Meal kit subscriptions and their growth during the pandemic aren’t new news, but there have been a number of other developments in the arena of food and beverage subscriptions as part of the growth of subscriptions more broadly. While we tend to think of meal kits as a 21st century phenomenon, food delivery had its roots in the mid-20th century. Omaha Steaks in the USA began a mail order and home delivery service as early as 1952. Wine clubs have been around in Australia
ia since the 1980s, with delivery of ‘cellar dozens’ by individual cellar doors and through longstanding clubs such as Cellarmasters and the Qantas Wine Club. Fast forward to the noughties The first meal kit as we now know it was launched in Stockholm, Sweden in 2007 when Kicki Theander created Middagsfrid (roughly, ‘dinner peace’ in English) to help families enjoy home-cooked dinners without the logistics of meal planning and purchasing. Middagsfrid spread rapidly through Germany, Denmark, Switzerland, and Belgium, driving a trail of competitors in the process, such as the more than 10 meal kit companies in Sweden alone, a country with a population of under 10 million. In 2012, meal kits entered the US with Blue Apron, Hello Fresh and Home Chef. By 2015, meal kit services had generated over US$1billion in sales. The US is now home to more than 150 meal kit companies, with hundreds more globally. Blue Apron and Hello Fresh both went public several years ago. According to a report from Numerator, there’s been some evolution in the consumers of meal kits too, from an initially affluent urban older Millennial profile to a broader base with a recently estimated two-thirds of buyers being Millennials and Generation Xers. According to Time, in 2019 the global meal kit business was estimated to be worth around US$2.2 billion and expected to capture up to 1.3 per cent of global food and beverage sales by 2020. And that was prior to the pandemic driven acceleration. Beyond meal kits Food and beverage subscriptions go way beyond meal kits however. The plethora of lists of the ‘top’ food subscription boxes demonstrates the maturity of the industry and the breadth of what’s available, supported by food subscription platforms and marketplaces including CrateJoy, Food52 and the inevitable Amazon. Individual and specialist food and beverage subscription box categories include cheese, coffee, wine, cocktails, gin, whisky, chocolate, condiments and pickles, fruit and vegetables, meat, ice cream, salami, dried beans, and even seafood. Tea was the top purchased food and beverage subscription box category in 2020. CrateJoy ranges subscription boxes across treats, snacks, cocktails, jerky boxes, spice blends, cookies, desserts, hot sauce, tinned fish, Mexican, Japanese snacks, Indian desserts, and popcorn. Niche subscriptions cater to every imaginable diet:vegetarian, vegan, organic, keto, paleo, gluten-free, and subscription kits designed for kids such as Raddish or picky eaters such as Yumble. More recently, international food subscription boxes such as ‘tastes of the world’ have gained popularity. Seasonal and occasion-based meal kits have also been on the rise for events such as date nights and footy finals. Grocery stores have invested in the category in the US, with Albertsons purchasing Plated, Kroger purchasing Home Chef, and some grocery stores and FMCG companies now producing their own meal kits, which may or may not be subscription but theoretically could be tied to a manufacturer’s direct-to-consumer operations. Pet food subscription services are also picking up, such as Barkbox (which saw a 47 per cent jump in sales in just one quarter) and Marley Spoon’s Bezzie. Pandemic accelerates and changes subscriptions With the at-home cooking genie out of the bottle during Covid and particularly during lockdowns, meal kit subscriptions saw a surge in take-up in 2020, accelerating the growth of subscription services that were already on the rise before the pandemic took hold. And as online shopping comfort levels increased, and consumers sought to reward themselves in the absence of travel and socialising, subscriptions to ‘luxury’ food and beverage products ranging from champagne to oysters increased. Total enrollment in all types of subscription programs surged 48 per cent in 2020 over 2019, and there was a 25 per cent increase in the food and beverage categories, according to Ordergroove. And it worked from a supply, as well as demand, standpoint. The pandemic’s shutdown of foodservice channels ranging from restaurants to cinemas and airlines meant that producers needed to pivot to other distribution channels and methods, often finding more interest and revenue than anticipated. This ranged from fruit and vegetable suppliers who could no longer supply closed restaurants, to popcorn that would have gone to cinemas and snack trays destined for airlines. Some suppliers are now also providing private-label brands for subscribers as a means of moving otherwise redundant stock. And then there’s the growth of restaurant meal delivery. Whilst providers such as the upscale Providoor in Australia are for one-off heat-and-plate-up deliveries, some providers are moving to restaurant delivery subscriptions. For example, six restaurants in Washington, DC joined together to sell a subscription supper club. They offered home delivery of a gourmet meal from a different chef each week for six weeks for US$360. It sold out in six days. Table 22 is another US platform helping smaller restaurants manage subscriptions and delivery. It has 200 restaurants in 60 cities including Rose’s Luxury, which also has its own subscription business. Rose’s holds the view that subscriptions are not an alternative to takeout, but to going out; the ‘restaurant experience at home’ complete with music playlists and flowers. Table 22’s average subscriber spends US$80/month and tends to be those who are the most frequent restaurant visitors. The Third Place in San Francisco helps more than 70 restaurants, bars, tea shops and other merchants to create subscription services to provide regular revenue sources and customer loyalty programs. Customers pay a monthly fee that can range from $30 for boxes of local baked goods to $300 for wine and cocktail packages from Salt Collective’s high-end restaurants. Why subscriptions (mostly) work Subscription services are attractive to providers because of the predictability of the recurring revenue and the direct relationship with the consumer. And once a consumer has one subscription they are more likely to buy another, appreciating the benefits such as cost and convenience as well as surprise and delight factors. Some Americans now have 10 or more subscription services – everything from socks and razors and streaming through to restaurants, according to US budgeting app Truebill. There’s also been a shift from buying purely for self to subscription gifts. Prior to 2018, 90 per cent of subscription boxes sold on isubscribe were bought for self. Since 2018 it’s been close to a 50/50 split between gift subscriptions and purchase for self. The downside for consumers is then the cumulative costs of all of these subscriptions. The number one reason people cancel subscriptions is due to expense. Many subscription-based meal kit companies find there are high churn rates as customers cancel or pause subscriptions in order to take a break, or not to be locked in. Post-pandemic outlook for food and beverage subscriptions Trends positive for food and beverage subscriptions Continued working from home resulting in continued elevated cooking at home; Among the consumers who reported to be cooking more in a Hunter Food Study Special Report, 51 per cent said that they will continue to cook when the crisis comes to an end. Many shared that they liked that cooking at home was healthier, saved them money, and they found it relaxing and enjoyable to try new recipes. Increased familiarity with ordering things online; Continuing uncertainty of travel and thus consumer need for surprise and delight; Broadening customer bases; not just for the young and affluent. Older populations who aren’t inclined to go to the supermarket as well as younger consumers who are tired of takeout and aren’t choosing to eat in restaurants; Ongoing minimisation of frequency and time spent in physical supermarkets. Trends against meal kit subscriptions People going back to the onpremise. Some restaurants have already ceased delivery and subscription, whilst others have retained it as an alternative or additional revenue stream; While there are a number of positive indicators, consumers may become more selective as the novelty of some food subscription types wears off. The longer lasting subscription services will be those meeting a core need shared by many; UBS financial services expects the broader subscription economy to grow to $1.5 trillion by 2025. It will be interesting to observe who remains standing in 2025.