One of the most popular sectors for food industry startups is meal delivery. Every week another company is completing a large funding round, expanding into a new market or creating a new service. Research group PitchBook recently noted that online delivery represents a $9 billion market. In that market, meal ingredient services are especially popular as consumers look for more healthy options and opt to play a stronger role in how their food is made.
Munchery is currently wrapping up an $85 million funding round that will value it at $300 million, reported The Wall Street Journal. The company falls somewhere between ingredient delivery services, such as Plated and Blue Apron, and restaurant delivery services, such as GrubHub or Seamless, because it provides prepared meals from local chefs that are delivered cold and are heated by the customer. Similar services are also raising funds of their own. Sprig raised $45 million in a Series B financing round in April, Blue Apron is seeking to raise more than $100 million for a multibillion-dollar valuation, and Germany-based Foodpanda raised $100 million at the beginning of May.
So why are so many financial institutions backing these food delivery startups? Nick Taranto, CEO of Plated, told Fortune consumers are really the backbone of the market. They are driving the trend towards healthy, high-quality foods, and that has created a very strong consumer base. Julian Lange, CEO of the German ingredient delivery service Marley Spoon, says his company recently entered the U.S. market because it is not dissimilar from the European market they are used to, but it is even more developed, requiring less explanation of their service than in some other countries.
GrubHub, one of the first food delivery services to pop up over 10 years ago, differs from the aforementioned companies in that it delivers from restaurants, it doesn’t create its own meals or ingredient kits. That may change, though, as it sees delivery-only restaurants as the future of foodservice, reported The Wall Street Journal. It lowers rent costs, since space for just a kitchen is much smaller than adding a dining room and doesn’t need to be in an ideal location or be decorated for ambiance, and it doesn’t require waitstaff and other similar employees. This could be ideal for restaurant startups looking to keep costs down while still providing for a large customer base. GrubHub’s CEO Matt Maloney said that orders from delivery-only kitchens only make up a small portion of overall order volume currently, but he expects the segment to grow exponentially in the near future.