Whether they realize it – yet – or not, every major food company has been outflanked in their pursuit of what they think could be the Next Big Thing.
Between Whole Foods' ability to procure and select high-end foods and ingredients and Amazon's ability to e-market and deliver just about anything, the meal kit delivery business has just been locked down about as tightly as online shopping.
Imagine if grocers get deeper into this business than they already are. And have you seen recent stories about the food safety concerns over meal kits sitting on your hot front porch? Game over.
Not every food company has ventured into this fad yet – and I suspect it is just that -- but most of the major ones have and most of the others are eyeing it with great interest. Imagine getting $60 from a single shopper … dealing directly with consumers … getting automatic repeat business via the subscription model. Drool!
We published a news story in June about all the interest. Campbell Soup had just made its second such investment, in Chef'd, earlier having been the sole investor in Habit. Unilever bought into Sun Basket. In June, Nestle joined the fray with an investment in Freshly. I'm sure I'm missing a few.
Blue Apron is no longer drooling. With 2016 sales of $795 million, it was the clear leader in this nascent business. The five-year-old, New York City-based firm looked excitedly at an initial public offering of stock, signaling prices in the $15-$17 per share range, hoping to raise $500 million. Then came news of the Amazon-Whole Foods deal. Even though there was no mention of home delivery in that blockbuster, hey, that's what Amazon is all about, right?
On June 29, Blue Apron went ahead with its IPO anyway, the first meal kit company to do so, but got only $10 a share for a total of only $300 million. By the Fourth of July mega-weekend, the share price had slipped to $9.34.
Sprig, a San Francisco-based competitor, recently closed down, as did another New York firm, Maple. SpoonRocket did so last year. Other meal delivery firms – Plated, Hello Fresh, Green Chef -- are on similarly shaky ground, although some also are rumored to be considering IPOs. Probably because the venture capital money is drying up.
The business model is tempting. I've seen market research that pegs the market at $1.5 billion and growing – although much of that through heavily discounted trial offers. Nielsen says one in four Americans has tried a meal kit, with holy grail millennials and generation Xers 321 percent more likely to purchase them.
I think all the investments in this game by the major food companies have been meager, so maybe they're just buying some intel they can put to use in their own ecommerce efforts.
However, consider an NPD Group factoid: 52 percent of consumers who already buy groceries on the web are Amazon Prime members.
Like I said: Game over.