For infamously time-pressed millennials, mail-order meal kits initially seemed like a dream come true. Rather than poring over recipes to figure out what to make for dinner, then schlepping to the grocery store for ingredients (and inevitably having leftover produce spoil in the fridge), subscribers could instead have perfectly portioned ingredients delivered right to their doors on a weekly basis, complete with easy-to-follow recipe cards. Meal kits also seemed like a dream come true for food tech-hungry investors, who sank millions of dollars into companies like Blue Apron, Hello Fresh, Sun Basket, Plated, and Chef’d; celebrity names like Ayesha Curry, Martha Stewart, and Mark Bittman also jumped in head first. Blue Apron, arguably the biggest name in the space, was founded in 2012 and valued at a hefty $2 billion just three years later.
But as the meal kit space became more and more crowded, the novelty wore off, and for many consumers, so did the sheen. Many ultimately found the mail-order services too expensive, and while meal kits may prevent food waste, the excessive amount of packaging (not to mention the energy used to ship ingredients nationwide) led customers to shake their heads. As Dirt Candy chef Amanda Cohen pointed out in a 2017 New York Times op-ed, “[Meal kits] generate enormous amounts of paper and plastic waste. Every ingredient is packaged separately, resulting in absurdities like a single scallion arriving in its own plastic bag.”
But the real problem with meal kit companies’ business models, Cohen argued, is that the kits serve as “training wheels” of sorts for newbie cooks; once subscribers grow more confident in their abilities to saute and figure out which ingredients complement one another, they inevitably cancel. Discussions in the r/BlueApron Reddit forum seem to support that theory: “I think of it more as a cooking lesson, and save the recipe cards,” one user wrote. Another former subscriber who cancelled after a few months said, “What it taught me was that I needed to spend an hour or so a week meal planning and looking for fun recipes, and I needed to set aside an hour to shop. I did really enjoy learning to cook new things.”
Indeed, in recent months, it seems the tide has turned against meal kits, with countless headlines saying they’ve “fizzled,” or worse, are “doomed to fail” or already “DOA.” Even the future of Blue Apron, which as of March 2018 controlled 35 percent of the U.S. meal kit market according to data from Earnest Research, is up in the air, with finance site Motley Fool asking if it was “the beginning of the end” for the company. Last November, its most recent quarterly earnings report revealed that Blue Apron lost more than 200,000 customers — or about 25 percent of its customer base — between September 2017 and September 2018. Meanwhile, its stock price has plummeted: After making its stock market debut in June 2017 with an IPO price of $10 (about a third less than it initially anticipated), Blue Apron’s share price slunk to an all-time low of 66 cents just before Christmas 2018. (At time of publication, it hovered around $1.40.) Since then, it seems the company has been grasping for ways to snare new customers: In February, it rolled out “Knick Knacks” — cheaper, stripped-down versions of its meal kits that require cooks to supply their own produce and protein.
It’s no secret that meal kits are a tough biz, what with the labyrinth of delivery logistics involved in shipping highly perishable products all over the country. Blue Apron expects to lose even more customers this year, as the company says it’s shifting focus from bringing in as many new customers as possible to attracting “high quality” customers — that is, loyal subscribers that stick around after initial discounts run out.
NPD group food analyst Darren Seifer says there are two main reasons customers abandon their meal kit subscriptions, and the first is that they’re too expensive once the initial coupon or sign-up promos run out. Blue Apron aggressively retargets customers who cancel with promotional discounts to lure them back, and the internet is rife with posts from customers who game the system by repeatedly signing up and canceling to score a seemingly infinite cycle of said promos. “I used Blue Apron since I was getting $20 off three boxes,” one Reddit user writes. “As soon as I stopped getting it I cancelled and within a week I got emailed another promo code to come back for two weeks. Did that and cancelled again and now I have another promo code that is good for another 3 weeks. I’m basically just paying $40 cause at that price its worth it with no intention of every paying the full $60.”
According to Seifer and others, meal kits’ struggles could come down to human nature: People want more spontaneity when it comes to what’s for dinner. “Dinner is often a last-minute decision and sometimes people just don’t want to decide [what to eat] a week before,” says Seifer. “They want to decide in the moment.” Additionally, while people are enthusiastic about buying damn near everything online these days, the major exception to that is groceries: A recent Gallup poll showed that Americans still overwhelmingly prefer to get their food shopping done the old-fashioned way. That’s where making one-off meal kits available at retail locations like grocery stores and membership clubs comes in; according to Seifer, moving beyond the mail-order subscription model seems pivotal to meal kits’ long-term viability.
