- Nestle USA is the main investor in the $77 million round of new funding in Freshly, a meal kit startup, the companies said in a statement.
- The investment will help fund Freshly's construction of a new East Coast kitchen and distribution center in 2018 as it prepares to expand to nationwide service. The company was founded in 2015 and currently employs 400 people.
- "While most food choices are still made in supermarkets, it's clear that consumers are responding to a growing universe of direct-to-consumer options, made possible through innovation," said Jeff Hamilton, Nestle USA's food division president. "Acquiring a position in Freshly not only gives us access to this growth market, but it also brings reciprocal benefits for both companies."
Jeff Hamilton, Nestle USA's food division president, said the investment will help meet its goal of "finding new avenues to deliver delicious, nutritious meals to consumers in a way that fits their busy lives."
The meal kit business is booming, with Blue Apron and Hello Fresh among the companies fighting for supremacy in the crowded space. Grocers such as Kroger and Publix also have jumped on the bandwagon early by offering branded meal kits that leverage their fresh capabilities and offer higher margins.
It's clear why this is a popular space: Nielsen Fresh data shows meal kit sales at U.S grocers totaled $80.6 million during the past year, with further growth expected in the future. In addition, the numbers show 36% of consumers say they’re interested in buying grocery-store meal kits even though online options exist. For an industry hungry for growth, meal kits could be an attractive option.
But what's interesting about the recent investments is many of them are coming from the same CPG companies whose very products are under attack from the fresh-based business models being touted by meal-kit delivery firms. In just the past year, Hershey announced a partnership with online meal-kit marketplace Chef'd, and Campbell Soup invested $10 million in the e-commerce company. Online grocery delivery company Peapod has struck other meal-kit deals with General Mills, Conagra, PepsiCo and spirits maker Jim Beam, among others.
For food and beverage manufacturers used to selling their wares through traditional grocery and convenience stores, there is a realization that they need to have a foothold in the meal-kit delivery sector as consumers, at least for now, take a deeper interest in the concept. Every can of chicken soup or jar of tomato sauce that makes its way into a meal kit is another avenue for food manufacturers to distribute their products and ring up a sale. The moto for CPG companies appears to be a pretty simple one: If you can't beat 'em, join 'em.
These partnerships, while unrelated to the recent takeover of Whole Foods by Amazon, could be even more important as the online giant expands its presence in the organic space and expands its own meal-kit business that so far is limited to the 16 or so cities where AmazonFresh, its food delivery arm, has operations.