Meal kits have come a long way since their U.S. debut just five or so years ago. With a wide variety of healthy, diverse food options and cooking guidance while eliminating time-consuming prep work and food waste, meal kits offer abundant benefits for consumers, thus driving the category’s rapid growth. But what about the benefits for meal kit providers?
Customer retention challenges coupled with high costs of production, packaging and delivery of perishable products have proven the original meal kit model to be a logistical nightmare. As a result, meal kit companies are reconsidering their approach, increasingly turning to brick-and-mortar retailer partnerships and acquisitions. (See: Blue Apron and Costco; Plated and Albertsons; HelloFresh and Giant Food; Home Chef and Kroger.)
Retailers such as Raley’s, Walmart and Meijer have also begun launching meal kits of their own, eager to snatch a piece of the rising meal kit consumer base without the commitment of a subscription. According to a recent report by market research firm Packaged Facts, based in Rockville, Md., the U.S. meal kit market had sales of $2.6 billion in 2017 and will grow nearly 22% by the end of 2018 to reach $3.1 billion. The company predicts that the category will continue to grow in the coming years, but as more traditional stores offer meal kits as a product rather than a service, the market will increasingly resemble other premium, convenient grocery products such as fresh-cut, ready-to-eat produce.
As such, retailers and meat suppliers are upping their efforts to offer convenient, creative and healthful meal solutions, further blurring the lines between meal kits, prepared foods and value-added protein products.
Perfecting Portion Sizes
When it comes to meat—which many consider to be the most important meal kit component—providing profitable portion sizes can be a challenge. While other components, such as produce and spices, are already available in precut and prepackaged formats that can easily apply to meal kits, the meat industry has consistently prioritized selling large quantities of meat by the pound and must learn to adapt to offering flexible package sizes.
“What’s interesting about meal kits is, logistically, those retailers and manufacturers are struggling with getting all of these different products in one box or package, and that’s why the first place that meal kits came to be was in a [vertically integrated] subscription model,” says Jonna Parker, principal with Chicago-based IRI’s Fresh Center of Excellence. “The meat industry plays a critical role in making sure that the right portion of the right protein is available in that kind of package size. And that’s an increasing trend in value-added that we’re going to see demand for, whether it goes in a kit itself.”
Indeed, breaking down a whole animal into precise portion sizes is challenging for suppliers striving to provide meal kit products while also remaining price competitive. “Meal kit companies quite often are very focused on hitting an exact size,” says Jefferson Heatwole, EVP of sales and marketing for poultry producer Shenandoah Valley Organic, based in Harrisonburg, Va. “If you’re going to cut something down to a small portion size, what do you do with the rest of that product?”
Projecting demand and avoiding spoilage also pose challenges for meat suppliers seeking to provide items for meal kits, particularly when offering a variety of meal kits on a regular basis, says Catherine Golding, business development manager for Washington, D.C.-based True Aussie Beef & Lamb, a subsidiary of Meat & Livestock Australia. The company provides market research for the Australian red meat and livestock industry, promoting the consumption of beef, lamb and goat meat for foodservice and retail applications, including meal kits.
“From a supplier standpoint, ensuring consistency is important,” Golding says. “Meat cuts must be similar in size, shape and appearance to avoid shoppers from sorting through inventory for the ‘best’ choice.”
From a retailer’s perspective, merchandising meal kits in strategic areas of the store is essential to increase shopper exposure and encourage new customer acquisition. Raley’s Family of Fine Stores, based in West Sacramento, Calif., recently launched its own line of subscription-free chef-created meal kits, including full kits, quick kits, creative kits, sides and meal components. The retailer displays the line on front endcaps in about 75 of its stores while merchandising them in the prepared foods department at its remaining locations.
Photograph courtesy of ShopRite
“The front endcaps offer great exposure and see more foot traffic, especially for customers that are coming in store for a quick grab-and-go option, not a full shop,” says Brad Poalillo, Raley’s category manager of foodservice.
Raley’s meal kit program also offers a build-your-own option, featuring preportioned meats from its in-house butchers, where shoppers can pick and choose their own meal kit components for a personalized meal solution. “This allows us to showcase our high-quality meat and seafood offerings, and this exposure will hopefully drive sales of those meats on return trips,” says Poalillo.
