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Attack of the meal kits

It's a big box delivered to people's doorsteps. Cardboard with insulated panels, it holds all the ingredients for dinner dishes. Is this the future of eating? And can grocers get in on the action?

This article appeared in the September 2016 issue of Canadian Grocer

What’s for dinner tonight? Home-cooked meal or delivery? How about both?

There is a newcomer to the Canadian food scene: the meal-kit delivery service. Companies that offer it source, portion and package all the ingredients needed to make a meal into one handy kit—and deliver it to subscribers’ doors.

They just follow the recipe, also provided, and cook it.

Market researchers say meal delivery is hot—whether it be takeout delivered by services such as UberEats or DoorDash, or meal-kit delivery. Chicago-based research firm Technomic says the meal-kit industry, in particular, topped US$1-billion globally in 2015 and is expected to reach $10 billion by 2020. Meal kits have already caught on in the U.K. and the U.S., with services such as Blue Apron and Purple Carrot. The latter caters to vegans by creating recipes using only plant-based ingredients.

Celebs and media are getting in on the meal-kit action. Meal-kit startup Chef’d has partnered not only with a number of well- known chefs, such as Robert Irvine and Chris Santos, but also with media brands—offering meal kits based on recipes from the New York Times’ cooking website, Runner’s World and Prevention. Martha Stewart is working with meal-kit service Marley Spoon, which is using the home maven’s recipes.

READ: Canadians turning to convenience of delivery, including meal kits

The meal-kit trend seems to be catching on in Canada, too. Toronto-based Rose Reisman’s Personal Gourmet service has been delivering meals since 2010 and, at about $14 a plate, is mostly geared toward busy executives who don’t have time to shop or cook, but still want to eat healthy. Others, such as Goodfood or Chef’s Plate, who offer meals for about $10 per meal, say their sales have grown double digits since their companies began—in 2014 for Toronto-based Chef’s Plate and at the beginning of 2015 for Montreal-based Goodfood.

Why? Canadians want to make their food fast, but they don’t want fast food. Research by NPD Group says 75% of Canadians prefer to make a meal in 15 minutes. While meal-kit dishes may take longer, depending on the recipe (the ones Canadian Grocer tried took closer to 30 minutes), there is time gained from not having to plan meals or head to a store.

The latest meal-kit company to arrive here is Germany’s HelloFresh. Founded in 2011, it was already in eight countries before setting up shop in Ontario in June. HelloFresh’s managing director in Canada, Ian Brooks, says his company aims to give time-strapped consumers a way to cook “from scratch.” All ingredients are packaged separately, which means customers with specific dietary preferences can pick and choose what to use.

“We create the recipes every week, we send them to [customers’] doors, and they get to cook nutritious, delicious, balanced, convenient meals at home,” Brooks says.

READ: HelloFresh meal-kit service lands in Canada

Convenience is a big factor in the growth of meal-kit services, says Erik Thoresen, principal at Technomic. But there is something else people are looking for with meal kits in particular: “They provide consumers with a new type of at-home entertainment: preparing these meals that arrive in kits. Overall we’ve seen an increase in culinary expertise that your everyday consumer has.” Meal kits also allow people to experience new cuisine types that may have ingredients—ponzu sauce or Thai basil, for example—that are sometimes difficult to find.

So, where does the grocery store fit in?

“The risk for them,” says Thoresen, “is not competition from meal-kit companies, but the possibility they will miss out on the trend.” Loblaw, which started a click-and-collect online grocery business two years ago, and Longo’s, with its longstanding Grocery Gateway delivery service in the Toronto area, may be well-positioned to add meal kits to their online offerings. Longo’s, for example, already sells a variety of own-label dinner kits.

Screen Shot 2016-08-22 at 9.21.18 AMIn the U.S., big grocers are eyeing meal kits. Rodney McMullen, CEO of supermarket giant Kroger, told analysts in June that Kroger “would be very open” to getting into meal-kit services such as Blue Apron’s, either on its own or as a partner. Meanwhile, a new San Francisco-based company called Handpick is working with retailers to win the meal-kit business using products already on the store shelf. The meals, which are packed in the store and are available for pickup or delivery, are about half the price of kits offered by other meal-kit startups. Among grocers Handpick has worked with: Albertsons/Safeway in the U.S., and Metro in Germany. Suppliers can also benefit from the meal-kit trend. Brooks at HelloFresh says he’s keen to work with Canadian producers to get their items into his kits.

One advantage meal-kit providers have is agility in offerings. Meal-kit companies can cut costs by using local, in-season ingredients or swapping out one protein or veg for another in a recipe if the ingredients are too costly. One of the reasons customers use meal-kit services is the constantly-changing menu.

READ: Martha Stewart gets into meal-kit business

“We introduce seven new recipes a week,” says Jamie Shea, Chef’s Plate’s CEO and co-founder. “It keeps people coming back. Our customers like variety and unique ingredients.”

And so far, so good. Chef’s Plate added a new warehouse in Vancouver a year and a half ago, which has allowed the company to expand to B.C., Alberta and Manitoba.

But if companies need to maintain variety to keep customers coming back, it means always sourcing new, local ingredients and developing new recipes.

“It’s not always the most efficient process when sourcing a new ingredient for the first time,” says Thoresen. Developing and testing new recipes can also be labour-intensive—which is why it makes sense for companies like Chef’d to simply partner with brands that have already established a bank of tested recipes.

Goodfood takes a slightly different approach. CEO Jonathan Ferrari says the company is now targeting families and couples in Ontario and Quebec and uses data obtained from customers to develop recipes that are tailored to members’ tastes. Following the lead of U.S. meal-kit companies who hire celeb chefs, Goodfood partnered with Quebec TV and radio personality Anne-Marie Withenshaw, who has hosted food shows such as Aux Couteaux Tirés and Pressure Cooker.

Regarding the business model itself, Thoresen says most meal-kit delivery companies are young and, though they may be expanding quickly to new areas, “it’s hard to determine whether sales are being driven by new customers or repeat customers.” He’s cautious about saying the Canadian market will see the same levels of adoption as in the U.S.

“We want to see really strong repeat [customers] and [subscription] renewal,” he says. “At the end of the day, what’s important is how long the customer stays.” And while many Canadian companies are using sales and coupons to lure new customers to try the service, it’s too early to know how many are staying.

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