Amazon Fresh putting a stake in the ground in this category is important for a variety of reasons.
Originally published on Forbes.com.
Amazon Fresh forged an interesting relationship with Tyson and launched Tyson Tastemakers ready-to-cook meals in the fall of 2016. This week they announced a deal where Martha Stewart’s meal kits, which are prepared by Marley Spoon that will also be made available to Amazon Fresh's customers in New York, San Francisco, Dallas and Philadelphia. Martha & Snoop's Potluck Dinner Party VH-1 show has also made her relevant again to a new generation of food involved Millennials and Generation Z who are a perfect audience for this Amazon Fresh offering.
No one in the food business, supermarkets and restaurants alike, debate the impact that meal kits from the likes of Blue Apron, Hello Fresh, Chef’d and Plated which discovered and satisfied the huge opportunity that until recently went unnoticed and the wake-up call for the food industry. The concept of offering customers a box of ingredients along with easy to follow cooking directions has been a hit. The success of meal kits is that every ingredient is measured out perfectly to each recipe. That requires a lot of labor, today mostly done by hand; and certainly as this phenomenon continues it will have to evolve to have elements fulfilled robotically. This industry is so big that the U.S. meal kit delivery market is on track to report approximately $1.5 billion in sales this past year and grow to a multi-billion-dollar market (some reports peg it to as much as $5 billion) over the next five years, that according to a recent report by market research publisher Packaged Facts entitled Meal Kit Delivery Services in the U.S.
Amazon Fresh putting a stake in the ground in this category is important for a variety of reasons. The first is that many of these meal kit companies might be based on an economical model that simply isn’t sustainable. Building kitchens that predict what kits people will order and preparing the portioned ingredients for those is an expensive undertaking. Shipping and packaging the kits properly in temperature controlled boxes is also costly and has received negative feedback from their consumers who are typically Millennials who are very concerned about sustainability issues, packaging waste and the impact on the environment. Pre-ordering what you will eat a day or more in the future for some shoppers also removes some of the excitement and fun of being adventurous at meal time; that they typically receive from restaurant dining experiences. Many of the services require a subscription, or multi-meal purchases, which for many is also a barrier. And then there are the offers – like Blue Apron’s “get 3 meals free” or Hello Fresh's "get 50% off your first order" when you sign up – that makes one wonder how long will it take for these services to earn a profit; and if their average price of just under $10 a meal is in fact sustainable.
Supermarkets across the country, from ShopRite to Mariano’s (which can be picked up in store or delivered by Instacart) to Hy-Vee chef and dietitian inspired kits have stepped in and are selling the same type of convenience and daily menu offerings but at a much lower cost for pick up at the store.
This “meal kit’ category is poised for growth. For consumers, many report that the pre-portioned servings are helping them eat healthier, others point to the step-by-step instructions as a way to learn cooking skills which according to % say they want to improve, and others love sharing the cooking experience at home with friends and family. From a social stand point, the non-profit sustainability firm BSR reported research conducted on behalf of Blue Apron that found after studying a week of Blue Apron meals, measuring how much food came into the company's facility and how much was left as waste after prepping the meal kits and donating some extra food to a local nonprofit. Then they compared that to the average waste for those ingredients—based on USDA numbers—in grocery stores. The Blue Apron facility threw out 5.5% of food; grocery stores threw out 10.5%. No doubt the at-home waste factor, that the study did not include, was even greater. The study, unfortunately, did not calculate the shipping and packaging waste footprint.
BSR then surveyed 2,000 Blue Apron customers to find out how much they threw out in meals that week—maybe they didn't like a particular ingredient, or they didn't eat a full meal. Compared to USDA food waste stats for the same ingredients, home cooks threw out 7.6% of the food in Blue Apron meals, and would throw out an estimated 23.9% to make the same meal from store bought ingredients.
Amazon Fresh’s current online and home delivery solution may well solve many of the issues that are facing the meal kit delivered brands – clearly adding one of these kits to one’s Amazon Fresh delivery is easy, satisfies our food impulse for what’s for dinner tonight and eliminates the huge and expensive shipping and packaging waste issue. It also serves as a terrific test for Amazon to expand these to its Amazon Go and Amazon Fresh Pickup bricks and mortar formats and gives the traditional supermarket and food service industries one more reason to fear Amazon.