Meal kit delivery services have changed the grocery game, and brick-and-mortar supermarkets are taking notice.
At least one-third of U.S. adults have used a meal kit delivery service, with industry revenue estimated to top $10 billion by 2020. But gains in the meal kit delivery industry pose a challenge for traditional grocers. People aren’t consuming more food now that meal kit delivery services have arrived—they’re just shopping for it in a different way, and that has some grocers worried about the future of their industry.
HelloFresh’s recent announcement that it will sell meal kits in Giant Food and Stop & Shop grocery stores is just one in a string of high-profile collaborations between supermarket chains and meal kit services.
In May, Blue Apron announced that it would start selling meal kits at Costco locations, and Kroger confirmed that it was acquiring the meal kit service Home Chef in a bid to capitalize on the craze. Albertsons will roll out Plated meal kits at its stores by the end of the year. And Walmart, the retail behemoth with more than 11,000 stores worldwide, revealed that it will soon sell its own meal kits in more than 2,000 store locations.
Does the trend toward collaboration between online meal kit services and offline supermarket chains mean the end is near for either group?
Howard Schneider thinks the exact opposite may be true. The vice president of loyalty strategy at Kobie Marketing says that by offering meal kit services within their stores, brick-and-mortar chains are disrupting the traditional supermarket model and giving themselves a better chance at competing with giants like Amazon.
“By offering kits in-store, the supermarket chains can retain some of the traffic and sales that would otherwise go directly to the meal kit company. Stores win by providing what their customers want,” Schneider says. “As Kevin Coupe recently pointed out in his Morning News Beat blog, supermarkets have had the components for the meal kit model; they just didn’t think of it until now.”
By partnering with, or outright acquiring, meal kit services, supermarkets are going where their customers need them to be. Although the supermarket chains didn’t think of the meal kit model first, Schneider believes they’re in a great position to compete with the disruptors.
“The key for retailers who want to succeed is to provide services that are simple and solve problems before the customer recognizes them as pain points,” Schneider says. “Offering meal kits in-store allows consumers to get the products they want when they want them and eliminates the hassle of dealing with the delivery process.”
SpecPage CEO Severin Weiss believes the current trend toward health consciousness is also a factor, since bringing meal kit services in-house allows supermarkets to meet the customer demand for healthy, fresh options.
“Really, it was only a matter of time before meal delivery kits moved into traditional retail arenas,” Weiss says.
Keeping up with the preferences of shoppers and meeting those complex demands is key to keeping customers loyal in the current economy, Schneider says.
With all the potential upside for supermarkets, what’s in it for meal kit services?
Andrew Park, vice president of CX strategy at InMoment, says the partnerships between supermarket chains and meal kit services may very well be a last-ditch effort for meal kit services to remain relevant, as industry research indicates that a saturation point may have already been reached.
Despite impressive sales, data from InMoment shows that just 10% of U.S. consumers say they find meal kit delivery services “highly valuable.” Partnering with supermarket chains gives companies like HelloFresh, and others, the opportunity to reach an entirely new group of consumers—a necessary component to any long-term growth strategy.
“HelloFresh would be smart to engage in always-on conversations with their customers as it expands into the grocery sector,” Park says. “By actively listening to its customers about their preferences, especially around subscriptions versus in-store pickup, HelloFresh can better gauge if its customers are seeing real value in this new option.”
Stephanie Miles is a senior editor at Street Fight.