Issue No. 116: What’s Next for Meal Kits

Courtney Powell

Subscription meal kits have seen their share of ups and downs.

A product of the pandemic, pre-made and self-prepared food boxes have boomed. But soon, they’ll have to find their footing in a post-COVID world.

Can the category sustain its newfound momentum?

Let’s take a look.

To clarify: Meal kit refers to a box of ingredients that need to be assembled or cooked. For boxes like ButcherBox or Imperfect Foods, they aren’t ingredients or prepared meals but curated food subscriptions. We’ll also look at pre-made food options like Freshly and Daily Harvest.

How We Got Here

In the early 1900s, Birds Eye introduced flash-frozen foods. Once a luxury, eating vegetables out of season or shipping fresh-caught seafood across the country became the norm.

By 1954, frozen TV dinners were a staple in US households. In 1959, Metrecal introduced a pink, goopy meal replacement shake, giving rise to brands like Ensure and SlimFast. Then, in 1981, Stouffer’s launched Lean Cuisine, a low-calorie frozen meal.

In a way, meal kits emerged as a kind of modern-day TV dinner — the kind that we actually want to eat. Optimizing for convenience, home delivery replaced trips to the grocery store. And, as younger consumers sought out better-for-you foods, meal kits catered to specific dietary needs.

Boom and Bust...

Founded in 2012, Blue Apron put meal kits on the map. Soon, competitors like HelloFresh, Plated, and Chef’d hit the scene. But uncertainty has plagued the sector.

For Blue Apron, 2016 was a good year. The company was on pace to do $1B in sales. And its valuation topped $2B. Then, the tide turned. Customer acquisition costs soared and churn worsened as 75% of members canceled their subscriptions within six months.

In need of capital, the company went public in 2017. But the IPO fell flat. By 2018, Blue Apron had lost 250K customers, and the share price dipped below $1.

Elsewhere, after initially raising $150M, Chef’d shut down in 2018. Plated was acquired by Albertsons for $200M, only to be phased out. A pairing that’s paying off, Kroger paid $200M for Home Chef in 2018. HelloFresh survived this tumultuous era.

...And Boom

In March of last year, Blue Apron’s stock hovered around $2/share. As losses mounted, the company was said to be considering a sale.

Then coronavirus happened.

By mid-April, its stock was up 400%. It has since come back to earth, sitting around $9/share. Now, as the vaccine rolls out and consumer habits shift yet again, the company hopes to find a sustainable path forward.

Likewise, the entire industry is preparing for what’s next.

  • The meal kit industry is expected to hit $20B by 2027.
  • Online sales of packaged food and beverages could reach $109B in 2021.
  • Grocers are increasingly adding ready-made options, like in-store meal kits.

In the meantime, the category is growing crowded.

Nestlé. Last fall, the food giant acquired prepared-meal delivery service Freshly for $950M. With a growing emphasis on health, Nestlé previously acquired personalized vitamin maker Persona, supplement maker Atrium Innovations, and collagen peptide brand Vital Proteins.

Amazon. Since its $13B acquisition of Whole Foods in 2017, Amazon has been reimagining how we get our groceries. From cashierless stores and in-garage delivery to meal kits of its own, the company is building an omnichannel ecosystem optimized for convenience.

Sunbasket. This meal kit provider is transforming into a full-service food delivery company. In addition to meal kits, Sunbasket will also deliver ready-to-heat meals, individual ingredients, and pantry items. Worth mentioning, Unilever is a Sunbasket investor.

HelloFresh. One of the original meal kit companies, Berlin, Germany-based HelloFresh saw sales jump in 2020, with revenue up as much as 112%. Having previously acquired Green Chef and EveryPlate, HelloFresh purchased ready-to-eat meal company Factor75 for $277M.

Imperfect Foods. With more than $200M in funding, Imperfect Foods is taking on sustainable grocery delivery. Initially focused on “ugly” produce delivery, the company will begin to look more and more like Thrive Market (who could be yet another addition to this list).

Daily Harvest. Taking a health-minded and plant-centric approach, subscription meal service Daily Harvest mails members frozen smoothies, soups, veggie bowls, and more. Founded in 2015, the company has raised $50M in funding and did $125M in revenue for 2019.

ButcherBox. Meat delivery subscriptions like ButcherBox are more popular than ever. With an emphasis on sustainable sourcing and grass-fed meat, the bootstrapped company saw sales increase 110% in 2020. Similarly, companies like Grass Roots and Crowd Cow are thriving.

The list goes on. Thistle, Gobble, Hungryroot, MilkRun, Misfits Market… There are countless other companies innovating on the idea of mail-order food. Whether it’s chef-prepared meals, plant-based options, personalized recommendations, or locally sourced eats, delivery options are specializing to gain traction with customers.

