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HelloFresh, Goodbye Grocery and Restaurants?

April 11th, 2017 | Posted by APT in Restaurants | Retail

Since 2012, the meal kit industry has grown, with more than 150 companies competing for their share of the growing market. The rise of brands like HelloFresh, Blue Apron, and others is representative of shifting consumer preferences: Meal delivery kits address key demands for convenience and fresh, healthy options. For grocery and restaurant chains to avoid losing market share as this segment grows, they should respond to meal kit players by innovating, with particular emphasis on convenience.

While meal kit companies are disruptors, they have not completely encroached on grocery and restaurant territory – although they are popular among some consumers, they have yet to gain widespread popularity. They also do present some drawbacks for consumers, namely cost. Purchasing the ingredients for a home-cooked meal at a grocery store, or even eating out in some restaurants, is generally less expensive than many meal delivery kit subscription prices. For example, the average HelloFresh box with three meals for two people is $69, which comes out to $11.50 per person per meal – more than they may spend at many fast-casual restaurants, and more than they would spend on grocery store ingredients.

As meal delivery kits become increasingly popular, grocery stores and restaurants should experiment to prevent share erosion from convenience- and fresh-oriented consumers. This approach empowers grocery and restaurant chains to determine which innovations will drive maximum value in maintaining market share.

Grocery

One approach that some grocers are already taking is selling meal kits in-store. In the U.K., Sainsbury’s now offers HelloFresh meal kits in some locations, and in the U.S., Giant also sells meal kits. Imagine another grocery chain was considering offering meal kits in-store, but wanted to determine if the program would be profitable. Before rolling out meal kit offerings on a broader scale, the chain could first introduce them in a subset of locations, then measure their performance against a group of similar locations that did http://www.supermarketnews.com/deli/giant-offer-fresh-meal-kits)not receive the meal kit inventory.

This Test & Learn approach is the best way for an organization to pinpoint not only the true financial impact of a new program, but where and with whom it is most effective, and how it can be improved. Specifically, testing would empower the chain to isolate key characteristics of the markets and consumers with which the meal kits sold best, allowing them to prioritize program introduction where it would drive maximum value.

Other strategies grocers could consider testing to enhance their competitive edge against meal kit disruptors include developing or refining loyalty initiatives, delivering personalized offers and promotions, and offering convenient delivery programs of their own. For example, grocers could design and test marketing campaigns to re-engage customers they have lost, particularly those that may be more likely to purchase meal kits. By measuring with which lapsed customers these campaigns are most successful, grocery chains can target their outreach to customers that fit the profile of those most likely to reactivate.

Another potential approach could be to capitalize on an existing advantage: Price. Purchasing ingredients at the grocery store is more cost-effective than most meal kit subscriptions, and grocers can compete further by providing additional discounts. However, while enhancing their existing advantage on cost by further refining pricing strategy may seem like a simple solution, grocers must also understand that pricing shifts are not a guaranteed fix. Often, the customers grocers are losing to meal kit services are not very price-sensitive to begin with, so discounts will hold less appeal for them.

Instead, it will be critical for grocers to understand which offers will truly be profitable in the long-term. Testing new promotions and marketing campaigns before deploying them on a widespread basis will enable them to optimize their offers. For example, grocery chains could develop and test campaigns highlighting the price difference between their offerings and meal kit options, then target them to the customer groups with which they would be most impactful.

Restaurants

On the restaurant side, one logical response to the convenience of meal kit delivery services is developing or enhancing their own delivery services, be it through an in-house delivery system or a third-party delivery partner like UberEats or DoorDash. Other potential convenience-driving options could include curbside pickup programs, mobile ordering capabilities, and even kiosk ordering to help place and fulfill orders faster and streamline the takeout process.

The future of restaurant technology will likely bring a wealth of other innovative options. These could include opportunities for chains to partner with various apps to offer order-ahead options via mobile device. At some point, perhaps restaurants could even offer their own subscription meal delivery services, which could directly compete with meal kit delivery services.

By using testing to refine their investments, both grocery and restaurant chains can innovate strategically to compete with meal kit disruptors. Perhaps there could even be opportunity for them to work together, implementing co-branded, in-store eateries in some grocery stores. The possibilities for creative new programs are limitless, and the best way to truly fuel growth in response to emerging competitors is using experimentation to inform strategic decision-making.

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