Consumers Crave Fast, Affordable Meal Kit Fulfillment

Meal kit popularity depends on cost control and quality

Nearly five years ago, meal kit companies appeared to be market disruptors launched with the potential of changing how Americans ate, a threat to the $650 billion U.S. grocery industry.  Initially meal kit delivery companies had a simplified formula for success by shipping pre-measured ingredients and a recipe to consumers hungry for convenient, fresh meals.  Capturing and using the data from consumers helped to adapt menus and product offerings and provided valuable insight into making meal kit companies more successful.

Investors have continually provided rounds of funding.  In 2016, meal kit companies generated revenues up to $1.5 billion according to market research publisher Packaged Facts.

Meal kits introduced innovation into the food retail landscape. Now both e-grocers and traditional specialty food markets and grocers are selling meal kits in their brick and mortar stores, adding new competition.

The meal kit market is expanding far beyond the boundaries of the dinner plate.  Meal kit companies are considered part of the “e-food” market, geared towards helping consumers enjoy the dining and cooking experience.  The meal kit category could be expanded in a variety of ways such as offering options for meal kit breakfast, lunch, snack or party product offerings.   In addition, meal kit companies may offer specialized menu selections based on regional cuisine or preferences.

The USDA is exploring ways to enable SNAP benefit recipients to purchase food online from e-grocers including Fresh Direct and Amazon Fresh.  In some geographic areas, it can be challenging for consumers to have access to good grocery stores and restaurants with healthy options.

Supply chain considerations for producing and transporting meal kits to millions of consumers is challenging.  Consumers are paying a premium for freshness and convenience, necessitating that fresh produce and other meal ingredients reach the consumers quickly.

As anyone who deals with food and beverage goods knows, there are many factors influencing food safety and freshness including governmental regulations, transportation availability and cost, sourcing requirements, safety protocols and food quality concerns.  Often the goal is to deliver meal kits within three days of harvest, a seemingly impossible task.  Let’s take a look at some of these challenges.

Keeping meal kit costs low starts at sourcing.  For each brand, consistency of product quality is of considerable concern.  Having a variation in the freshness or quality of the ingredients between meal kits produced an uneven, sub-optimal customer experience.

To reduce sourcing costs, businesses buy higher volumes of goods from a single supplier to receive discounts.  Although meal kit companies cannot purchase goods in volumes equal to that of national grocery store chains, they can scale on the outbound side of the food supply chain.  This involves dividing supplies and goods into smaller amounts than grocery stores.

Speed is another factor.  Produce and other temperature-sensitive ingredients are highly susceptible to spoilage and tend to have a shorter shelf life.  To meet consumer expectations for freshness, all meal kit ingredients have to be assembled rapidly then packaged for shipment to the consumer.  This adds time, labor and handling costs.  Keeping material and ingredient costs low is essential to ensuring manageable meal kit pricing, especially after the cost of transportation is factored into the equation.

Meal kit companies have an advantage in the food and beverage market.  Instead of offering only standardized menus, they can opt to provide seasonal menus or menu options based on ingredients that are more readily available, have better pricing or meet other sourcing criteria.  Some meal kit companies elect to form partnerships with food producers.  This enables them to influence when and where produce is grown and if possible, help align production with the development of recipes.

Data analysis is an important tool for meal kit companies, enabling them to adjust product offerings and ingredients to deal with crop performance, logistical constraints impacting delivery of items needed for meal kits, etc.  Using data and information gathered regarding consumer preferences also helps meal kit companies develop a better understanding about seasonal variation of food crops and how this can help with recipe production and lead to greater revenue generation.

Transportation costs in the meal kit segment of the food and beverage industry are typically higher than in other segments, largely due to the need for speedy deliveries.  Given the fact that customers of meal kits can usually be found anywhere in the United States and all expect top quality food in the peak of freshness, the requirement for speedy parcel delivery results in higher transportation costs.

Blue Apron Turns Overage into a Delicious Employee Benefit

Meal kits introduced in the United States are designed to provide pre-packaged and assembled meals ingredients along with easy-to-follow recipes for fresh food choices, all delivered directly to the homes of consumers with an appetite for freshness and convenience.  For meal kit companies, one of the biggest challenges lies in producing a variety of different menu options using the freshest ingredients possible, without substantial over-or under-sourcing of ingredients.  No matter how precise supply and demand forecasts are, there is bound to be some overage of items.

Blue Apron uses the overage to provide an employee benefit and simultaneously reduce waste.  Each Friday in all of its three fulfillment centers in the United States, Blue Apron provides a free farmer’s market and allows its 4000+ employees to take home excess products and inventory free of charge.  The program benefits employees by providing valuable nutrition for their families and reducing family food budgets.

The market food items are typically available as surplus goods that are already pre-packaged or prepared and may include products which do not meet specifications.  They may be products that are mislabeled or those which have shorter shelf life.

Each employee is provided with two canvas tote bags which are scanned when visiting the weekly market.  While there is a limit on specialized items such as avocados, meat or cheese to 1 to 2 per person, the rest of the food goods are available on a first come first serve basis.  Grains, condiments, noodles, dairy and eggs are also available.

The employee farmer’s market program has helped to reduce waste hauling costs by 45% within six months of operation.  Blue Apron feels that it has also been instrumental in improving team morale and enhanced employee engagement and retention.  In addition, Blue Apron still works to reduce surplus goods and contributes donations to food banks.

As with all industries, supply chain management issues are critical.  As the industry transitions to a digital model, struggles continue to optimize supply chains to ensure maximum value for minimum cost.  More and more technologies are starting to be used to help reduce cost, provide information visibility end-to-end and integrate systems such as warehouse management software, transportation management systems and ERPs.

 

Conclusion

Whether consumers prefer ice cream, mashed potatoes, pad Thai, red wine-enriched sauces or a beet salad with black beans, it probably can be found in a meal kit in the United States.   From Home Chef, Hello Fresh to Purple Carrot vegan meals and Peach Dish, meal kits now are offered in a wide variety of options from a la carte ordering to subscription meal delivery.  Consumers who fancy themselves home chefs (rather than home cooks) can be assured that tasty meals await them using meal kits.

Cook at home meals, whether your favorite meal or something tasty and exotic featuring meat alternatives is simply a click away.  The issue is not whether consumers can have their cake and eat it too, it is more about how meal kit companies fulfill consumer wishes for affordable, fresh delicious meals.  From the recipe card to meal delivery, the process is challenging.  Keeping costs down involves more than merely minimizing the cost of sweet potatoes.  Cooking comfort food at home using a meal kit can be fun, but for the food and beverage supply chain, getting meal kits to consumers quickly who are spread across America is no simple task.

Transportation and sourcing costs for the meal delivery business can be daunting.  Using technology and insight from consumer orders is essential to curbing costs and ensuring quality.

Looking for a comparison of Amazon Meal Kit vs. Blue Apron?  There seems to be a comparison of nearly everything these days, from packaging to portions. Ultimately, preference is up to the consumer.  With a myriad of choices, keeping it fresh, easy to prepare and convenient is both critical and involves curbing supply chain, production and transportation costs.

 

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