The Pandemic Is Boosting A Stagnant Meal Kit Industry. Will Interest Persist When People Can Leave Homes?

By Alexia Elejalde-Ruiz Chicago Tribune

WWR Article Summary (tl;dr) As Alexia Elejalde-Ruiz reports, the surge in demand for at-home meal kits is "a welcome development for an industry that was crowded with more than 100 competitors and stagnating before the coronavirus struck."

CHICAGO

Barbie Steffen was trying to determine the best way to feed her family without stepping foot in a grocery store when she remembered a gift card that had gone unused for more than a year.

Steffen, 35, of Chicago's Lincoln Park neighborhood, dusted it off and placed her first order with Home Chef, a Chicago-based meal kit delivery service that hadn't interested her pre-pandemic. Prepping and assembling the ingredients had seemed like too much work.

But soon she was smitten by the idiot-proof recipes that gave her confidence in her cooking and brought variety to mealtime. Now she makes dinner from Home Chef meal kits twice a week and has seen her veggie-hating kids transformed.

"They're eating Brussels sprouts," Steffen said. "They love couscous now." For the Steffen family, the meal kits filled a pandemic-fueled need when Instacart grocery delivery slots were more than a week out. But she expects they will remain a part of her dinner repertoire long-term.

"I think I want to keep doing it," she said. "Not only does it make it easier for me, it gives me more inspiration for meals. Because I get very stuck making the same thing."

