Dive Brief:
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Sun Basket opened an expanded distribution center in New Jersey this week that is six times bigger than its previous location and potentially allows it to reach $500 million in revenue, the company said in a release.
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The announcement comes just after the meal kit company raised $57.8 million in new funding led by August Capital. Sun Basket, launched in 2014 in San Francisco, said it is the fastest-growing healthy meal kit delivery service in the U.S. and has increased net revenue by more than 280% during the past year.
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"Our rapid growth and need for a much larger East Coast facility is an amazing vote of confidence from customers, and it's a clear sign that there is a huge market for healthy, delicious meals which meet consumers' diet-specific needs," Adam Zbar, CEO and co-founder, said in the release. "We will continue to upgrade our facilities with automation, which improves efficiency and provides customers with an even more personalized experience."
Dive Insight:
As one of the largest companies in the hotly contested meal kit market, Sun Basket has so far found its niche by focusing on customers with specific diets and providing organic and sustainable ingredients that arrive in recyclable and compostable packaging.
But even though the four-year-old company managed to accrue by the start of this year an impressive $250 million annual revenue run rate (defined as recent financial results extrapolated into the future), it needs to steadily expand distribution if it hopes to reach its goal of eventually boosting annual sales to $1 billion.
That's where the New Jersey facility comes in. By adding this 190,000-square-foot distribution center on the East Coast — and another one planned for the Midwest — Sun Basket hopes to reach 98% of the country with its meal kit delivery service. The company also is ramping up its personalization platform and working on potential partnerships with grocery retailers and health groups, CEO Adam Zbar told Food Dive in January. These steps toward profitability have been helpful to the company as it looks for new sources of funding.
Marketing costs have been a problem for Sun Basket, as they have for other meal kit companies such as Blue Apron, since the higher the cost per customer, the lower the margin. In addition, some of Sun Basket's higher-quality food items command a premium from its customers, whom Zbar noted tend to be more loyal than other people in the meal kit business due to the personalization factor.
Working with health organizations could be a lucrative direction for Sun Basket since the company is already positioned in the better-for-you segment. Zbar has said he would like to see branded grab-and-go salads and meal plans personalized for those with certain health issues. Such medicine-as-food initiatives are on-trend add-ons that can be a positive and predictable revenue stream for startups.
PlateJoy, the personalized meal-planning service which partners with Instacart, recently launched an app providing weight tracking and virtual coaching for prediabetics that apparently will be covered by some insurance plans. And while such services can't be compared to meal kits, they help to illustrate a company's better health mission with action.
If Sun Basket can continue drawing in customers and expanding its geographic reach with a personalized approach offering high-quality, better-for-you ingredients, the future may end up shining more brightly than for its competitors. Blue Apron has been losing money and customers lately and had challenges opening a New Jersey fulfillment center, while HelloFresh went public overseas and plans to stress faster and more convenient meals in order to overtake Blue Apron as the market leader this spring.
Meanwhile, Sun Basket's investors seem to believe the company has enough potential to eventually lead to net revenues of $500 million to $1 billion. The rest is up to the company's leadership and its ever-growing customer base.