The coronavirus pandemic has absolutely thrown a curveball at many different industries around the world. Everyone is adjusting to “the new normal” – a phenomenon that seemingly changes week to week. While restaurants have closed and grocery stores have mandated new in-store rules and regulations to keep shoppers safe, there is one industry that has been booming since the term “covid” was added to our vocabulary – the meal kit industry.
Until recently, meal-kit delivery services like Hello Fresh and Sunbasket have historically had trouble maintaining their customers. Many customers cite that the boxes are too expensive, the portions are too small, or the packages themselves produce too much wasted plastic. During the pandemic, though, meal-kit delivery services have gone through a fiery rebirth, now known as the lifeline that keeps healthy food on the table without running the risk of potential COVID-19 exposure from a typical grocery store visit.
For example, let’s take a look at Blue Apron, who has had a challenging few years since going public in 2017. First, the company was nearly delisted in 2018 after stock fell below $1. Earlier in 2020, it was reported that there were considerations of private ownership or even a sale of the company just to stay afloat. By the end of the fourth quarter in 2019, Blue Apron was sending their signature healthy kits to just over 350,000 customers, a 9% drop from the previous quarter.
However, once COVID-19 hit and people started to avoid grocery shopping and no longer had the option to go out and eat at their favorite restaurants, Blue Apron and similar meal kit delivery services were deemed essential services.
According to Nielsen, U.S. customers spent around $100 million on meal kits for the month ending April 11, which is nearly double the sales during the same period in 2019.
When shelter-in-place orders hit, Blue Apron’s stock was up 400% from mid-March to mid-April. Berlin-based Hello Fresh saw similar results with their U.S. customer base doubling in the first quarter and increasing their revenue by 66% year-over-year.
However, the customer retention obstacles previously mentioned still stand in the way. Many individuals on the r/mealkits subreddit note that they’re more likely to use a meal kit service now because of the overwhelming amount of discount codes available, dropping the costs by anywhere from $50-$80 dollars for your first couple of boxes.
One woman, Rachel Duncan, said that she “will keep using HelloFresh until my credit turns out, because at full price it does not make financial sense to us. I also did this up until last week with a Gousto subscription.”
Even with customers continuing to bounce around from service to service, riding the various waves of coupon codes and discounts, the meal-kit industry is still booming. In a recent meal-kit sector analysis, Deutsche Bank noted that Blue Apron now expects their Q2 revenue to be in the “high single digits” to $130 million, making this the first quarter of growth for the company since its operational issues began in mid-2017.”