Ready-to-make meal kits have surged in popularity during the pandemic with indoor dining off the table for so much of the last two years. The question now is whether they will endure.
A new Canadian study by Empathy Inc. in partnership with Vividata suggests that, while the appeal of these kits varies based on demographic, the popularity of providers such as Goodfood, HelloFresh, and Chefs Plate may begin to wane as we move toward a post-pandemic world.
An initial rush
Once emergency status hit in spring 2020, going out for dinner was eliminated as an option virtually overnight. Meal kits boomed in that climate; HelloFresh in 2020 posted a €369 million net profit, compared with a net loss of €10.2 million a year earlier, while revenue more than doubled to €3.75 billion.
Meanwhile, Goodfood CEO and co-founder Jonathan Ferrari told CBC that the pandemic served as a “huge tailwind” behind the company’s business.
Market research firm the NPD Group found that the incidence of households ordering a meal kit rose from less than one out of every seven pre-pandemic to nearly one in four.
Predictably, a large majority (82 per cent) of those polled by Empathy said the pandemic did play a role in subscribing to meal kits, with the most common reason being no availability of restaurants (46 per cent).
In particular, with the usual go-to avenue of going out for a dinner date no longer viable, meal kits became a preferred option for those seeking out new partners.
The overwhelming majority (91 per cent) of respondents said the pandemic played a role in subscribing to meal kits. And 30 per cent of those looking for a partner said they used meal kits as a stay-at-home date night idea (vs. 14 per cent of those not looking for a partner). In addition, those using online dating apps are 89 per cent more likely than the average adult to have used meal kit delivery services three or more times in the past month.
People may be priced out
But, as the economy opens, consumer confidence improves, and the appetite for discretionary spending rises, meal-kit providers are threatened again.
As public health restrictions were lifted in the summer, Goodfood reported a loss of 19,000 subscribers. Rival and market leader HelloFresh also saw a significant drop, although business remains markedly up from 2020.
One major concern from consumers is that meal kits are too costly. The majority of people who try and then reject meal kits say they are too expensive (79 per cent), according to Empathy. Half of people who have tried and rejected meal kits self-identify as mostly making ends meet or say they have unpaid bills; the other half say they are either financially stable or comfortable.
“As the pandemic has gone on, the product of meal kits has gone from a necessity and a convenience item to a luxury to a treat,” said Mo Dezyanian, president of Empathy.
What is interesting is that each group has a different perception of what a meal kit represents in their basket of household purchases. Those who aren’t financially stable are more likely (66 per cent) to say that purchasing meal kits makes them feel like they are doing better in life than those who are financially stable (59 per cent).
That concern over price is likely to continue, as the recently released Food Price Report estimates that the price of meal kits will go up by around eight per cent in 2022. That is above the report’s predicted general rate of food price inflation, which sits at between five and seven per cent.
Lead author of that report, Sylvain Charlebois, says that while lots of meal-kit companies’ initial appeal was achieved via getting customers hooked on the convenience factor, they will have to increasingly rely on loyalty going forward.
However, the report notes that while cost is a point of friction, meal kit purchases aren’t really about price. They are often purchased as a mood lifter or to impress others, particularly for those people looking for a new relationship. That group is more likely (73 per cent) to say that meal kits make them feel like they are doing better in life vs. those who are not looking for a new relationship (59 per cent).
When it comes to the feel-good factor, meal kits were seen as a fun activity by 84 per cent of respondents. This trend is even more pronounced amongst married couples and parents: 87 per cent of married couples see it as a fun activity vs. 79 per cent of not married, and 87 per cent of parents see it as a fun activity vs. 80 per cent of non-parents.
Key takeaways for providers
All in all, the Empathy report concludes that for meal-kit providers, the relationship-seeker segment is clearly a valuable one to focus on coming out of the pandemic. There is also an opportunity to position these kits as an accessible treat, especially to those who make purchases to elevate their status. The report suggests evaluating your current coupon and offering strategy based on your target audience.
In sum, the NPD Group’s Vince Sgabellone believes the habit increasingly formed over the last two years will stick long after the pandemic has gone despite potential price bumps. “We’ve had 18 months or so to develop these new habits. That’s a long time to get used to something. And if we’ve enjoyed it, we’re going to continue it.”
For those key segments who will likely continue to subscribe to meal kits even as the economy opens up, having a reason to cook together is an important facet of the experience.