Meal Kit Delivery: Is It Right for You?

Lisa Grubbe of Kenosha, Wisconsin, hasn't been in the area very long. She's just recently bought a house with her partner, and as a new employee, she's working long hours with overtime. She subscribes to a meal kit delivery service, and although the company occasionally sends her meals that went against her allergy list, she says the service offers a welcome break of convenience in her busy week.

Grubbe admits she doesn't save much off her regular grocery bill, but the value of the $40-per-week service is still commendable. "The price is actually pretty good for the food they send," Grubbe said. "It feeds 2 to 4 people [two dinners a week], and it's good quality food. It's a little expensive, but some of the products in there are very expensive to begin with."

Grubbe is just one of the many Americans giving meal kit delivery services a try--one out of four adults has purchased a meal kit for delivery or in-store within the last year. If you're thinking about joining the thousands who already subscribe, here's what you should know.

Most meal kits provide fresh ingredients, which you then cook in 30 to 60 minutes according to included recipes. Meal kit companies usually require you to subscribe to their service, giving you a specified number of meals to suit the number of people you indicate. You often can choose your preferences based on ingredients or specific dietary concerns.

The industry by the numbers

Since Kicki Theander launched the first meal kit company, Middagsfrid, in Sweden in 2007, meal kit businesses have been booming, with 170 companies, including niche markets, operating globally. 150 of those are in the United States, with America accounting for 40% of the $1 billion in sales generated in 2015. Industry sales have also grown over 500% in just two years, and U.S. companies are expected to generate more than $1.5 billion in revenue through 2017. The $400-million-dollar American meal kit industry is expected to grow tenfold over five years.

To keep these figures in perspective, total restaurant spend is $210 billion, with online food delivery comprising just $10 billion (less than 5%). Pizza delivery, which accounts for 60%, is still the undisputed food delivery king, but experts assert that consumers want more options, and meal kit delivery service is one of the fastest growing categories in the food industry. Despite concern from analysts that similar competition is essentially cannibalizing the market, industry leaders say that there is plenty of room for growth, so long as companies can drive new customer acquisition. Grocery stores are trying to get in on the action with their own services, as research indicates that customers that use meal kits spend less at the supermarket.

What's making meal kits so appealing

Multiple factors are contributing to the rise of the meal kit industry, but one of the biggest is the acclimation to technology. Smartphones and other mobile devices have resulted in a shift from traditional in-store shopping to online purchase. Subsequently, people feel more comfortable relying on the ease of the Internet for their meals, and they are demanding more choices with better service. This isn't just in the menu--it addresses factors like localization and transparency, too.

Secondly, many individuals have grown up with or become accustomed to restaurant dining, buying foods locally from fresh markets and watching chefs on TV. The kits allow people to experiment with cooking according to those tastes and exposures. It can offer a feeling of empowerment to individuals who feel unaccomplished or stressed. This is especially true when the meal kit company partners with well-known chefs, as the credibility of the professional can make the meal kit user feel like a more knowledgeable insider.

There is also an environmental or ethical component to meal kits. Even though companies are still working toward better and more efficient packaging, some supporters argue that meal kits help to eliminate waste, as they are all properly measured and prevent the overbuying that often occurs in stores. Some niche companies, such as those that cater to vegetarians, are better able to cash in on this angle.

All these elements on the table, most people who order meal kits are older millennials. The members of this demographic are digitally savvy, increasingly concerned about their health and the environment and strapped for time. Although they enjoy high-quality, fresh foods, many have not learned how to cook from previous generations, and in fact, spend approximately 44% of their food dollars eating out. Therefore, they look to meal kits to bridge gaps in education and basic needs.

Savings will vary

In general, the price of a meal kit is between $8 and $12 per person, per meal. This makes the most sense for middle- to upper-class urbanites, particularly those who are single or who don't have children. About 40% of meal kit subscribers are parents, and 47% have an annual household income of $125,000. For many families, that still is not affordable. But even some individuals who are less well-to-do still enjoy meal kits because the time-cost ratio works in their favor. Additionally, the middle class isn't going out as much because they can't afford to do so. For these individuals, meal kits can be a slightly less expensive way to put dinner on the table in a more convenient way. There are large opportunities for meal delivery companies that can provide more affordable quality.

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