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Meal Kit Industry

Is the rising popularity of Meal Kits a Food Processor’s opportunity or threat?

Meal Kit delivery services were invented  by Kicki Theander in 2007 in Sweden. Her company Middagsfrid, (Dinner Peace, in English) was the World’s first meal kit company, the concept of delivering  pre-portioned ingredients for a number of meals every week, the customer uses only the ingredients and the provided recipes to create a home cooked meal..

The concept quickly exploded and In 2015, Goldman Sachs research expected the meal kit industry to grow to between $3 billion and $5 billion by 2020.

What challenges does the sudden popularity in the Meal Kit Market hold for logistics in the  Food Processing Industry?

1. Quality

With fresh produce, meal kit delivery companies will rely on efficiency now more than ever. They simply cannot afford to deliver food which is late or under par. Convenience is key – if meals cannot be delivered on time, when scheduled, then the main reason the customer subscribed to the service in the first place disappears. To succeed, meal kit delivery services should remove the need for customers to visit the supermarket, otherwise, why subscribe to this service at all?

2. Loyalty

Loyalty will no doubt run hand in hand with the quality and service, because fresh product delivered on time coupled with excellent service usually equates to a great user experience, and this will gain the loyalty of the customer. (Except this time, your recipe instructions better be good as well!)

3. Responsibility

Every food producer or processor has responsibility for ensuring that their product ticks all the boxes. Nowadays, with instant social communication, feedback and reviews, a customer can instantly give voice to their disgust for a brand not delivering what was promised.

This creates a greater need for the processor / manufacturer / logistics divisions of the company to work together to seamlessly complete the delivery process, and keep in mind the impact every step has on the user experience.

4. Service

With any subscription-based business, great customer service is the key to success. If the service delivers less than expected – then there are plenty of competitors out there, ready to step in and take up the challenge.

The last step, and possibly the most memorable to the customer, is often the face at the front at the front door. It’s a shame to concentrate on all stages of the delivery, only to let the team down on the very last step. And many a customer will forget all the great service they had up until the point of delivery, if  they’re disappointed by the service at delivery.

5. Speed

It seems to be an amazing fusion of the food processor’s cleanrooms, the grocer’s store rooms, the restaurant’s gastronomic flair, and the couriers routine. A new sort of food model has blended the grocery warehouse and the fresh produce stall and moulded it all around an online service, to become part of both the shopping and the meal provider scenes. The food processing standards must all still apply.

6. Competition

The rise of third party delivery services like UberEATS have disrupted the food delivery space, in the same way Uber and Airbnb have shaken up the traditional business models for taxi services and hotels.

Many industry commentators suggest that full-service restaurants will be heavily and negatively hit by the growth of these third-party meal providers, prompting certain commentators to believe that “foodservice outlets are now at the mercy of third party delivery companies”. This tends to overlook that you still have to cook the meal!

Other commentators argue that certain third party services can be used to support full-service restaurants. Take UberEATS for example – this service is allowing restaurants to offer online home delivery of fully prepared meals, a market that they previously haven’t been able to compete in.

2015 saw a 118% growth in home delivery sales for full-service restaurants in the US, and this is expected to grow in the next few years.

  • More than 170 meal kit businesses are in operation globally (including single product niche operators ).
  • Meal kit food delivery services generated more than $1 billion in sales, in 2015. The US accounts for 40% of this.
  • According to Technomic Research subscribers of meal kit services are typically older millennials equally split among the genders. 47% of subscribers have a household income of over $125 thousand and 23% more likely to rent their home.
  • 40% of subscribers to meal kit services are parents.
  • More than 150 meal kit delivery services in the United States.

There are unprecedented regulatory challenges for this space. The kitchen where the final cooking and preparation is done is not subject to regulation or audit. And the transporting vehicle?

The recently released 2016 data from CGA Peach shows that more than half the British adult population have had a takeaway meal brought to their door in the last six months, equating to approximately 28.6 million people! And a USA-Based article recently noted that Millennials spend more on food outside the home than any other generation, averaging US$50.75 a week. There’s a lot of money getting circulated.

Competition is coming from angles no one anticipated just a few years ago. It underlines the urgency of doing everything that can be done to maximise your current operational efficiency and minimise all costs, waste and energy consumption.

Because nobody knows when the industry or field we’re in will be challenged by some new concept or technology.

As Brad Banducci, Woolworths CEO said: “What was quick a few years ago is no longer quick today.”

Why wait?

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