INDAGARI

America’s relationship with food evolves constantly, influenced by factors such as convenience, dietary choices, and price. COVID-19, the subsequent inflation, and the resulting pullback are recent examples of how wallet allocation for food has changed over a relatively short period of time.

Alongside restaurants and grocery stores, meal kit and ready-to-eat (RTE) subscription services have been impacted by this shift in consumer behavior. Meal kit services - which deliver ingredients and recipes - arrived in the United States in the early 2010s in the form of HelloFresh, Blue Apron, and Plated. RTE services offering microwave-ready meals launched several years later. These services grew, competed, and acquired each other.¹

There are obvious operational synergies to be realized in combining these services together. However, the meal kit and RTE customer segments remain relatively distinct, with the former being far more price conscious while the latter indexes heavily on convenience. As the RTE offerings mature, keeping their seat at the table will be critical.

Setting the Table

During the COVID-19 pandemic, US consumers limited their grocery store trips and ate at home. Searching for convenience and variety, many turned to meal kit services in late 2020. They continued to subscribe in 2021, and the services experienced record sales between 2022 and the first half of 2023. Both sales and subscribers have decreased since then, but, with the exception of Blue Apron and Gobble, sales and customer counts remain at or above 2019 levels.

As the pandemic subsided, consumers began to spend more on experiences. Having cooked at home for the previous couple of years, people were keen to eat at restaurants and prioritized convenient meals when dining at home. Sales at RTE services - promising ease without sacrificing quality - soared. Factor, which was acquired by HelloFresh in 2020², is the market leader in RTE subscriptions and has seen over 80% growth in sales year-over-year. Meanwhile, CookUnity’s small-batch, chef-prepared offering has seen double digit sales growth for 9 of the last 13 quarters. Interestingly, Trifecta Nutrition’s focus on weight loss did not resonate with consumers and sales declined in 2024 despite being featured in a Netflix documentary.

Different Dining Desires

The narrative of pandemic home chefs turned ardent microwave users is as appealing as it is broad. Instead, the customer journeys and wallet shares of these two segments suggest that they are relatively distinct populations with different meal preferences.

The meal kit industry is besieged by “promiscuous” shoppers - consumers who sign up to receive the new subscriber offers only to churn to a direct competitor once the offer expires. On average, the meal kit consumer segment spends between 2 - 5% of their food budget³ each quarter on another meal kit service. When meal kit consumers churn from their current subscription, 21% of them sign up for another meal kit subscription..

RTE services offer similar initial sign-up discounts. However, their customers do not display the same level of promiscuity, as only 7% sign up for another RTE service post-churn. Behaviorally, consumers looking for a high degree of convenience might be happy to stick with their selection if they are satisfied. After all, signing up for new services, updating payment information, and selecting food preferences is a hassle. Economically, RTE prices comprise a larger portion of their customers’ wallets, which may limit the budget available for exploration.

The Next Course

Relative to meal kits, RTE services are still newer to the US market. However, conveniences such as frozen store-bought meals and meal replacements like Soylent have long existed in the general zeitgeist if not in the kitchen itself. Perhaps one element of RTE’s success has been its ability to upscale the familiar frozen meal while offering consumers the convenience associated with direct-to-consumer meal replacements. Meanwhile, companies like Hungryroot combine grocery, meal kit, and RTE services by coupling online grocery shopping with recipe planning while offering RTE options.

Americans have never had more options to cook less. Demands on their wallet and time will inform their preference for meal services, and the industry will likely continue to come up with solutions to feed consumers.

Footnotes:

• 1. For this article, meal kit services comprises Blue Apron, Dinnerly, EveryPlate, Gobble, Green Chef, HelloFresh, Home Chef, Marley Spoon, and Purple Carrot. Ready-to-eat services comprises CookUnity, Factor, Thistle, Tovala, and Trifecta Nutrition.
• 2. HelloFresh Acquires Ready-to-Eat Meal Company Factor75, Inc.
• 3. Food & Beverage includes discretionary food & beverage brands, food delivery services, grocery stores, e-grocers, grocery delivery services, meal kits, meal replacements, and select restaurant chains and alcoholic beverage vendors. Spend related to restaurants, dining-out, and drinking is not comprehensively reflected within Food & Beverage.