Will the meal-kit market continue to grow?

Meal-kit companies, which deliver recipes to customers together with fresh ingredients, have seen a tremendous boom in growth during the pandemic. However, investors are now asking how long this will continue.

Consumers spending more time at home have created new demand for straightforward but rewarding home cooking, and meal-kits are catering to this with convenience and novelty.

The biggest player globally is Hello Fresh, which delivered 122.6% year-on-year revenue growth in Q2 2020. The company expects full-year revenue growth between 75% and 95%.

Whilst demand growth for services such as Hello Fresh, and competitors including Gousto and Cookaway, will almost certainly slow down soon, competition in this emerging market will only get fiercer.

The biggest competitors to the current rising stars in this market are traditional grocery chains, which are losing significant sales for every customer who converts to meal-kits long-term.

Many supermarkets have extensive experience sourcing recipes and publishing meal plans, and with the skyrocketing demand for grocery delivery triggered by pandemic lockdowns, those meal plans are integrating with online ordering.

For example, the UK supermarket chain Sainsbury’s offers basket-building meal plans for online customers, which automatically compile an order and enable the customer to remove any items they already have.

This falls short of the meal-kit offering, adding waste and cost from excess ingredients. However, those issues have digital solutions, and supermarkets are only just scaling up their online investment.

The upmarket UK grocer M&S went a step further in 2020 with its own meal-kit offering featuring tailored own-brand ingredients, again showing that supermarkets are ready to challenge new competition.

A plethora of smaller meal-kit companies has also diversified the market, working in single countries or with specialized offerings.

Some are growing rapidly but remain in their home-markets, such as Foodinthebox in Spain and Frichti in France. Others aim to lead narrower segments, such as Pasta Evangelists or the plant-based specialist Planty.

These smaller companies will create new competition as they expand, and also provide opportunities for bigger players like Hello Fresh or Blue Apron in the US to make strategic acquisitions.

Meal-kit delivery will continue to grow with smaller and larger players, and 2021 could be an even more important year for the market than 2020 has been.