Mealkits have been an industry buzzword for the last 18 months, though they’ve yet to begin to realize the expected potential. Big players like Blue Apron and HelloFresh have stumbled through start-up phases, and customer retention rates have proven problematic with the average mealkit dinner clocking in around $12.50.
Now there’s a new player in the space that could revolutionize everything, doing away with the need for infrastructure and micro-curation and instead providing name-brand appeal with traditional delivery methods that will also boost brick-and-mortar and online retailer sales.
Meredith Corporation, publisher of iconic brands like Better Homes & Gardens and AllRecipes.com, announced last week it’s entering the “meal plan” market – basically, having its notable experts provide menus, right down to the last teaspoon of salt, for consumers, who can then use apps or other methods to have those meals picked and packed at retail or online for pickup or delivery.
Users can shop themselves or save time by skipping the grocery store with integrated pickup and delivery options. Users can place their order via an app for pickup at Walmart Grocery and Kroger ClickList locations, or for same-day home delivery through AmazonFresh, Instacart and soon through Shipt.
What makes that news particularly important is that Meredith is one of the world’s largest publishers, with a catalog of instantly recognizable, vetted consumer brands like Parents, People, Entertainment Weekly, Southern Living and Sports Illustrated – could entertainment and sports celebrity meal plans be far behind?
Says analyst Daniel McCarthy, assistant professor of marketing at Emory University’s Goizueta Business School, “I think Meredith could be a real competitor in the mealkit industry. With 200 million subscribers currently, they get very broad reach ‘for free’ which should lower their customer acquisition cost.
“The expertise they have built up in recipes should help keep down their cost to serve the customer. The partnerships with AmazonFresh and Instacart are interesting. This is certainly one way to allow Meredith to offer direct delivery, which will be a necessity for many of the people who will consider using the service. It also makes the business model very asset-light.”
The mealkit market has hardly been static. Many retailers have jumped in the game with their own offerings, despite disappointing early returns. As McCarthy’s previous research has pointed out, customer retention is a huge problem for mealkit purveyors. Blue Apron’s IPO last year was a major disappointment, with stock shares tumbling before and after the initial offering. Those struggles have continued, as this week it was announced that Hello Fresh, with its recent acquisition of Green Fresh, is now the leader in the mealkit space by a narrow 1% margin.
For whatever that’s worth. The verdict is most definitely out on mealkits, as far as consumers are concerned. The initial appeal is obvious: An easy way to make a quality meal at home and maybe combine that with quality family time. But when the end ticket comes to about $50 for a family of four, people start to wonder if maybe they could have had the same kind of quality experience by going out for a meal together and not having to do the dishes afterwards?
Meredith has partnered with eMeals, a leading digital meal planning solution for over a decade, to bring editorially curated meal plans to millions of home cooks through its well-known Allrecipes, Better Homes & Gardens, and EatingWell brands. Users of a simple app will have access to trusted, end-to-end meal planning solutions, developed by Meredith editors and staff nutritionists, from recipe inspiration to shopping list creation and grocery fulfillment. Users select the meals they want to make for the coming week, save recipe favorites, and automatically generate a shopping list of ingredients for pickup or delivery.
Paleo, Gluten-Free, Name A Diet…
Meredith’s mealplans are “cutting to the middle of the mealkit morass – you have no investment in infrastructure, no investment in perishables, you are simply packaging intellectual property – vetted, verified, credible intellectual property – and letting people do what they will with it,” says Forrest Collier, CEO of eMeals.
The added stroke of brilliance of partnering with local retailers for prep is utter genius. Prices plummet, retailers don’t lose business, consumers get the same experience: Everybody wins because they actually know the experts behind the meal plan. Not one consumer can name one person who works for or represents Blue Apron or Hello Fresh.
“It’s more experiential,” Collier says.
It’s also nothing new for Meredith and eMeals. What’s a mealkit other than a recipe that someone else picks and packs for you? Meredith has been doing that on the recipe side across the media spectrum for years – and with eMeals can do so in a variety of ways to meet consumer needs, from gluten-free to diabetic diets to whatever the fad of the moment is.
“We’ve been doing it for a decade but we’ve also used the platform to take the content form AllRecipes and Better Homes and Gardens and basically give the same option – once people sign up they’re free to use any of our plans, paleo, gluten-free or whatever,” Collier says. “The traditional mealkit certainly struck at the heart of the convenience people need and want in today’s culture and that works for some people.”
But for most Americans, mealkits are a novelty or a treat, something to enjoy “typically as a one-off or a once-a-month experience” except for “maybe a couple who both work and live in San Francisco or New York. But for most people who are feeding a family of two or three of four and wanting to do it multiple nights a week,” traditional mealkits are unaffordable, Collier says.
Will Consumers Be Willing To Do Any Prep Work?
McCarthy worries that Meredith might not be making the mealkit idea quite simple enough, though.
“How effective this distribution strategy is remains to be seen,” he says. “The traditional meal kit operators have gone a very different route, cutting and packing ingredients themselves, and having their own distribution facilities that they ship out of. Meredith is taking a more ‘hands off’ approach to prep work on the ingredients. This could certainly be cheaper, and offering a service that is cost competitive could win over some customers who otherwise would have been on the fence at a higher price point. But customer retention has been generally very poor for companies that primarily have higher prep time offerings.
That’s why “Blue Apron and HelloFresh have both pivoted a lot more towards low-prep meals, and Gobble, which has the best customer retention of any meal kit company, focuses exclusively on this market. So from a unit economics perspective, I would be less worried about CAC and cost structure, and more worried about what their customer retention will be.”
One thing’s for sure. Consumers love the idea of mealkits. When somebody finds the perfect solution to delivery, the revolution will be on in full.