Looking Ahead

As the broader food industry confronts mounting challenges, from food waste to climate change, we’re left with more questions than answers.

In the near term, meal kits and food boxes will have to sustain pandemic-era gains. Down the line, Nestlé or Amazon could further consolidate the space. And eventually, meal delivery might intersect with personalized nutrition, taking the guesswork out of what constitutes a healthy diet.

🎙 On the Podcast

This week, on the Fitt Insider podcast, we’re joined by Wilfred Valenta, CEO of Silofit — a network of private, on-demand fitness spaces.

In this episode, we discuss:

  • The company’s vision for a decentralized gym
  • Innovative approaches to brick-and-mortar fitness
  • Why Silofit is focused on helping fitness professionals grow their business

Listen to the full episode here.

📱 Beyond Booking

Brick-and-mortar wellness is headed toward an omnichannel future, and booking platforms are steering into the shift.

Mindbody. The software and payments platform recently introduced Mindbody Flex, a membership option that gives users access to 450 studios. Based on the number of classes, the cost ranges from $39 to $99.

According to Mindbody CEO Josh McCarter, the company has seen a 400% increase in virtual bookings since last March. Signaling the rise of digital fitness, McCarter told Business Insider that 91% of studios reported having or launching a digital option in 2020, up from single digits in 2019. And 80% of exercisers used live-streamed workouts last year, compared with 7% the year prior.

ClassPass. While many boutique studios remain closed, this fitness aggregator has been expanding beyond exercise. ClassPass now offers bookings at more than 8,600 beauty and wellness venues.

When COVID hit, the company’s revenue went to zero. A bright spot, virtual grooming and beauty classes gained traction. Now, as some businesses begin to reopen, one-third of all ClassPass credits are currently being spent on wellness and beauty bookings like hair appointments.

Doubling down, the company partnered with on-demand beauty providers PRIV and blow LTD. This year, ClassPass plans to “hyper-scale” the number of beauty and wellness options in its network.

Zooming out: As the industry evolves, so does its infrastructure. And with beauty and wellness increasingly in the mix, the list of Mindbody or ClassPass alternatives will also grow.

To name a few, Booksy recently raised $70M to schedule beauty and wellness appointments. Boulevard added $27M for its spa management software. And companies like Urban, Kenshō Health, and WellSet see opportunity in on-demand and personalized wellness options.

📰 News & Notes

💰 Money Moves

  • Hippeas, makers of organic chickpea snacks, raised $50M from The Craftory Limited in a deal consisting of direct investment and secondary purchases of shares from existing shareholders, including CAVU Venture Partners.
  • Jessica Alba-founded natural baby and beauty brand The Honest Company is expected to file IPO paperwork at a valuation of $2B.
  • Cutback Coach, a mindful drinking app, raised $3.1M in seed funding.
    More from Fitt Insider: The Impact of Dry January 
  • Vessel, an at-home wellness tracker using a urine test to access biomarkers, added $8M in funding led by Monogram Capital Partners, bringing its total seed funding to $14.5M.
  • Wellness startup Heights landed $2M in seed funding for its “brain health” supplement.
    More from Fitt Insider: Selling Smart Drugs
  • Hormone health upstart Aavia launched with $2.5M in seed funding.
  • Digital physical therapy company SWORD Health raised $25M in Series B funding.
  • Recovery tech company Hyperice acquired RecoverX, makers of intelligent thermal technologies.
    More from Fitt Insider: The Big Business of Recovery  
  • Stryve Foods, makers of biltong meat snacks, is going public in a $170M SPAC deal.
    More from Fitt Insider: The SPACs are Coming
  • Consumer DNA-testing company 23andMe is in talks to go public through a $4B Richard Branson-backed SPAC.
  • Lyra Health, a provider of mental healthcare benefits for employers, closed $187M in Series E funding.
    More from Fitt Insider: Peak Burnout 
  • Alma, a membership-based network for mental health care providers, raised $28M in Series B funding.
    More from Fitt Insider: Confronting the Mental Health Crisis
  • Booksy, an appointment booking platform for beauty and wellness companies, raised $70M in Series C funding.  
  • Prepared meal company WeCook raised $5.5M in new funding.
  • Cricket protein maker Entomo Farms landed $2.9M in funding.
  • ClubReady, makers of software for managing fitness and wellness clubs, acquired iKizmet, a data analytics provider in the fitness industry.
  • Folx Health, a telehealth provider for the LGBTQ community, raised $25M in Series A funding led by Bessemer Venture Partners.
  • Plume, a health tech company built for the transgender community, closed $14M in Series A funding led by Craft Ventures.
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