The emergence of meal kits in the food retail landscape has quickly proven to be one of the most disruptive innovations in the industry today. What was once the exclusive domain of creative startup companies—such as Blue Apron, Chef’d and Plated—is now a unique and profitable niche in the U.S. grocery arena.
The rising demand for value-added meat and produce coupled with consumers’ desire for fast and fresh meal solutions has formed a gaping opportunity for retailers to increase sales and repeat shoppers through in-store meal kit offerings. In 2017, in-store meal kits generated $154.6 million in sales, posting growth of more than 26% year over year, according to Nielsen. For context, brick-and-mortar sales for center store products, including grocery, dairy and frozen foods, dipped 0.1% last year to $374 billion.
Meal Kit Spending Growing 3X Faster Than Other Channels
Total monthly $ spend by channel (indexed to March 2015)
Source: Nielsen Buyer Insights, March 2015-March 2017, Total U.S.
Who Is Buying Meal Kits?
Major players like Walmart Inc., The Kroger Co. and Meijer have begun offering their own meal kit lines to tap into the earnings. As retailers continue to experiment with their own offerings in the meal kit space, it’s imperative they understand exactly who it is that they’re targeting. Overall, 9% of American consumers say they’ve purchased a meal kit in the last six months—amounting to 10.5 million households, per Nielsen data. What’s more, 25% of consumers—or 30 million households—say they would consider trying a meal kit in the next six months.
According Nielsen’s recent analysis of its “What’s Cooking” consumer segmentation, examining which consumer groups are avid meal kit buyers, more than one-fourth (26%) of meal kit users classify themselves as gourmet cooks. Comparatively, only 16% of U.S. consumers consider themselves to be gourmet cooks, demonstrating the strong appeal of meal kits to this specific consumer segment. On the other hand, 15% of Americans consider themselves frozen foodies, yet only 9% of frozen food consumers are meal kit users. However, opportunities also exist with young families and singles that enjoy cooking and trying new recipes, which make up roughly 44% of U.S. households, per Nielsen. Retailers can appeal to these demographics through family-sized meal kits or exciting, healthy recipes.
The Value of Meal Kits
Identifying consumers’ perception of value is perhaps as equally important as identifying which consumers are purchasing meal kits. When examining what meal kit buyers look for in the offerings they purchase, almost 60% say value for the money is extremely important, per Nielsen, and nearly half (49%) say low-cost items are important.
However, consumers’ experience with meal kits varies greatly, as 56% of consumers disagree that meal kit services are affordable for everyone. For retailers and pure-play meal kit providers alike, this discrepancy suggests the need to clearly articulate the value in their meal kit offerings when compared with traditional meal solutions.
Of consumers purchasing meal kits in-store and online:
- 76% are satisfied with produce quality
- 72% like meal kits because they allow them to try ethnic foods
- 24% would add wine if it was an option
- 29% say they eat more seafood with a kit
- 36% say the availability of diet-specific foods is extremely important in their decision-making process
As with most sectors within the grocery industry, digital transformation is a key factor in the meal kit arena. Of the 9% of Americans who have tried a meal kit, 6% have purchased exclusively online, according to Nielsen. And as a result, online meal kit companies are experiencing tremendous growth. When examining the various food channels consumers can choose from, sales across the mature options like restaurants and traditional food outlets have been trending in line with one another over the past two years. But some newer options, including digital delivery and grocery e-commerce, are defying the norm, with pure-play meal kits garnering three-times the growth of all other channels, per Nielsen.
Coming of Age
Share of $ spend by age group
Source: Nielsen Buyer Insights, April 2016-March 2017, Total U.S.; percentages may not total 100% due to rounding
However, in-store meal kits still pose a unique advantage over subscription services, as well as demonstrate how retailers can and are evolving with the times. In-store offerings require less commitment for the consumer than a paid subscription, and they offer more flexibility for retailers and suppliers to experiment with components and “levels” of convenience that keep consumers coming back, according to Nielsen. As retailers consider the potential in the meal kit space, and continue to tout their own meal kit solutions, they must understand the attributes that customers look for in order to best develop offerings that highlight those values when compared with more traditional offerings.
Source: The Nielsen Co., The Meal Kit Opportunity, 2018