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Analysts Say Chipotle Won’t Recover Sales Losses Until at Least 2018

Analysts Say Chipotle Won’t Recover Sales Losses Until at Least 2018


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Food giveaways cited as a short term, unsustainable solution

Analysts believe the company’s current valuation “reflects an overly optimistic outlook” on Chipotle’s road to recovery.

Analysts on the future of Chipotle: Good, but not great.

The company’s stock was downgraded by investment firm Wedbush Securities, which stated that — best case scenario — the company will not recover its sales losses from the foodborne illness outbreaks until at least 2018, reports CNBC.

In a research note, Wedbush analysts write, “Based on our belief that current valuation reflects an overly optimistic outlook regarding Chipotle's path to recovery, we downgrade shares to underperform from neutral.” It cut Chipotle’s target stock price to $400 from $450 and discourages investors from owning shares in the company as “unit economics may not rebound even if sales do.”

Though the company reports that it has recovered about a third of its sales, analysts say the company’s giveaway strategy is not only unsustainable, but the company has yet to prove its ability to sustain sales without coupons.

“We model a gradual rebound in traffic through 2016, with upped near-term marketing the lone driver to point to,” Wedbush analysts say.


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

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Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

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Referenced Symbols

Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

  • Email icon
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  • Twitter icon
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Referenced Symbols

Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

  • Email icon
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  • Twitter icon
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  • Flipboard icon
  • Print icon
  • Resize icon

Referenced Symbols

Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

  • Email icon
  • Facebook icon
  • Twitter icon
  • Linkedin icon
  • Flipboard icon
  • Print icon
  • Resize icon

Referenced Symbols

Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

  • Email icon
  • Facebook icon
  • Twitter icon
  • Linkedin icon
  • Flipboard icon
  • Print icon
  • Resize icon

Referenced Symbols

Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

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Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

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Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

  • Email icon
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Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


People like meal kits, but their business model is unsustainable

Blue Apron and other traditional meal kits are facing a growing category of competitors, among other challenges

  • Email icon
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Meal kits were expected to overhaul dinner time in the U.S., helping busy workers indulge their love of cooking without the burden of shopping for individual ingredients.

Now, it seems the many players that have emerged in recent years—there are more than 150 meal-kit companies operating in the U.S. today, according to The Motley Fool— are backing a business model that is unsustainable, suggesting a shake-out is all but inevitable.

“The meal kit sector seems a lot like the dot com boom and bust of the late 90s,” said Darren Seifer, food and beverage industry analyst at NPD Group. “Lots of competitors jockeying for market share and not focusing on the bottom line.”

The main problem facing meal kit providers is the high cost of customer acquisition, and the difficulty of retaining those customers, who can quickly move on to embrace the next food fad. Then there’s the cost of paying staff to put the ingredients together and the packaging and logistics required to deliver a highly perishable product.

“Between having staff to get boxes together, shipping costs, [and other costs], it sounds like it could be an expensive business model,” said Seifer.

For now, Blue Apron Holdings Inc. APRN, -8.93% and HelloFresh SE HFG, -1.00% , the two biggest publicly-traded, pure-play meal-kit providers, have failed to turn a profit. Blue Apron was founded in 2012, while the Berlin-headquartered HelloFresh was founded in 2011. Blue Apron shares have fallen 60% in the last 12 months, while the S&P 500 SPX, -0.36% has gained 5%.

The cracks are beginning to show elsewhere, too. Earlier this month, Chef’d closed abruptly and was acquired by packaged-food consultancy True Food Innovations, which will halt its e-commerce operations until it has figured out how to be profitable, as The Wall Street Journal reported.

Chef’d’s demise is disappointing as it was one of the players that had supply deals with physical retailers and reports from grocers suggested sales were healthy. The news has led to speculation about who will be next to close or merge with a bigger player.

The sector has already seen companies make deals and seal alliances. Albertsons Cos. announced it was buying Plated in September 2017. Blue Apron announced a pilot partnership with Costco Wholesale Corp. COST, +0.86% in May.

