Will The Growing Meal Kit Industry Satisfy Fickle New York Foodies?
We all know that for New Yorkers, the takeout industry is king. Even in winter, stalwart deliverymen are out there braving the elements on their bicycles. But here’s something you might not know: According to GrubHub Inc., the biggest food-delivery platform on the market, New York City customers are 98 percent more likely than the rest of the country to search for the category “grocery items.”
The reality is that people don't want to do their own shopping anymore, which is exactly the window of opportunity the burgeoning meal-kit-delivery business is looking to pry open. Consulting firm Technomic suggests the food industry space (including restaurants, retail, suppliers, and distributors) will grow to more than $2 trillion in annual sales by 2025 — a staggering figure — and the meal-kit business, as a portion of that, will increase sales 13.5 percent year over year.
These are numbers that invite envy. With an ever-increasing array of options, New Yorkers can satisfy their inner foodies, vegans, and locavores alike. In addition to the three nationwide leaders in meal kits — HelloFresh, Blue Apron, and Plated — you can sign up for weekly dinner plans from smaller, regional services such as Quinciple, Purple Carrot, and Mise en Place.
No one seems to doubt that this relatively new category is poised for growth, but how many players will we have? Will consumers want Amazon-style service, or something more akin to shopping at their local indie bookstore?
The New York culinary scene as portrayed on Instagram is one of the best ways to keep up with our rapidly changing dining landscape, which is how we discovered NYC-based startup Mise en Place. An image we spied one day was of a parmesan-crusted chicken with a radicchio, fennel, and arugula salad. All that user @kevmasse needed to do was turn on an oven and toss the salad. Mise en Place vows to surmount the very last hurdle to cooking — all that laborious prep work. According to founder Vicente DyReyes, the problem they’re looking to solve for customers is the wiggle room between “deciding to cook and cooking. Our goal is to get people cooking more and sitting down at the table,” he says.
Andy Levitt, founder of the Purple Carrot, the Boston-based vegan delivery option that wooed Mark Bittman away from the New York Times, tells the Voice, “We’re not preaching veganism. We want people to appreciate a plant-based diet: healthy for yourself and the planet.” Meanwhile Quinciple, based in Brooklyn, gives New Yorkers the chance to discover a wealth of local foods sourced within a hundred-mile radius, all from producers they know intimately.
As meal-kit companies tinker with what they offer and how they offer it, they're also fine-tuning their unique value propositions. Not only do they deliver food, they bring a halo of emotional attachment for customers to latch onto as they go about crafting their "made at home" dinners. In today’s demanding era of transparency, in which every millennial needs a reason to give a damn, it seems our food options are arriving with increasing amounts of backstory.
David Robinov bought Quinciple from its founders in 2015 after they ran out of their startup money. Located in the Pfizer building (which was also home to Good Eggs, a fresh-food-delivery company that recently closed down its East Coast operations for lack of funds and customers), Quinciple is paying close attention to the bottom line. When HelloFresh filed its IPO this year — one that was later postponed — Robinov reviewed his competitor's now-public documents. “Their food margins are much better than ours,” he says. “I think it's a combination of scale and quality — they're not working with small-scale farms. They’re using generic meat and not sourcing grass-fed meat. There’s a big qualitative difference.”
Plated co-founder Nick Taranto doesn’t want to be the biggest, he just wants to be the best: for his customers (millions of meals delivered to date), employees (over 400 and counting), and communities (four fulfillment centers across the country). The market Taranto is after is made up of what he calls "evolved eaters."
“These are folks who tend to shop at farmers' markets on the weekend. They care about what they’re putting in their bodies," Taranto says. According to Taranto, there are over 31 million evolved eaters. And the company wants to help reduce waste by delivering perfectly portioned meals to users’ homes for their own cooking pleasure.
For each of these new and established businesses, there are three main challenges that — if solved — will make the margin for success wider: packaging, logistics, and sourcing.
