The meal kit market has grown significantly since being introduced broadly to the U.S. in 2012, and it’s changing the way some consumers shop for food. On a recent NGA Webinar titled “A Contest of Convenience: How to compete with the meal kit format”, Erik Thoresen from Technomic discussed how this fast growing market represents both an opportunity and a threat to retailers. In the blog post, I’ll break down some of the takeaways from his presentation.

What are meal kits?

First, what exactly are meal kits? Chances are, you’ve already heard of these ‘meals in a box’ delivered to your doorstep. Meal kits are ingredients and meal components which companies assemble and transport to consumers for home preparation. The biggest companies today offering meal kit delivery include Hello Fresh, Blue Apron, Gobble, Home Chef, Marley Spoon and Plated.

The meal kit market has seen significant growth.

The meal kit trend started in the U.S. around 2012 and globally is estimated to have a $3.3 billion dollar impact on the retail channel in 2020 (the amount that customers will spend on meal kits vs. at retail stores). It’s estimated that the U.S. impact will be about half of this global $3 billion impact.

Why has the meal kit market grown so quickly?

Last year, Blue Apron saw an increase from 500,000 meals to 5,000,000 meals in only 18 months. What’s causing this rapid growth? Consumers, lead by millennials, are increasingly looks for ways to increase convenience in their lives and gain new experiences. Meal kits offer an easy to prepare meal, which saves time and requires little meal planning. Rightly or wrongly, many consumers also consider meal kits to be a way to eat healthier foods.

Millennials and other consumers are constantly seeking out ways to gain new experiences. Meal kits can be a source of entertainment for consumers, creating new opportunities for hosting guests, friends and family for dinner to showcase the meal they prepared with the delivered kit.

The threat to brick and mortar grocery stores.

In a recent study cited by Technomic, 54% of consumers indicated that they would cut back on grocery purchases if they signed up for a meal kit delivery service. This was the top category that consumers said they would spend less in, followed by 47% who said they would cut back on takeout and delivery. Meal kits are another source of food for consumers, and this “share of stomach” battle is directly targeting grocery retailers.

The opportunity for retailers to compete with meal kit delivery.

Even with the meal kit market becoming more and more popular, in many ways retailers are better prepared to serve these customers seeking the convenience of meal kits. Grocery stores are better suited and have a greater ability to customize their meal kit offering. There are also many opportunities to serve consumers in need of specialized diets (gluten-free, etc.). Retailers also have better access to fresher ingredients and healthier selection of foods.

Consumers who want the convenience of meal kits, also want the conveniences of home delivery or quick in-store pickup. Retailers can sell their meal kits directly on their e-commerce enabled website to capture this meal kit business and other foods needs of these consumers. This allow attracts consumers who want the ease of meal kits, but don’t want to pay a subscription fee to these traditional online companies.

To learn more about this study from Technomic on meal kits, visit their website at technomic.com.