Few verticals have been as significantly disrupted by hyperlocal technological innovation as the food industry. With grocery delivery companies like Instacart, restaurant delivery services like Grubhub, and meal-kit services like Blue Apron, many of the services consumers use to get food on the table today have transformed the thinking around meals.
California-based Chef’d recently secured $12 million in Series A funding to try to forge a new path in the meal-kit delivery space. Street Fight caught up with the company’s CEO Kyle Ransford recently to talk about Chef’d’s journey, the meal-kit delivery space, and the technologies underpinning the disruption of grocery retail.
Where did the idea for Chef’d come from?
We’re a little bit more than two years old. I was looking at a Bon Appétit magazine on a Saturday, and I thought it would be fun to have people over and cook. As I started going down the ingredients, I saw I’d have to go to one or two different grocery stores. I thought, that would ruin my whole Saturday in order to have dinner tonight. I thought, how come there isn’t a button that someone could just bring you the ingredients?
This was prior to Blue Apron, prior to Instacart. So we started off on the idea at that point and along the way saw what Blue Apron was doing. That gave us some encouragement, and we kept going.
But our original idea was always recipe fulfillment. So it always was the idea to give you exactly what you need for a meal — a meal kit. That makes us rather uniquely different because we have recipes available all the time rather than having subscriptions.
How saturated would you say the meal delivery space is these days, and how does Chef’d stand apart from the crowd?
I don’t think the space is nearly as saturated as everybody says. [A single-digits percentage of] people have tried meal kits at this point, and if you survey the people who have tried them, they say it’s a tremendous value to just buy what they’re going to use. I think this style of shopping is going to dominate grocery-style shopping over time. So I think there’s quite a big runway to go, and you see it in the monthly growth, it’s still growing 5 to 10 percent.
Chef’d, we like to say, is exactly different from the other 150 out there. All the others are signing you up so they can pick what they’re going to send you. They’re going to pick 150 meals for you to cook at home next year. We don’t think a lot of consumers are actively searching for a company to pick 150 things for them to cook at home next year. We do think they really love the convenience of getting it sent to their house. So Chef’d is all about choice. You have the choice to order one; you have the choice to order seven. You have the choice to get it this week and not next week.
So we’re working with the consumer to find out what they’re interested in cooking, what they’re interested in eating from a lifestyle perspective in their household, and to serve those options for them along those categories. We do business with a lot of different brands, and that’s because consumers are interested in a lot of different lifestyles.
What challenges come with providing meal kits on demand rather than using a subscription model like many of your peer companies?
It’s slower to build because we get a lot of the consumers who don’t want to order a subscription, and they want to order the first week but don’t want to order the next week. So it’s a little slower for the initial orders, but we don’t have as many people quitting our company. Over time we think we have a much higher lifetime value, and people tend to stay with us longer, but it’s not as many orders in the first two weeks.
Do you see the meal kit delivery space as competing with food delivery from local restaurants? Does the growth of one industry affect the other?
I think they’re both together competing with the grocery store. We think restaurant delivery spurs more meal kit ordering.
We think most Americans are saying, we’re going to cook at home two or three times a week, get takeout or delivery two or three times a week, and eat out two or three times a week. Grocery is still selling you sizes that are akin to the ’50s and thinking that somebody’s making 20 out of 21 meals at home. When you get the delivery service a couple times a week, the meal kit makes more sense [for groceries], because I don’t need leftover celery and I don’t need leftover chicken breast [which come with large grocery packages].
You guys secured $12 million in Series A funding recently. How did you get investors to support you, and what do you plan to do with the funding?
We had a lot of interest. We ended up putting together a deal with FreshDirect in New York. We’ve been self-funded to date. There’s about $20 million invested in our company, primarily by the founders.
FreshDirect has been doing online groceries for 15 years; they have the deepest knowledge of customer buying patterns, so the opportunity to work with them on an investment and customer level was exciting for us. Carl Shepherd, the founder of HomeAway, also agreed to invest. He invested personally because he believes so much in the space, the product, and the non-subscription market.
We’re working hard on expanding our data capabilities. We’re very unique in that we have all these options to offer you and we have all this data to track the things that you have purchased to try to understand what you might want to purchase again in the future. So we’re investing heavily in our data platforms and are looking to launch a new Chef’d experience in December of this year.
What is your marketing strategy like? How do you get new users interested?
We primarily get new users interested from the new partnerships that we launch. We have a very limited marketing budget, so generally speaking we’re using new partnerships. The social power of our partners is our strongest marketing, and that’s why we’re very selective about whom we pick as partners.
What recent technological innovations allow you guys to do what you do, and are there any emerging technologies that will mix up the meal kit delivery business?
Certainly shipping is probably the number-one thing. Shipping still rivals the cost of the food in this business. Shipping, in the past 5 years, has fallen dramatically with the internet and that really enabled the industry from the get-go.
The technology exists for drone delivery; that would move things forward quite quickly. We’re looking to work with some of the new technologies that Apple is rolling out to make one-touch ordering more convenient for our customers.
Most of the technology we’re focusing on is making it convenient for customers to have the choice to decide to order. You get the choice of making the decision versus having all the decisions made for you.
Joseph Zappa is Street Fight’s news editor. This interview has been edited for length and clarity.