According to data by Statista, the meal kits business in the U.S. will be worth $11.6 billion by 2022 from $5 billion this year, while it will expand at a compound annual growth rate of 13% by 2028 as per Grand View Research.
Market value predictions and company moves only go to show how juicy the meal kits industry is at present, driven by pandemic habits and the growing eating preferences of the younger generations.
So, what trends are shaping the industry and how is the business panning out for the near future in terms of opportunities and competitive landscape?
Why Meals Kit?
In the last couple of years, the meal kits market has been on the rise but has flourished during the pandemic and growth is up for grabs.
Not only the time-saving convenience of pre-portioned meals but also the sheer level of diet specialization has made this an attractive alternative for people who pursue a less complicated lifestyle.
Statistics assert that 80% of Americans believe kit meals are healthier than food prepared in restaurants.
According to the Grand View Research report, “The COVID-19 pandemic has offered a significant opportunity to the market as almost all the restaurants, eateries, and hotels were shut down across the globe.”
Do you know which under-the-radar stocks the top hedge funds and institutional investors are investing in right now? Click here to find out.
“People are focusing on a healthy diet more than ever to increase their immunity and maintain a balanced diet.”
Anne-Véronique Benoist, head of insight in the media division at Kantar, sums up why the meal kits market is at a tipping point: “Meal kits offer the joy of cooking without the hassle of sourcing and shopping.”
According to statistics, 29% of millennials and 26% of gen-xers say they have tried a meal kit service, compared to 12% among those aged 45 or older.
The truth is, millennials, gen-xers, and boomers are increasingly looking to have full control over their meal ingredients, which is especially important for those who need to avoid allergic reactions.
The report states that eating at home is becoming more prevalent over dining out, as consumers are becoming more frugal on the money they spend on food. These generations prefer both cooking and ordering as they are also making fewer visits to restaurants.
It is, undoubtedly, a generational subject: “While millennials have surpassed baby boomers in number, boomers remain a large population and their behaviors have a significant influence on the marketplace that caters to cooking at home.”
Both growth estimates and consumer adoption are backed by some sounding moves in the meal kits industry.
According to Reuters, in mid-September, Hellofresh SE (ETR:HFG) announced a $58.9 million investment to hire more than 1,000 tech employees in the U.S., Germany, Australia, and Canada in 12 months, as online orders have nothing but skyrocketed.
Further, the company’s revenue more than doubled to $1,66 billion in the first three months of 2021, compared to the same period last year.
The meal kits market is at a sizzling stage as companies like Blue Apron Holdings Inc (NYSE:APRN), Delivery Hero SE (ETR:DHER), and Just Eat Takeaway.com NV (AMS:TKWY) were able to capitalize on home delivery and online orders during lockdowns.
As the market becomes more competitive, meal kits review sites have emerged offering customers the possibility to choose from the best alternatives based on company reputation, plans and meals, delivery and flexibility, and support and usability.
In these spaces, meal kits companies are battling for consumer preference as diners can compare scores and prices, access promos, check geographic coverage, and more.
As the meal kits business grows, several trends are shaping the industry’s growth. Not only they are intrinsically related to the product itself, but also to how consumers perceive food and home dining and how their habits adjust to the post-Covid reality.
According to specialized portal Packaged Facts, “Premium foods suppliers who locally source their ingredients will likely notice early opportunities, as long as meal kits balance high-quality ingredients with price tags customers can stomach.”
The key niches among consumers will likely include, Organic, Veggie-centric, Paleo, Specialty Diets, and Farm-to-Table home meal prep.
Consumers are also demanding more sustainability commitment from meal kits companies, mainly more environmentally-friendly packaging and insulation materials produced through recycling methods.
This, in turn, has put an emphasis on organic ingredients that guarantee water-conscious production and sustainable farming methods that respect biodiversity.
The business is also increasingly veering toward more diet specialization, as consumers go for meal kits to be able to follow more strict diets for various reasons –weight loss, veggie, gluten-free products, etc.
Consumers’ lifestyles and principles are also strongly shaping the market as, for instance, “Meal kits make it easy to maintain a vegan lifestyle while offering a wide variety of choices. Other lifestyles, such as those that require fast or easy cooking but do not require special foods, or avoiding certain foods, are also met through meal kits.”
In terms of market opportunities, some trends are clearly evident. Marjolein Hanssen, analyst of consumer foods at Raboresearch told Fortune, “On the demand side, the bigger you are, the easier it will be to attract consumers, the more meal-kit choices you can offer.”
“The whole situation has changed and these bigger players have attracted a lot more consumers and have invested in their local fulfillment centers becoming more efficient.”
Further, price will become a crucial element for the meal kits business to grow, as revealed by market research firm Mintel. In a study, 63% of potential customers in the U.S. said that a high price was the main barrier to adoption.
In this regard, companies must step up their ability to find their right market, as big players –HelloFresh, Gousto, Mindful Chef– are going to dominate the market, while newcomers will fight for a smaller space trying to find a niche.
As lockdowns become a thing of the past –for now, at least– the meal kits demand will dip but the overall trend is pointing to solid growth in the course of the next few years.