“The last 18 to 24 months has really been the time period in which these companies have taken off, and even more so in 2015 when we really saw companies doubling or more than doubling their business,” Erik Thoresen, principal at Technomic, told FoodNavigator-USA.
He added that in the next five years the US market, which currently accounts for 40% of the global category, will become a multi-billion segment.
The boom in the online meal kit delivery service segment, which currently includes about 170 players, can be attributed to overall growing consumer interest in food culture and increasing demand for convenience, Thoresen said.
“If you go back five years, there were a lot of foodies, but the number has grown and now they have a more sophisticated and complex understanding of food,” he explained. “A lot of that has to do with more premium offerings in food and beverage and the availability of better-for-you items – and meal kits capitalize on all those factors.”
In addition, consumers need for and definition of convenience is evolving. One way they achieve convenience is by shopping online, which has led to a general acceptance of the subscription model on which meal kits are based.
Low household penetration
Despite the rapid growth, household penetration of meal kits in the US is “still fairly ow,” Thoresen said.
Indeed, consumer research firm CivicScience recently found only 8% of the 7,700 US adults it surveyed subscribed to at least one subscription service across categories, including not just meals but razors, pet products, clothes and crafts.
However, that number will increase substantially in the next few years, both companies agreed.
Specifically, CivicScience found 24% of respondents said they plan to subscribe or would consider subscribing to an online service to replace in-store shopping.
In order for the meal kit market to grow and meet Technomic’s projections in the study Understanding Fresh Food Subscription, Thoresen said it must innovate around meal types, target different demographics and potentially tweak delivery models.
Currently, the meal kit market is driven primarily by older millennials, according to Technomic. Research from CivicScience also reveals subscribers are equally split among men and women, 47% more likely to have a household income of more than $125,000 annually, 23% more likely to rent their current home and about 40% are parents.
This profile is very similar to potential subscribers, CivicScience notes. It said those who are interested in or might subscribe in the future are 17% more likely to be men, 33% more likely to be millennials and 17% more likely to have household incomes more than $100,000.
A closer look at this group’s values reveals they “enjoy expanding their knowledge and experiencing new things,” according to CivicScience. This aligns well with many meal kits’ focus on exposing subscribers to new flavors and ingredients and teaching then new cooking techniques and about other cultures.
Expanding dishes and target consumers
Thoresen also sees potential around more ethnic dishes as well as specialized diets, such as organic, gluten-free or vegan.
That said, he sees the most potentially currently for meal kits that center on mainstream diets and occasionally incorporate other aspects such as organic and vegan meals.
Thoresen also believes empty-nesters are a good group to target because like young millennials who have not yet started families, they have time to cook for entertainment. Plus they have more discretionary spending money, he said.
Meal kit companies should not write off families, either, Thoresen said. He explained parents of young children like the kits so they can have something special while their children eat more age appropriate food. And families with older children like the kits because they can all cook together.
Capitalizing on social media
As for reaching new subscribers, sampling has worked well so far, Thoresen said. But CivicScience sees potential in social media.
It points out potential subscribers are 56% more likely to primarily watch TV via online streaming, 26% are more likely to spend more than an hour on social media daily and 30% are more likely to be early adopters.
Given users and potential subscribers currently focus on social media, Thoresen recommends meal kits companies also make their dishes beautiful, as well as delicious.
He explained that many subscribers already post photos of their finished meals and if they look good, those posts likely will generate interest among potential new subscribers and further accelerate growth.