Are ready-to-make meal kits stealing your customers?

| by Amanda McNamara
Are ready-to-make meal kits stealing your customers?

Editor's note: This is part of a series called, "Now trending." Each story will dissect an upcoming fast casual trend.

By Amanda McNamara, content marketing Specialist at Toast

Though still in its infancy, the ready-to-make, meal-kit market has quickly earned respect from consumers and investors alike as a legitimate dining option, to the tune of a 2.2 billion dollar industry valuation. 

Plated, HelloFresh, Blue Apron, Sun Basket, and others, have won over the hearts, stomachs, and wallets of millions of Americans through the delicious, chef-curated, ready-to-make meal kits they deliver to customers' doorsteps a few days each week. 

Effectively disrupting dining as we know it, what does the success of the ready-to-make meal kit market mean for restaurants and the foodservice industry as a whole? 

With the "on-demand lifestyle" shifting from trend to norm, long-since established brands are already spending big money to get in on the action, pivoting to meet existing and potential customers alike with on-demand offerings. 

Albertson's, the U.S. grocery titan, recently announced its intent to purchase Plated for between $175 and $200 million, thereby expanding its business into millions of more homes across the country, potentially even the world over. 

The hype behind the ready-to-make meal-kit market has translated into even bigger dollars and cents for some of the more well-known brands vying for market share alongside Plated. BlueApron went publicthis past June with a $1.89 billion dollar valuation at IPO, pricing shares between $10 and $11; HelloFresh followed suit in October, opening on The Frankfurt Stock Exchange with a$1.6 billion dollar valuation, putting shares at $12.40 a pop. Though BlueApron has faltered financially in the months following their IPO due, in part, to opening on the market mere days after the announcement of Amazon's intended purchase of Whole Foods, HelloFresh saw a 53 percent year-over-year growth in revenue during Q2 this year.

According to a 2016 survey by Zagat, Americans go out to eat approximately 4.5 times a week, spending an average of $36.30 for dinner. The majority of ready-to-make meal kits price per serving (1 person = 1 serving), usually between $9 and $12 dollars, though wholly dependant upon the specifics of your chosen meal plan (a paleo-oriented plan may cost more than a classic ‘omnivore' oriented plan, for instance) as well as any additional shipping costs. 

That would mean one person could purchase three nights of ready-to-make meal-kits for the price of one dinner in a traditional dining establishment. 

If budget is a concern, as it is for most of us, signing up for a high-quality, affordable service like a Plated or a HelloFresh really seems like a no-brainer. 

Another takeaway from the Zagat survey worth mentioning: when asked what irritates them most about dining out, 28 percent of respondents said the service, 25 percent said the noise, and 13 percent said the price tag. A 2017 study by Toast likewise found that 58 percent of diners put quality of food as the most important factor involved in a positive dining experience, yet 15 percent of Generation Z respondents ranked efficiency as their top concern. Can you think of a dining option that checks all of these boxes? Staying in the comfort of your own home and whipping up whatever BlueApron or Sun Basket's team of highly skilled chefs conveniently sent along that afternoon. 

So, what does this shift to optimized in-home dining mean for existing businesses in the foodservice industry? That depends on how you feel about change?

Restaurants are in a unique position: they have the insight, they have the connections (including loyal customers) and, most importantly, they have a reliable revenue stream that enables them to test new growth opportunities. 

Viewing ready-to-make meal kits as a detractor is a mistake — treat their success as a learning opportunity. Though they do deserve full credit for creating an innovative approach to dining, the strategy these brands have adopted is the oldest and wisest in the book: always maintain a keen understanding of customer behavior. 

In the case of the ready-to-make meal kit market, the big players in this space created a product in-line with the three guiding principles of the on-demand lifestyle: affordability, availability, and ease of use. 

Some big names, Tyson, Qdoba, El Pollo Loco, and Chik-Fil-A to name a few, are already integrating this positioning into their business's offerings, and you ought to as well. Through their Tastemaker'sline, Tyson offers ready-to-make meal-kits with fresh Tyson products for both in-store purchase, as well as at-home delivery. Qdoba, El Pollo Loco, and Chik-Fil-A are each testing out family-style options aimed at satisfying the demand for customizable, multi-serving meals. 

Looking for a way to compete?

Test out a pilot program where customers pre-order meals to be delivered throughout the week at a discounted rate. If you have an existing loyalty or rewards program (and you should, consumers spend 46 percent more with businesses that have loyalty programs) you can offer this promotion to customers who have earned a certain point benchmark. Before making it a permanent addition to the menu, try offering a bundled meal package as a time-sensitive deal on a site like Groupon to assess both new customer interest as well as whether your existing operations can handle the change of pace. Are you especially confident in the power of your brand, and want to solve for scale? Leverage any strong relationships you have with distributors to create a co-branded ready-to-make meal kit offering, like Tyson's Tastemakers. 

It's only natural to be apprehensive of the new kid on the block shaking up the status quo, but don't let their success discourage you. Instead, study their strategy and adopt your findings into your existing business practices. Change can be scary, but it can also be profitable.  

Cover photo: iStock

Topics: Trends / Statistics

Companies: Toast, Inc.

Amanda McNamara

An experienced digital marketer and veteran of the server life, Amanda whips up easy to digest tidbits for Toast’s Restaurant Management Blog and beyond.

wwwView Amanda McNamara's profile on LinkedIn

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