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Blog > July 2017 > The Rise of Subscription Meal Kits: New Opportunities for CPG Manufacturers and Retailers
7/19/2017 9:12:23 AM
By Susan Viamari
 
IRI Blog
 
Most of us can relate to the seemingly endless “What’s for dinner?” question. After a long day at work, getting takeout can seem like a much more attractive option than having to spend time looking for recipes, identifying needed ingredients, and then shopping for and prepping those items. The actual cooking can be the easy part!   
With major CPG manufacturers like Nestle and Unilever now investing in meal kit startups, and Blue Apron’s IPO bringing the company to a valuation of nearly $2 billion, meal kit subscriptions are becoming a more visible option. With pre-measured ingredients and simple, step-by-step cooking directions, it’s easy to see why this type of dinner delivered to your doorstep is growing in popularity, though meal kit use is currently limited.
 
IRI Blog


Only about five percent of U.S. customers have tried a meal kit subscription service so far. The added costs of delivery are still high, and consumers still have to take the time to cook the meal and clean up afterward. Packaging waste can be a deterrent, especially for millennials, even as some meal kit companies claim that the packaging waste offsets their elimination of food waste. And, consumers also still overwhelmingly prefer to select their own food, especially produce, as they become increasingly aware of products’ origins.   

Opportunities for Food Manufacturers and Retailers

While shoppers are not ready to abandon brick and mortar stores, subscription meal services may prove less easy to resist in the near future, and the CPG industry must be ready to respond and leverage this growing trend. Winning in this area will require CPGs to tackle some of the hurdles that have thwarted growth thus far.

First and foremost, marketers need to make the path from the grocery store to the dinner table simpler and more time-saving for the customer. For retailers, this could be changing the layout of the store to offer mealtime solutions, not just components. Strategically placing complementary items near the front of the store for easy in-and-out makes quick drive-by shopping easier. Posting items together online as a meal to purchase through the retailer’s website for same-day delivery or pick-up taps into the click-and-collect phenomenon. Manufacturers could offer easy, time-saving recipes or innovate an existing dinnertime product to eliminate some of the time it normally takes to prepare. The possibilities are endless, limited only by the imagination.

Some CPG manufacturers and retailers are already experimenting with online subscription-based services to drive consumer loyalty and encourage repeat behavior. While this is more prevalent with non-food items, such as razors, it is a viable—and growing—option for edibles as well. This is an area the industry should continue to explore as a potential new growth opportunity.  

To address concerns around packaging waste, some meal subscription companies have begun actively reducing packaging and/or using biodegradable packaging materials. CPG manufacturers and retailers must innovate in this area and tout their environmental focus in their offerings and messaging.

A few grocers, such as Kroger and Publix, have begun innovating with their own meal kits. Much of this is still in the testing phase, but it is clear that CPG marketers must develop an aggressive strategy to keep up with the convenience trend and the need that consumers, especially millennials, have for fresh ingredients with transparent origins and minimal environmental impact.

Many believe that delivered meal kits are going to be the next big thing to shake up the grocery industry. With high customer acquisition costs, difficulties with scaling and questions about profitability, they still have some way to go before they are in a majority of U.S. households. In the meantime, CPG marketers can tap into multiple ways to better understand the changing consumer and their specific needs, making the “What’s for dinner?” question a lot simpler to answer. Ask us how.  

For more information on recent food and beverage trends, click here. Also, IRI is regularly tracking key retail industry trends and benchmarking measures of performance across channels, departments and categories to highlight growth opportunities in these areas. Ask your IRI representative for more details on this Retail Trends thought leadership initiative.

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