Will the Meal Kit Delivery Industry Hold Up in a Recession?

Food delivery marketThe food industry is the latest targeted for “disruption.” With the rise of meal kit delivery services, venture capital firms have been in a frenzy the past three years to find a success story, and profits. However, when the economy turns south, who will be left to pay $10-12 per person per meal for gourmet food?

Rather than just targeting affluent and convenience-seeking Millennials, perhaps a more diversified model targeting a broader audience of consumers looking for weight loss and other health benefits, at a lower price, might be prudent.

Top 8 Things to Know About the Meal Kit Delivery Industry

  • Meal kit industry growth: Marketdata estimates that the meal delivery market was valued at $3.2 billion in 2015, up from $2.2 billion in 2012. We expect a 19% gain to $3.8 billion this year. Marketdata forecasts 11.6% average yearly growth to 2020, reaching $5.56 billion.
  • Market segmentation: The market is comprised of 3 segments: 1) healthy prepared meals & meal kits ($1.5 billion), 2) diet foods ($910 million), and 3) premium meats, appetizers, and desserts sold via mail order ($1.39 billion).
  • Competitive landscape: The meal kits market is the segment most supported by venture capital, with 150+ competitors. It’s getting more crowded and venture capital investment is slowing. Companies such as Blue Apron, Plated, and Hello Fresh are the major players. This market is the youngest, only emerging since 2012.
  • Diet foods: The diet food home delivery market is somewhat older, taking root in the early 2000s. There are roughly 30-40 players in this market, led by Nutrisystem, along with and mostly local firms.
  • Premium meats: The premium meats market, led by Omaha Steaks, Harry & David, and Honey-baked Ham, is the oldest and most established market, with roots going back to the early 1990s (online). Roughly 30 players compete. This is a seasonal market dependent on holiday sales during Easter, Christmas, and Thanksgiving for 60% of its revenues.
  • Geographic factors: Many companies in this market focus on serving either or both New York City or Los Angeles. The other “hot spot” seems to be Florida.
  • Food delivery trends: Marketdata expects major consolidation in the meal kits market over the next four years, as weak players fail or get acquired. Diet food delivery is a more stable market, as is the mail order premium meats market. The latter have smartly diversified by opening retail stores as well (such as Honey-baked Ham and Omaha Steaks).
  • Market challenges: Meal kit delivery does have some logistics issues — environmental concerns over excessive packaging for meal kits, for example. There is also the question of how to classify the personnel that deliver these meals locally — as independent contractors or regular employees? In addition, many customers report that food quality is not always up to par, for the high prices being charged.

Learn More About the Food Delivery Industry

For more in-depth information, download Marketdata's study on The U.S. Prepared Foods Home Delivery Market, which covers:

  • The nature/structure of the market
  • Key demand factors
  • Venture capital funding activity
  • Pricing and distribution
  • How companies are formed and operate
  • Customer mix and demographics
  • Market size and forecasts
  • Management outlooks and opinions of market growth and competition

The study also profiles a variety of companies in the food delivery market including Blue Apron, Plated, Peach Dish, Munchery, Hello Fresh, Omaha Stakes, Harry & David, Appetizers USA, Nutrisystem, and many others.

About the Author:  John LaRosa is the President of Marketdata LLC and is the author of 100+ industry and market studies. His research appears in top media outlets including ABC, CNN, Fox, Forbes, USA Today, The Wall Street Journal, The New York Times, and a variety of trade journals

Topics: Food & Beverage E-commerce & IT Outsourcing