In order to succeed, subscription meal kit companies not only need to offer good, quality meals and an intuitive user interface, but also must have excellent supply chain management skills. Many services promise some mix of local, fresh, reduced-calorie, gluten-free, or organic products and may provide hard to find items. Because of the growth of food home deliveries, the distance between stops has been reduced and the number of items delivered to each stop has been increased. This lowers the carrier’s cost resulting in overall lower shipping costs. The attention to fresh ingredients is often ideal for consumers looking for healthy, tasty meal alternatives with many delivery options. Local farmers also benefit from the increased ongoing demand for their perishable foods.
Meal delivery and meal kit companies are disrupting the food retail market with a simple idea: provide just-in-time products for consumers by taking on the last mile logistics challenge. The last mile delivery challenges encountered by many of these companies lies within their supply chain processes and technology can help. It is easy to deliver meals from a local kitchen by using software to optimize the last mile delivery process. Meal delivery companies are essentially restaurants offering little more than a menu, delivery service, and a box. As a result, they must also cater to local tastes in order to appeal to consumer demand. The market relies on a premium paid for the convenience of last mile delivery.
It is difficult to promise local ingredients without opening local kitchens, or transporting all the ingredients to a single distribution center. Companies may also struggle to obtain sufficient quantities of different ingredients if they limit themselves to local sources of supply. One solution may be networks of distribution centers that pull from farmers located within several hundred miles of each other. Once the ingredients arrive at the facilities, they need to be sorted, prepared, packaged, and assembled into meal kits. Meal kit companies need robust systems to be able to handle inbound goods and ingredients, assemble, package, and keep the products hot or cold and secure. In addition, all of the functions have to occur at an extremely fast pace.
With any food delivery, even meal kits, safety is always a primary concern. If an ingredient in a meal kit later proves to have carried a health or safety risk, the companies in the supply chain need to be able to quickly trace it back to the source and to destinations forward to the consumer. Having access to real-time, accurate information and product traceability is essential and can save lives. The track & trace functionality in the supply chain software that is used needs to be robust. This is critical not only to eliminate the risk of illness or death, but also to protect the business and brand. The more targeted a safety recall, the less of an impact it will have on the respective businesses.
The subscription meal kit delivery business model can enhance demand planning. Subscription models allow for the most accurate forecasting and planning. This is because consumers usually choose their meals several days in advance, letting the food companies know how much of each ingredient to order. When companies engage directly with consumers, it provides them with direct demand signals. Industry leading companies should be able to respond and adjust their supply chains more quickly than grocery stores or restaurants. Blue Apron plans its menus one year in advance. It can predict demand for each ingredient, and work directly with its network of farmers to grow the crops that will end up on its menus. Providing a source of predictable demand for these farms allows them to produce what is most effective on their land.
In 2017, Amazon expanded its offerings and focused on testing its new meal kit, food delivery service via Amazon Prime. Delivering meals would build on the company’s AmazonFresh service, which has been delivering groceries to customers’ homes for a decade. The pioneering food-prep tech, known as microwave-assisted thermal sterilization, or MATS, was developed by researchers at Washington State University and is being brought to market by a startup called 915 Labs. The method involves placing sealed packages of food in pressurized water and heating them with microwaves for several minutes. This is not like traditional processing methods, where packages are in pressure cookers for up to an hour until both bacteria and nutrients are gone. These food products retain their natural flavor and texture. The food items can sit on a shelf for a year, which would make them ideal for Amazon’s storage and delivery business model.
The long-term prospects for meal and meal kit delivery services are positive. The market hit $1.5 billion in sales in 2016, a number that is projected to grow to multiple billions over the next five years, according to Packaged Facts. Meal kit companies have the potential to disrupt the restaurant industry, retail industry, and grocery industry. Their customers look forward to cooking restaurant-quality meals at home, with none of the planning or shopping that most home-cooked meals require. Because consumers of all ages are comfortable using technology to make purchases and want a lower-cost alternative to eating out, meal kit delivery services are thriving, satisfying consumers’ growing taste for fresh, local food.