As retailers continue to launch meal kits of their own, the “complete kit” concept will increasingly break out of the box with items packaged individually yet merchandised together within fresh departments of the store to allow shoppers to conveniently build complete meals of their own; this also allows the retailer to introduce shoppers to their fresh protein products to ultimately inspire repeat purchases, whether on an individual product basis or meal kit basis.
“Retailers and manufacturers seek to get those out on the shelves in the kit and also separate from the kit because, potentially, the new way to do meal kits may in fact be to just merchandise products that can be used for recipes together, as opposed to putting them all in one box,” Parker says.
Photograph courtesy of Australian Organic Meats
Plus, complementary product placement drives increased basket size while reducing shoppers’ barrier to exploring different cuts and types of meat and seafood. “Wegmans does it exceptionally well,” says Simone Tully, managing director of Australian Organic Meats, based in Dubbo, Australia. The company offers a variety of certified organic beef and vegetable chef-inspired meatballs, steaks and other proteins designed for complete meal solutions that can be merchandised in the fresh or frozen departments. “Meal kits could take up this space as a quick solution for category managers struggling with cross-store category management.”
Creative Recipes Inspire New Home Cooks
Perhaps the biggest draw of meal kits is that they allow shoppers to be involved in the cooking process, while also reducing prep time and offering a learning experience for novice home cooks. According to a recent report by online grocer Peapod, 77% of Americans say they would rather eat a homemade meal than go out for dinner, and 43% said they plan to cook more often in 2019.
As such, the opportunity for meat in meal kits is bountiful. Meal kits are particularly beneficial for retailers launching a new meat product, allowing them to teach shoppers preparation techniques and what the product will taste like. Raley’s employs in-store cooking demos and sampling events to offer introduce shoppers to a new product even before they take it home. “Not only do sampling events draw attention to the meal kits, but allowing customers to taste them helps build confidence in the quality of our offerings,” says Poalillo.
Photograph courtesy of Raley's
Retailers are also turning to their meat suppliers’ recipes for meal kit inspiration to showcase their products. “We are seeing a big surge in demand from retailers of venison, buffalo, Wagyu beef, milk-fed veal, Berkshire pork or Rohan duck in portioned pieces. A lot of these are going into meal kits inspired by recipes featured on our website,” says Ariane Daguin, co-founder and owner of D’Artagnan Foods, based in Union, N.J. The company offers adventurous, creative recipe ideas such as Chinese Five Spice Pork Roast, Braised Lamb with Tarbais Beans and Pistou and Lamb Shank Tagine with Sweet Dates and Pomegranate.
“The retail stores will gain in proposing a variety of contemporary recipes with all the measured ingredients,” Daguin says.
Similarly, American Foods Group, in collaboration with Beef. It’s What’s for Dinner, recently rolled out fresh beef meal kits in retail grocery stores nationwide. Featuring globally inspired flavors such as the Korean Style Bulgogi Beef Bowl and the Steak & Tzatziki Bowl, the kits are merchandised in the fresh meat department and feature raw USDA choice beef, designed to provide the shoppers the opportunity to experience a meal kit or new flavor to reinvigorate consumers’ excitement for home cooking.
Hitting Demand for Health Attributes
With meal kits typically featuring wholesome recipes and fresh meat and produce, research has indicated that meal kit shoppers are often health-conscious consumers. According to Peapod’s recent report, 53% of respondents expressed intentions of cooking more healthy meals in 2019. As such, retailers and meat suppliers are promoting not only healthy recipes but also meat and seafood products with wellness attributes, such as organic and antibiotic-free, which grew 16.6% and 33.2%, respectively, in the 52 weeks ending Sept. 9, 2018, according to IRI.
“Within meal kit consumers, a higher percentage of those are more likely to be interested in organic or source-verified product,” says Heatwole. In addition to its organic offerings, Shenandoah Valley Organic’s Farmer Focus brand features a sourcing code on each product that traces the item back to the farm where it was produced, appealing to both consumers’ health demands and traceability standards. The brand will soon launch fully cooked value-add items such as breakfast sausage and cooked meatballs, which retailers can merchandise as complete or DIY meal kits with a health focus.
“It may have claims like organic or certified humane, but people are familiar with chicken and they want to feel like they are eating something that they are confident they can fix,” says Heatwole. “But also, it has some health benefits to it as well with regard to saturated fat, for example.”