HelloFresh S.E said in June that its meal kits would be sold in 600 Giant Food and Stop & Shop stores this year. In May, Kroger Co. KR, +1.42% announced a deal to purchase meal-kit company Home Chef for up to $700 million.

And last March, Martha Stewart and Amazon.com Inc. AMZN, -1.45% partnered with meal kit service Marley Spoon.

In some cases, grocers are launching their own meal kits, with Walmart Inc. WMT, +0.18% announcing in March that it will make their’s available in 2,000 stores this year.

For those meal-kit companies that remain, the audience may be too niche.

“There’s a small segment of the population that wants products like this, but simply not enough of them to keep all these companies that want to play alive,” said Gary Stibel, founder and chief executive at New England Consulting Group.

Nielsen data published in March shows that meal kit spending is growing three times faster than other channels, suggesting that consumers like them. And 9% of Americans, or 10.5 million households, said they had purchased a meal kit in the previous six months.

A report on “The Future of Dinner in America” published by the NPD Group, illustrates how dinner-at-home has changed thanks to access to grocery delivery, meal kits, mobile apps, and more, with a focus on convenience.

But studies cited in a recent eMarketer report shows, consumers may not like the idea of being locked into a subscription. “I feel as though the subscription model might come to an end in the coming years,” said NPD’s Seifer. “Models not requiring subscriptions, that’s the key.”

And then there’s the novelty of meal kits, which wears off.

“There’s a focus on acquiring new customers and then they forget to feed core customers, who get tired and move on to the next shiny thing,” said Stibel.

Stibel is expecting Chick-fil-A’s meal kits, which will launch Aug. 27 in 150 restaurants across Atlanta, are “brilliant,” and will be a traffic driver. Chick-fil-A kits are meant to be prepared in 30 minutes. They will be available through November 17, and cost $15.89 per kit, which serves two people.

“Not everyone likes Chick-fil-A, but the people who like Chick-fil-A love it,” he said, predicting that the chicken chain will expand its meal kits offering when the test is through.

Companies that follow the traditional meal kit model are still looking for innovation.

Purple Carrot, a 100% plant-based meal kit company, just launched a new menu that includes three plans: Quick & Easy for meals cooked in 30 minutes or less High Protein, for an “energy boost” and Chef’s Choice, for new dishes, like Curried Carrot Fritters with Mango Avocado Salad and Tamarind Chutney.

“While there has been a lot of noise about the challenges of the e-commerce meal kit category, we have continued to innovate our product offering while making steady progress with respect to margins and profitability,” said Andy Levitt, founder and chief executive of Purple Carrot, which got a $4 million infusion from Fresh del Monte Produce Inc. FDP, +0.43% in May.

“There is an abundance of choice for consumers, yet I believe that there won’t be a winner-take-all outcome,” Levitt said. “Instead, e-commerce offerings like ours will address at least three nights of meal planning, and grocery and restaurants will fill in the balance.”

Purple Carrot meal plans are priced at $12 per meal, or $72 per week, for three meals that each serve two people, which could be another hurdle. NPD’s Seifer points out that $10 per meal is expensive for a lot of the country.

The goal is “delivering on convenience in an affordable manner, and meal kits aren’t delivering on that yet or haven’t convinced consumers of the value yet.”


Watch the video: Why this analyst says Chipotle could hit $1,600 (July 2022).


Comments:

  1. Lyel

    Completely I share your opinion. In it something is and it is excellent idea. It is ready to support you.

  2. Ciarrai

    I'm sorry, but I think you are making a mistake. I propose to discuss it. Email me at PM, we will talk.

  3. Glendon

    If only mushrooms were growing in your mouth, then you wouldn't have to go to the forest at least

  4. Chadburne

    Yes indeed. I agree with all of the above. Let's discuss this issue.

  5. Moogutaxe

    Without conversations!

  6. Nathair

    A win-win :)

  7. Iapetus

    and something analogous is?

  8. Mikkel

    at least I liked it.



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