Grocers may start buying meal kit companies to compete with Amazon
- Grocers may begin buying up meal kit companies in order to compete with Amazon, according to CNBC, citing a report from tech news site The Information.
- According to The Information, Albertsons has discussed buying meal kit company Plated. Both companies declined to comment, and a future merger between the two remains uncertain.
- Meal kit companies interviewed by The Information said they would be open to being bought. “We had companies asked if we're for sale,” Michael Joseph, CEO of Green Chef, an organic meal kit subscription service, told the site. “As a responsible CEO I said, 'Perhaps.'"
Grocers sold $81 million worth of meal kits last year, and are expected to sell many times that amount over the coming years. So consumer demand is strong, and it’s steadily increasing as retailers like Kroger and Whole Foods offer meal kits in their store aisles. But do retailers really need to buy meal kit companies in order to cash in on this demand?
Meal kit providers certainly aren’t averse to the idea. The market, which more than a few observers have referred to as the “Wild West,” is packed with startups and beset by inefficiencies and steep marketing costs. In addition, companies like Blue Apron are seeing declines in order frequency and spending per customer. Blue Apron’s stock value has plunged 50% since it went public this summer. The company has also fired top executives, instituted a hiring freeze and is facing multiple lawsuits claiming it offered “misleading” and “untrue statements” in SEC filings prior to its IPO.
With the right retail partner, a meal kit company could gain financial stability and have access to built-in consumer bases. But would retailers inherit many of the financial struggles meal kit companies are facing? Not necessarily. Grocers like Publix, Whole Foods and Giant Eagle are seeing positive results from their meal kit lines. Kroger also recently announced it’s expanding its Prep+Pared line to more stores. Offering the kits in stores is a natural step, as they have fresh appeal and complement grocers prepared food offerings. Meal kits also make for an enticing addition to grocers’ online offerings, and benefit from the fast delivery that many offer.
However, grocers don’t need to acquire a meal kit company in order to offer meal kits. Many already have all the fresh ingredients and the culinary and marketing know-how. Plus, aside from Blue Apron, there’s no meal kit brand that really stands out with consumers right now. Retailers can save money and earn higher margins by developing their own lines, as Publix and Kroger have done.
Of course, developing a line like this takes time and money, so some retailers will see a value in acquiring the branding and expertise of a company like Plated or Hello Fresh. Albertsons seems like a natural candidate here, given its aggressive growth of late and preference for acquisition.
Whether through acquisition, a company partnership or in-house development, retailers need to develop a presence in the meal kit space if they haven’t already. Amazon has already started testing meal kits in Seattle, and could quickly become the market leader through its online and in-store sales via Whole Foods.
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