Blue Apron and Hello Fresh have waded into in-store offerings: Blue Apron began selling its kits in Costco stores in May 2018, while Hello Fresh did the same the following month and is now in more than 500 grocery stores including HEB, Brookshire’s, and Fareway. Competitor Plated was acquired by Albertsons last year, and its meal kits were rolled out to Albertsons and Safeway stores in October. Selling meal kits in grocery stores makes a lot of sense: People are already there to buy food, and meal kits provide a quicker, easier route to dinner than shopping for individual ingredients, no pesky subscription required.
Industry insiders seem to agree that’s where the market is headed, but even selling kits in-store has proven insufficient for some meal kit brands. In July 2018, meal kit company Chef’d shut down — despite having once been valued at more than $150 million, selling its kits in more than 400 retail stores, and boasting investments from food juggernauts like Campbell Soup Co. and partnerships with celebrity chefs like Wolfgang Puck. In a Linkedin article written post-shutdown, Chef’d’s former senior vice president of retail Sean Butler argued that the company’s demise didn’t foretell the doom of an entire industry, but posited that “The right way to do meal kits is not the subscription model… The future is a curated non-subscription e-commerce model supported by a fresh, rotating set of in-store offerings.”
Interestingly, Blue Apron has at least temporarily abandoned its in-store options. It pulled its kits out of Costco stores in November 2018, stating it was pausing the program due to the “seasonal cadence” of the retailer’s business (aka the store needed more shelf space for holiday products). But its kits seem likely to pop up on retail shelves again soon: A Blue Apron spokesperson says the company is “in active discussions” with other prospective retail partners. Currently, the only way to get Blue Apron kits without a subscription is to order them via Walmart-owned Jet.com, and they’re only available for delivery in the NYC area. (Another hurdle for Blue Apron is Amazon, which sells individual meal kits that don’t require a subscription and are available nationwide with free shipping. The retail giant has proven it’s already conquered the delivery logistics game — and thanks to its incredibly large product selection and numerous revenue streams, it doesn’t necessarily even need to turn much of a profit on its meal kits.)
As far as Seifer is concerned, getting back into retail stores ASAP ought to be a priority for Blue Apron. “We found that about half of people who stopped using subscription services are giving in-store kits a try,” he says. “If the consumers are moving in that direction, it makes sense to try and follow that.”
Unfortunately for Blue Apron, it seems even some once-loyal customers are souring on the company. On the r/BlueApron subreddit, numerous users have posted in recent months about the meal-kit service going downhill from its early days, with reports of late or lost shipments, boxes missing ingredients, and proteins arriving past their prime. “We have been using BA for off and on over a year and in the last two months we’ve been so unhappy,” Reddit user hollycarpe wrote last May. “Had some rotten steak and got a partial refund credit. Used that towards the next week and ended up getting a full refund due to the fact our box came way late and was not at all frozen… I miss the old BA.” (To be fair, many of the same users are also laudatory of Blue Apron’s customer service, noting that they always receive prompt credits or refunds upon complaining to the company.)
Inevitably, the meal kit industry is bound to see more shutdowns and consolidation as time goes on. “This market looks a lot like the dotcom boom and bust of the late nineties [on a smaller scale],” Seifer says. “There’s a lot of companies that are jockeying for market share. [Blue Apron] went public but isn’t necessarily making money, and at the end of the day, if you’re not making money for several years, the money’s going to run dry.” Blue Apron has stated that it expects to become profitable in 2019.
It’s clear that meal kits aren’t for everyone, but they also don’t need to be: Blue Apron has decided to focus on courting a smaller niche of mail-order customers, while seemingly also realizing the importance of getting its kits on store shelves where non-subscribers can discover them. But whether or not all that will add up to a company that can sustain itself without further huge injections of VC money will remain to be seen.
“There’s a reason their stock price is less than a dollar,” Reddit user Thenadamgoes writes in the r/BlueApron subreddit. “Even at $60 [for six portions] I have no idea how BA makes any money or ever will. But I hope they figure it out cause I really like it.”
Whitney Filloon is Eater’s senior associate editor.