Plated, which is also based in New York City, is leading the way with respect to the packaging dilemma. It still ships weekly meals in a cardboard box, which customers can recycle, but the inner layer of insulation is made from 100 percent recycled jute that can be composted. Gel packs, used to keep foods cold, are made of cornstarch and can be cut open and poured down the drain. With these changes, Plated was able to cut its carbon emissions by 95 percent, taking each box from four and a half pounds of CO2 down to a quarter-pound.
Although all the founders say they are aware of the packaging problem, they also say it’s a part of the business. “It's the tradeoff for getting the convenience, for having everything solved for you,” says Levitt. Quinciple delivers a box with similar packaging, or you can pick it up at various locations throughout the city. Mise en Place is the only one delivering something different: an insulated tote that it hopes members will want to continue using. When we asked DyReyes about a recycling or return program, he said he was "thinking about" it.
The logistics — how you get your box each week — are also complex. Do your members pick their box up? Do you have your own fleet of drivers, or do you outsource? Most do a hybrid of these, save for Mise en Place. “Everything is delivery right now,” says DyReyes. Totes come via Zipments or Uber Rush, and if you order by noon you can get it delivered the same day. Flexible delivery options are something everyone wants to offer but none do perfectly.
Sourcing, while nail-biting, is where we can ultimately see each company's commitment. Plated delivers organic produce and antibiotic-free meat (steak dishes are their bestsellers). But Plated has muscle to deliver that. "At our scale now, we’re able to go to vendors and tell them what we want and they will grow it for us to meet our standards," says Taranto.
At Quinciple, Robinov admits that "a lot of our money goes into food, probably too much." They let their customers know what to expect each week, but this can backfire, like when brussels sprouts go out of season or the arugula gets hit by a frost (customers get wild spinach instead). "These last-minute changes give you gray hair. It's really up to nature," says Robinov.
Purple Carrot has seen the same types of complexity, like when it ran a Cyber Monday promo and ran out of tofu. Bittman has made it clear that the company's first priority is to deliver food that is healthy and clean, with the second being to work on sourcing domestically. Organic? It's not even in their top three yet.
According to an article by Adam Ozimek in Forbes, what meal-kit businesses have wrong is their business plan. Ozimek claims that the concept simply needs a platform, one that would allow it — along with restaurants and supermarkets — to present their wares and allow consumers to pick and choose as they please. What this idea seems to ignore is that these companies need their customers to forecast their food needs. It’s why they’re all subscription-based, demanding that you select how many meals you want each week. But will you want to cook next Tuesday? That's hard to predict.
While some may think the meal-kit companies have it wrong, the investment community appears to feel otherwise. Plated closed on $35 million in Series B fundingthis past July (Blue Apron raised $135 million), and the company is tracking for another successful year. But before you start to think that these boxes are only being sent to the East and West coasts, Taranto reveals that “less than 10 percent of our customers are in San Francisco and New York. It speaks to how much demand there is across the country.” And this is where the competition is heating up.
With all of these factors to consider, we haven’t even touched on the weekly recipes and menus that are required from this business model. Let’s face it — we New Yorkers are a fickle bunch, demanding an ongoing cycle of tasty creations. Some companies have in-house recipe and test-cooking experts, or reach out to well-known chefs for their favorite items. Still others hire people like Bittman, whose sole focus at Purple Carrot is writing recipes and sourcing. In a story about the challenge of sourcing domestically, Bittman told FastCompany, “We will need to constantly think six months or more likely a year ahead to determine seasonal recipes, project customer numbers and preferences, and discuss quantities we need way before we’re sure of them.”
For some time, what we'll continue to see is a growing list of niche companies in this category, all homing in on their preferred segment, praying for enough customers to make a profit and enough bandwidth to grow beyond their means. Mise en Place, the newest of the bunch, could find room in the pack by keeping things small and local. DyReyes is hopeful: “The food spectrum is large, and New York is large. I think there’s space for a lot of different players.”
Written and published for The Village Voice.