Nestlé-owned healthy meal service Freshly is done with doorstep delivery.
What’s happening: Freshly is terminating direct-to-consumer service for fresh-prepared meals. After completing final deliveries this week, the company will refocus on retail and food service.
For context: Nestlé acquired Freshly for $950M amid a wellness buying spree in 2020.
Bolstered by pandemic lockdowns, the service met early expectations, delivering up to 1M meals per week nationwide at its height.
But, with restrictions ended, demand for prepared meal services has fallen. Worse, as inflation drives food and vegetable prices to record heights, margins have evaporated.
With losses mounting, last November, Nestlé sold a controlling majority stake to investment firm L Catterton, who merged the business with its wholesale and retail service Kettle Cuisine. The joint venture will now sell exclusively to out-of-home businesses seeking grab-and-go appeal.
Spoiled. Things aren’t going well for the prepared meal delivery category, healthy or otherwise. And companies are desperate to cut operational expenses:
- Last year, world’s largest meal kit maker HelloFresh raised prices, closed a California production plant, and pulled out of Asian markets.
- Since a food illness fiasco last spring, Daily Harvest’s sales have dropped 36% YoY.
- In August, sustainable produce box company Imperfect Foods closed its Bay Area warehouse and laid off 50 before selling to its rival, Misfits Market.
- In December, Blue Apron laid off 10% of its corporate workforce, seeking to spare $50M in expenses for 2023.
- Also in December, Sunbasket and Prüvit operator Intelligent Foods acquired meal kit maker Gobble, merging distribution capabilities.
Bottom line. As the sustainability of meal kit and prepared food services comes into question, operators will seek to turn the economics in their favor — aligning with price-setting grocers, personalizing diets, or creating add-on products to increase the size/cost of individual orders.
What to watch for: Skirting those issues entirely, watch others follow the path of food-as-medicine providers Season Health and ModifyHealth, convincing payors, employers, and healthcare systems to foot the bill.