The meal kit and fresh food segments have experienced tremendous growth over the course of the pandemic on a combination of limited dining-out options, families with little time to spare for preparing and cooking food, and the simple desire of consumers to eat an easy-to-make, well-balanced meal instead of takeout.
Main Points:
- The pandemic caused a fundamental shift in the meal kit industry.
- Global meal kit delivery services market size is expected to reach almost $20 billion by 2027.
- Grocers and restaurants are growing market share in the meal kit segment.
In fact, the global meal kit delivery services market size is expected to reach almost $20 billion by 2027, expanding at a CAGR of 12.8%, according to Grand View Research. Among meal kit offerings, heat-and-eat options will have a large share of the market due to time-constrained families, while cook-and-eat is expected to be the fastest growing segment.
It’s a far cry from a once struggling industry that couldn’t quite connect with consumers over the longer term after the initial novelty (and higher cost) of these services wore off.
The pandemic caused a tectonic shift in the industry as consumers avoid restaurants and grocery stores and eat in more. Meal kit providers, in turn, expanded operations, adjusted offerings to meet increased demand, and grew their businesses substantially.
Market Leaders HelloFresh and Home Chef See Expansion
In the U.S., HelloFresh is currently the largest meal-kit provider in terms of market share, surpassing Blue Apron in 2018.
In November 2020, Frankfurt-based HelloFresh reported sales of 970.2 million euros ($1.13 billion) for the third quarter, up 120% from a year earlier.
Half of the growth in sales in the third and fourth quarters was coming from customers spending more time at home during lockdowns, while the other half was growth the company would normally have expected organically, Chief Executive Dominik Richter said on an analyst call.
Added Richter: “The trend towards eating more meals at home accelerated during the pandemic and we consider the key drivers for this to have become permanent.”
Meanwhile, Kroger-owned Home Chef is generating “double-digit, near triple-digit growth year on year,” Chief Revenue Officer Rich DeNardis told FoodNavigator-USA, as it has expanded its offerings beyond traditional meal kits that may take 45-55 minutes to prepare, to fully cooked prepared meals that can be microwaved in 2-5 minutes.
Restaurants are also getting in on the meal kit action. Chick-fil-A began selling chicken-based meal kits at drive-through locations and through delivery services like DoorDash. Denny’s also sells kits that allow customers to prepare various menu items at home, according to Restaurant Business.
Grocers are also joining in as demand for fresh food sparks growth opportunities. In Albertsons’ fiscal third-quarter earnings call earlier this month, Chief Executive Vivek Sankaran said “to further capitalize on the strength we see in fresh, we are expanding our portfolio with meal solutions – ready to eat, ready to heat, and ready to cook – that are growing in popularity as alternatives to cooking from scratch, with plans to introduce these solutions more broadly in the weeks and months ahead.”
The Prospects for Meal Kit and Fresh Food Growth
Industry consolidation that accelerated during the last weeks of 2020 could further bolster the meal kit market. In November, HelloFresh agreed to buy Illinois-based meal delivery business Factor75 for up to $277 million, as European food companies turn their attention to the U.S. to fuel growth. The deal came weeks after Nestlé completed its $1.5 billion acquisition of New York-based meal delivery startup Freshly.
Other factors are likely to further support meal kit momentum this year:
Expanding past dinner time: Most meal kit services provide dinner only, leaving the door wide open for breakfast, lunch, and snacking options.
Costs: Providers will look for ways to lower costs and appeal to more consumers.
Increasing popularity of pre-made meal kits: With no preparation or cleanup, these offerings align with consumers looking to eat fresh food with minimum effort.
Packaging improvements: While certainly reducing food waste, excessive meal kit packaging has turned off some consumers. Sustainability efforts will lead to improvements and change consumer views.
Targeting consumers on a diet or with specialized diets: with some services already offering keto, paleo and vegetarian meal plans, additional specialized selections are likely to draw in more consumers.
