Proceeding with caution

Grocers are slowly moving into the meal kit space. To win, they’ll need a good strategy

meal-kits-issue

There is a growing appetite for meal kits across Canada, and more and more consumers are making it clear where they would like to purchase these products: at their local grocery store.

New research from Nielsen Canada found that while overall use is still low, commitment among meal kit users is high. From May 2016 to June 2017, 4% of Canadians had purchased a meal kit. Of these, 80% were still actively purchasing meal kits after trying them.

Currently, meal kits are purchased primarily online from suppliers like Chefs Plate, and HelloFresh in Canada and Blue Apron in the U.S., to name a few. Now, grocery stores are moving into this space, albeit cautiously. “Grocery stores are the most logical supplier of meal kits,” says Dan Bregg, president of Buy-Low Foods in Vancouver. “We are already experienced in maintaining the level of quality and freshness that will make this type of offering successful in the long term.”

First to enter the Canadian market in a significant way was Metro, which recently acquired majority interest in MissFresh, a Montreal-based meal delivery subscription service.

The purchase makes good business sense, says Metro spokesperson Geneviève Grégoire. “We wanted to continue our efforts to respond to all emerging needs and trends in the food sector. Customers are increasingly looking for practical and simple solutions.”

Speed and ease of use are the foundation on which meal kits are built. “Mobility and convenience are increasingly becoming major decision drivers for consumers,” says Sylvain Charlebois, dean of the Faculty of Management at Dalhousie University in Halifax. “This phenomenon is forcing processors and grocers alike to think about portable options for consumers who are pressed for time.”

Meal kits hold significant appeal to younger people. Research conducted by Charlebois and colleagues found, for example, that generation Z, those born after 1995, want to cook more, yet actually find themselves eating at restaurants more often.

The pre-packaged approach to a meal also appeals to older individuals, says Bill Bishop, chief architect with Brick Meets Click, a consulting and retail advisory services company in Barrington, Ill. “Empty nesters are using meal kits in lieu of going out.”

Growing consumer interest in meal kits is prompting grocery stores to examine the market more closely. “We believe ready- to-cook meals represent a promising market,” says Grégoire. “The way people buy their food products is increasingly chang- ing and diversifying.”

Grocers stepping into the meal kit space have many factors in their favour. Buy-Low’s Bregg, whose company is exploring offering meal kits in all of its store formats, says: “consumers want options and flexibility and having to make dinner decisions days in advance for a future delivery doesn’t always fit with those desires.”

Grocery stores can also offer greater convenience to customers. Says Bregg: “There is still a one-stop shopping benefit to being able to pick up your other household needs at the same time you are selecting your dinner for that night.”

There are downsides, however, and for many retailers the negatives may outweigh the advantages of entering the meal kit space. Scope will be an issue. “Grocery stores are used to working on a large scale,” says Brick Meets Click’s Bishop. “This feels more like piecework, and labour is expensive.”

Grocery stores will also have to do their homework to ensure they have the best ingredients, notes Bregg. “Quality, freshness and food safety are, as always, at the very top of this list. After that, an understanding of what consumers are looking for in the variety of meal options and ease of preparation is key, along with the right support for those [customers] that are not experienced in the kitchen to make a great meal every time.”

Ultimately, many industry experts believe grocery stores can do very well with meal kits if the right strategy is implemented. “Meal kits represent a high-margin solution, but the know-how is not always available,” says Charlebois.

Traditionally, meal kits have been an afterthought for grocers, a way to generate revenue without much investment, he adds. “This is changing. Price points should be high enough to deliver good-quality products to the value proposition that fits with what young urbanites and others are looking for.”