In-store meal kits are driving sector growth, Nielsen says

Dive Brief:

Meal kits continued to build momentum in 2018, expanding from web-exclusive subscription services to in-store distribution. According to a new Nielsen report, 14.3 million households purchased kits in the last six months of last year, up 3.8 million households from 2017. Twenty-three percent of households say they would consider purchasing one within the next six months.
Sales of in-store full meal kit offerings rang in at $93 million in 2018 as in-store users jumped by 2.2 million households – accounting for 60% of all meal kit user growth, according to Nielsen. Retailers introduced 187 new meal kit items in the 52 weeks ended December 29, 2018.
In another sign of in-store meal kits building momentum, premium grocer Gelson’s Markets is bringing back Chef’d meal kits at all 27 of its Southern California locations. The re-introduction, which includes Chef'd and True Chef brand offerings, features preservative free recipes that take 15 minutes of prep time.

Dive Insight:

Nielsen’s report demonstrates that consumers are hungry for meal kits, but that the subscription model is not necessarily one that can sustain. In-store meal kits, which offer convenience and flexibility that's netting additional users, is quickly becoming an important other-half to the industry's sales model.

Last year saw big moves from retailers in the space, most notably Kroger's acquisition of Home Chef. Plated continued its rollout at Albertsons stores while co-founder Josh Hix stepped away, and chains like Publix and Raley's added new options centered on freshness and innovation. Grocers are eager to stake a claim in the meal kit market, but the category's future prospects remain in question, particularly as retailers continue to build out their prepared foods offerings.

Nielsen surveyed 120 million households last fall and found that in 2017, 67% of consumers purchased their kits exclusively online while 30% purchased exclusively in-store. Last year, that ratio began to shift, with 60% of consumers purchasing their kits exclusively online and 32% purchased exclusively in-store. The percentage of shoppers who buy through both channels has increased from 3% to 8%.

Meal kit companies are looking to retail sales as a lifeline. Last summer, Chef’d ceased operations after struggling to make a profit, then got snapped up by True Food Innovations and positioned as an in-store brand. The re-introduction of the brand at Gelson’s Markets, a chain known for its high-quality produce, meat, seafood and deli items, could be a step in the right direction. Gelson's will carry all eight recipes from both brands providing consumers a selection of recipes, including truffle butter sirloin steak, chicken marsala and saffron tomato chicken.

As high costs and low customer loyalty continue to plague the subscription meal kit business, look for companies to roll out more in-store offerings. Earlier this year Blue Apron, which has become a symbol of the industry's struggles, launched bundles of sauces, grains and spices called Knick Knacks that customers can pair with their choice of a retailer's produce or protein. The line launched on Jet.com's City Grocery service, and Blue Apron executives say they're in talks with other chains.