How Meal Kit Companies Make Money
Market leader HelloFresh has been a publicly traded company since 2017 and continues to enjoy phenomenal YoY growth. Global HelloFresh revenue doubled from $511 million in 2019 to $1.1 billion in 2020
According to information provided by Grand View Research, revenue of the global meal kit delivery market is forecast to grow to around $27.33 billion USD by 2028. With an estimated 13.4% annualised growth rate predicted, this will see an almost three-fold increase in 2020 revenues of $10.26 billion USD in 2020.
North America holds the largest market share by geography, accounting for around 45.0% of global revenue in 2020. The food delivery market in the U.S. and Canada has enjoyed considerable growth in recent years with consumers driven by the ease and simplicity of the make at home kits. Freeing up consumers to have more time and less stress, whilst still having a healthier option than pre-cooked ‘ready meals’.
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How Meal Kit Companies Make Money
Market leader HelloFresh has been a publicly traded company since 2017 and continues to enjoy phenomenal YoY growth. Global HelloFresh revenue doubled from $511 million in 2019 to $1.1 billion in 2020, giving the firm a 10% market share of the global meal kit delivery market. With Q3 2021 results recently announced by HelloFresh, group revenue is also up 71.7% compared to the first nine months in 2020.
However, not all indicators are positive for HelloFresh, with the firm encountering a fairly significant rise in costs in 2021. The firm’s contribution margin (i.e. the per-item profit margin) was 22.5% for the period specifically relating to Q3, down on the 25.6% margin enjoyed for the full nine-month period ending 30 Sep 2021. Demonstrating the impact of global inflation and rising costs that HelloFresh has encountered. Costs of procurement have increased slightly (34.6% of total revenue in 3 months ending 30 Sep 2021 vs 34.2% of total revenue in 9 months ending 30 Sep 2021). But it’s fulfillment costs which have proved the biggest burden, up 4.2% in the third quarter of 2021 which reflects higher packaging expenses, increased production-related wages and higher logistical costs. With all marketing and administrative costs included, HelloFresh had an EBITDA of 8.4% in the 9 months ending 30 Sep 2021, compared to 11.6% for the same period in 2020.
So whilst meal kits are generally regarded as a more expensive option, we can see the pressure on meal kit delivery firms like HelloFresh who are encountering both higher procurement costs (i.e. cost of food itself) and fulfillment costs (i.e. packaging and distribution).
Are Meal Kits Worth it in Spite of Being Expensive?
Meal kits generally work out more costly than sourcing your own goods but, crucially, the improved retention rate and growth in customers of firms like HelloFresh indicate that consumers are happy with the value they received. There are a number of reasons why an individual might be interested in the speed and ease of cooking at home meal kits. Typical customers include:
- Millennials who prefer homemade meals to dining out
- City dwellers who are unable to access fresh food from supermarkets
- Individuals short on time but still seeking a quality meal (no need to shop and cooking times are generally fast)
- People who are health-conscious and seeking a healthy, balanced diet
- Anyone looking to diversify their meals and discover new recipes
Is HelloFresh Worth it?
In 2023, HelloFresh has seen an increase in the number of active customers, the number of meals ordered and the number of orders made per customer. All of these signs, particularly an increase in the number of orders placed by each customer, indicate that existing HelloFresh customers see the value of the make-at-home meal kits. 6 servings per week with its standard box is charged at $11.49 per serving.
Responding to market trends, the firm offers vegetarian meal kits and a variety of adaptable boxes to suit dietary requirements. HelloFresh also commits to offsetting all the direct CO2 emissions caused by their internal operations, plus all emissions from corporate travel and delivery to customers. Its sourcing, packing, and shipping operations also generate less food waste than traditional food supply chains.
Is Chef’s Plate Worth it?
Chef’s Plate focuses on two things more than anything else; cost and speed. Meaning Chef’s Plate offers some of the most affordable meal kits in the industry, with meals almost always designed to be ready in 15-30 minutes. Its flexible subscription service sees meals priced at $9.99 per serving and is easy to manage online. It’s easy to skip a week if you know you’re going to be away.
The boxes are also 100% recyclable and fresh goods come in compostable packaging.
Is GoodFood Worth it?
Goodfood comes in only slightly more expensive than Chef’s Plate, with its classic basket beginning at $10.88 per serving. Headquartered in Montreal, Goodfood is available online in both French and English. It’s well known for its Clean15 box, specifically designed for those interested in losing weight.
Meal Kit Growth to Continue in Canada and Rest of World
The meal kit industry in North America has already enjoyed tremendous growth over recent years, partly driven by the pandemic boosting the success of stay-at-home delivery options like meal kits but also because of changing consumer demands. This shift in consumer behaviour is expected to drive the meal kit industry to almost three-fold in size by 2028. Meal kit companies like HelloFresh, Chef’s Plate and Goodfood continue to monitor trends so they can cater to different lifestyles and remain key players in a fast-growth industry.
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Try Chefs Plate Meal Kits From $2.99 Per Serving!
HelloFresh Review
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