By Dorsey & Company Associate and Guest Writer Mark Bogomolny
This post-holiday season may find many families staying indoors, cutting back on spending and enjoying more meals in-home. Some of those meals may include trials of meal kits received as gifts or purchased online or – lately – in the grocery store. If you have thoughts on the phenomena, please share them here.
Across the country, grocers are increasingly offering meal kits for purchase. According to a Nielson study, in-store meal kits generated sales of $154.6 million in 2017 – a 26 percent increase over the year prior.
This trend, coupled with the availability and choices of meal kits, may cause grocery stores to take a harder look at this segment of the food industry. The thought of being able to have all the fixings needed to make a family meal at home from one box is undoubtedly appealing to many.
The temperature-controlled boxes filled with pre-measured, fresh ingredients and step-by-step instructions from companies like Blue Apron, Hello Fresh and others found mostly online until now, give the buyer a way to expand their palates and cooking expertise without huge investment in products or time.
The down side for grocers? The addition of meal kits may mean less frequent trips to the store and less trial of new or higher-margin impulse items.
True, the category seems a lucrative one. Meal kit revenue is expected to surpass $10 billion by 2020, up from $1 billion in 2015. As the meal kit category continues to grow, more retailers are seeing the benefit of having them available in their stores, challenging the online competition. Including meal kits in their offerings gives grocers the chance to keep the customers in the store and still get them to try a meal kit. Done right, at least the grocer has the chance to add items to the shopper’s basket and profit from meal kit sales.
Additionally, if a grocer carries a kit from one of the existing providers, the retailer can benefit from the reputation the kit makers have already earned. In other words, the item already has an inherent demand or pull, lessening the risk for the retailer. Further, if grocers decide to go it alone and create their own kits, they can ride the coattails of the existing demand for meal kits.
Not only is the grocer keeping the sale in house, but selling kits – whether premade or made in house – will carry higher margins for the retailer than selling the items individually. The retailer can also introduce new items that may create new demand for products that a consumer may not have considered – like plant-based alternatives to meat for newly discovered vegan entrees or exotic spices from half-way around the world.
In-store meal kit benefits also accrue to the grocery store customer. First of all, the customer by-passes the long term commitment of a subscription to many of the major online meal kit delivery services. Secondly, the customer can make a spontaneous menu choice instead of planning around the future kit delivery. Finally, having these kits sold at the local grocer will reduce the amount of packaging and cooling products that the delivered kits require.
Grocers considering meal kits may be weighing the blessing and curse they pose. Considering their projected steady growth in sales and popularity, the good seems to outweigh the bad if the answer is “yes” to carrying meal kits on the grocery store shelves.
Mark Bogomolny is a Dorsey & Company Associate with more than 20 years experience in the grocery, retail and food service industries.