Meal kit services are enjoying a surge in demand as legions of people cook from home amid COVID-19 stay-at-home orders. That's a welcome development for an industry that was crowded with more than 100 competitors and stagnating before the coronavirus struck. The share of the population using meal kits has grown to 7% since the pandemic began, after being stuck at 5% all of last year, according to Darren Seifer, food and beverage analyst with NPD Group. The lift may be temporary, but some say it could be a seminal moment as people avoid going out and look to stretch their dollars. "These meal kits have an opportunity now to prove their value," Seifer said. Whether interest continues depends partly on whether people will continue to pay for the convenience if the economy worsens. But that's not stopping some companies from getting in the game with concepts that try to solve some of the challenges faced by meal kit pioneers. That includes Kraft Heinz incubator Evolv, which just launched a new meal kit delivery service, SupperUp, in partnership with Instant Pot. While a primary benefit of meal kits is to avoid food waste by pre-portioning ingredients, some customers find them so time-consuming that the food expires before people prepare them, said Katie Peterson, head of growth at Evolv and co-founder of SupperUp. Unlike meal kit services that send fresh ingredients, the no-subscription SupperUp, which is being piloted in Illinois before a national rollout, delivers flash-frozen ingredients that can be put directly into the popular pressure cooker. The recipes serve four and work out to $5.50 to $7.50 per serving. The pandemic has inspired some established restaurants to introduce meal kits of their own. Chick-fil-A, which started testing meal kits in 2018, recently added a $14.99 chicken Parmesan meal kit for two to its menus nationwide. Denny's last month launched five meal kits, including a breakfast for up to six and a slow-cooked pot roast for eight. In Chicago, Fat Rice announced it was closing its popular restaurant and reopening as Super Fat Rice Mart to allow customers to cook its Macanese recipes at home. Its signature Super Value Cook Kit, for $99, includes ingredients to feed two adults for breakfast, lunch and dinner over two days. But the shift in eating habits has been particularly beneficial for traditional meal kit delivery services, which report rising demand since shelter-in-place orders took hold in the U.S. in March. Blue Apron, once the industry leader, is touting a much-needed sales bump after losing customers and money for several years. The New York-based company, which saw revenue fall 28% to $102 million in the first quarter compared with a year earlier, is forecasting second-quarter revenue to grow to $130 million. After losing $20 million in the first quarter, it expects to deliver a net loss of no more than $6 million in the second quarter, the company said in its earnings release. Blue Apron CEO Linda Findley Kozlowski has said the company expects demand to continue even as COVID-19 restrictions lift. But Cara Rasch, a research analyst at Packaged Facts, cautions that the resurgence of meal kits is likely not sustainable once people are no longer confined to their homes. "When businesses reopen and people return to lifestyles on the go, restaurant carryout, prepared meal delivery, and other similar food options are going to keep winning out over meal kits due to increased convenience and value to the customer," Rasch said. Rasch expects Blue Apron to continue its fall and lose customers to stronger competitors like Hello Fresh, now the market leader. Both Blue Apron and Hello Fresh are subscription services priced at about $10 per meal. Hello Fresh, based in Germany, grew its U.S. customer base by 88% in the first quarter compared with last year, to 2.6 million, out of 4.2 million customers globally. It owns organic meal kit company Green Chef and budget-friendly meal kit service EveryPlate. Home Chef, headquartered in Chicago's Old Post Office, started the year expecting to grow 20% to 30%, but as a result of the pandemic now forecasts at least 60% growth, said Rich DeNardis, chief revenue officer and head of marketing. "We are speaking to a whole different set of consumers," DeNardis said. "Maybe folks who are more vulnerable, older, empty nesters who have disposable income. They are thinking of the risk/reward of going to the grocery store more than they used to." Bought by Kroger two years ago for $200 million, Home Chef has three tiers of meals based on the amount of effort it takes to cook them _ traditional meal kits, oven-ready meals that require less prep work, and heat-and-eat trays. They are sold online as well as in 2,000 Kroger-owned grocery stores, including many Mariano's, for an average of $9 per person. Companies large and small are seeing the meal kit sales boost and hoping it reflects long-term eating trends that will bolster the industry. More than half of Americans say they are cooking more now than they were pre-pandemic, and half of those people said they will continue to do so once life reverts to normal, mostly to save money and eat healthier, according to a mid-April survey by Hunter, a food public relations firm that polled 1,000 people. Demeko Taylor, a real estate agent who lives in the Gold Coast, said the no-prep meals he gets from Chicago-based Tovala work with his unpredictable work schedule, and he likes avoiding the hassle of grocery runs and the amount of food that rotted in his refrigerator. Tovala sells customers not only meals but a high-tech countertop oven that cooks them. When the pandemic struck, Taylor increased his weekly meal delivery order from four to six, a pace he expects to continue after life resumes some normalcy. "Everything is virtual now, so I will probably be home more often," said Taylor, 38. The $72 weekly he pays for six meals seems like a "steal" for the quality of the food, he added, and "it gives me the variety of what I want when I want it." Founded three years ago, the company delivers meals with a QR code that customers scan into their smart oven, which automatically adjusts its settings to cook each of the fresh ingredients to specifications. The oven costs $299 and each meal is $12. Founder and CEO David Rabie, who declined to disclose revenues, said sales have increased 300% since September. Evanston-based Meez Meals, which had been growing steadily but modestly since its founding 10 years ago, doubled its sales as soon as the stay-at-home order hit, CEO Scott Zuckerman said. The service sets itself apart by doing the time-consuming work in advance _ dicing the onions, preparing the ginger soy aioli _ to make meal preparation easier. It also maintains a local, personal feel, putting the names of the workers responsible for preparing each dish on the packaging. Priced at $9.50 to $15 per person, its meals are on the higher end. But for customers who normally shop at Whole Foods, it doesn't add much to the grocery budget, and Zuckerberg thinks interest in the service will stick even as lockdowns lift. "I think that this has caused a real sea change in the way people think about food," Zuckerman said. "I think there is going to be a greater desire by customers to know what they're eating and see it come together, and we're making it a lot easier." ___ (c)2020 Chicago Tribune Visit the Chicago Tribune at www.chicagotribune.com Distributed by Tribune Content Agency, LLC. _____ PHOTO (for help with images, contact 312-222-4194)

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