to be on the rise, is that really the case?

A beautiful blend of cooking from scratch and going out to eat is what a meal kit desires to be. With the average cost per meal being around $10-$13.50, using a meal kit proves to be less expensive than going out, but is still almost three times the cost of shopping for your own groceries and truly cooking from scratch. The beauty of meal kits (this is a big appeal to those environmentally savvy) is that you ideally won’t have any food waste. According to the USDA, on average 30-40 percent of food is wasted every year. Everything is portioned out per use, so you will only get the exact amount necessary for each meal that you will cook.

As the market flushes with different meal kit services, it seems as though this fad is not sustainable or profitable. Companies are having to give out major discounts on the first few deliveries (right now for their New Year special, Hello Fresh is offering $20 off each of your first three deliveries). The heavy influx of different meal kit services, including those endorsed by celebrities like Martha Stewart’s Martha & Marley Spoon and Tom Brady’s Purple Carrot, have caused the market to be flushed with different options. Why wouldn’t a consumer just try one and then switch to another to get yet another great discount after the first expires? Well, that is exactly what they are doing. According to a recent study done by Cardlytics, after one month, only 77 percent of customers remained with a meal kit delivery service, only 48 percent were left after six months and after one year, only a small 29 percent remained. This creates sustainability problems for companies.

So how can a company profit if they cannot create repeat customers? This is the problem that many, if not all, meal kit companies are currently running into. In July of 2018, Blue Apron (APRN) was trading at around $3.10. As of January 3, 2019, the stock had dropped to $1.01. If companies could figure out how to package and market the delightful aromas that their meals create, they may see a better return. Currently, only nine percent of the population has tried a meal kit delivery service. Sales are projected to be great in the next few years, but as it currently stands, the future of meal kits has yet to be determined.