The meal kit sector is in growth in Europe. According to estimates from business intelligence provider Visiongain, recipe box sales are forecast to increase to €1.4bn in 2017.
This has been supported by consumer demand for both convenience and a back-to-basics approach to diet and food. On the one hand, recipe boxes offer convenience for busy consumers; on the other, they also meet seemingly contradictory interest in home cooking.
And the opportunity to further expand remains significant. “Whilst meal kits already feel a big thing for the industry, for shoppers they are very much in their infancy currently only being embraced by the early adopters. However, the growth opportunity is substantial as a new type of convenience resonates with shoppers and food transparency and values become deeper ingrained in society,” Bridgethorne e-commerce expert Nick Kirby told FoodNavigator.
“There is clearly a trend here in meeting the needs of what historically would have been called time-poor shoppers and consumers but are now being viewed as time savvy shoppers; Those that are making conscious decisions to use their time in ways that could be more productive or enjoyable than deciding what food to prepare and buy during the working week.
“It is also more than that. If time was the only factor than the perfect solution already exists: ready-made meals. Meal kits are offering something more: an opportunity to still feel engaged in the process of preparation, the opportunity to experiment outside of the normal routine meal and, importantly, to feel as though there is control over the quality, freshness and any ‘hidden ingredients’ that are being out into the body.”
But while meal kits fit neatly with consumer desires the sector nevertheless faces some significant barriers to expansion: not least the physical and temporal challenges of preparing, packing and delivering fresh produce. The complexity of the operation and cost of establishing infrastructure could give many considering investment in the space pause for thought.
Carrefour ups ante with M&A
French retailer Carrefour has decided to overcome some of these challenges and expand its reach in recipe boxes by taking a majority stake in what it describes as the “leader of meal kit deliveries” and French food tech pioneer Quitoque.
Created in 2014, Quitoque employs a subscription system to provide users with “healthy recipes” to be prepared at home with local, organic and seasonal products. In 2017, the company, which has 60 employees, delivered nearly 3m meals throughout France.
After the deal, Quitoque’s co-founders will continue to develop the company alongside Carrefour. The company did not provide further detail on how this cooperation would work and did not respond to requests for comment on how Carrefour’s scale could be leveraged to Quitoque’s benefit.
However, co-founder Etienne Boix did note that the group would utilise Carrefour’s strengths to accelerate growth. “This transaction confirms the relevance of our model and will enable us to capitalize on Carrefour’s strengths to accelerate our omnichannel development,” Boix commented.
For its part, Carrefour said the investment – for an undisclosed amount – allows the group to ramp up its food e-commerce offering. It is “fully in line” with the group’s ambition of creating an “omnichannel universe of reference” and becoming “the world leader in the food transition for all”, Carrefour said.
“Carrefour constantly strives to be closer to its customers and to enrich the shopping experience by offering innovative services that simplify everyday shopping. At the crossroads of digital and food, Quitoque will enable us to strengthen our position in the food tech industry in order to provide an omnichannel response to new consumer habits through the combination of proximity, convenience and quality” said Marie Cheval, executive director of customers, services and digital transformation at Carrefour.
Consolidation on the cards?
The potential offered by meal kits is attracting the interest of retailers and branded manufacturers, who are experimenting with different formats and scaleability.
Last year, Unilever launched pilot schemes with its Knorr and Hellmann’s brands in the Netherlands and UK respectively. Meanwhile, Lidl rolled out its own meal kit box scheme in Switzerland.
The sector remains dominated by pure-play meal kit providers despite this influx of investment. Even as larger retailers and food manufacturers dip their toes in the meal kits pool, with about 1.3m active customers, HelloFresh remains at the forefront of the rapidly emerging space.
According to HelloFresh UK CEO Claire Davenport, the group is able to leverage its competitive advantages to stay ahead of the game.
HelloFresh operates as an integrated food manufacturer and the company has seven fulfillment centres around the world. The group also believes its “unique procurement set-up” creates a further “competitive moat”. More than 50% of the food is directly sourced from local producers and the company believes this means lower sourcing and storage costs as well as fresher food for the end consumer.
“Succeeding in the meal kit market is demanding – amongst many factors, clever logistics and intelligent product development are key requirements. This might be one reason why we’ve seen many new players come and go. As a pioneer in this category, we have gathered extensive experience over the years. This experience, combined with a tailor-made infrastructure, is the foundation of our unique business model. Moreover, HelloFresh goes beyond just being a food retailer. We are a business that is deeply rooted in our customers’ daily routines and preferences,” Davenport insisted.
To Bridgethorne’s Kirby, the proliferation of start-ups active in meal kits is likely to drive consolidation and we could well expect increased activity from supermarket operators or, indeed, the likes of Amazon, he predicted.
“There will, without doubt, be failures and consolidation within the meal kit sector. However, I think it is too early to predict who and when. For now, I envisage a raft of start-ups trying to capitalise on this opportunity and falling by the wayside. To succeed, it will need to be a long-term investment, ideally leveraging multi-national scale alongside local sourcing, distribution and marketing activation.”