Terra's Kitchen CEO: Strategics are eyeing up meal kit players now...

Plated teams up with Albertsons in bid to become 'the first omnichannel meal kit offering with national scale'

By Elaine Watson contact

- Last updated on GMT

Albertsons buys meal kit co Plated for undisclosed sum
As shockwaves from the Amazon/Whole Foods deal continue to reverberate throughout the food industry, Albertsons has struck while the iron is hot via a deal to acquire Plated – one of the leading brands in the burgeoning meal kit market – for an undisclosed sum.

Under the deal, which is likely to close later this month, New York-based Plated​ will operate as a wholly owned subsidiary of Boise, Idado-based Albertsons, with its own leadership team led by CEO Josh Hix, who co-founded the business in 2012 with Nick Taranto.

For Plated, the deal immediately gives it access to a physical store network (2,300 stores) through which to sell or/and market its kits, coupled with access to Albertsons’ 35m customers per week and exposure via its digital marketing channels.

It also gives the five-year-old firm access to Albertsons’ purchasing operation and supply chain infrastructure, enabling it to drive efficiencies, Mike McDeVitt, CEO of fellow meal kit firm Terra's Kitchen, told FoodNavigator-USA.

"This makes a ton of sense for Plated, although they've spent most of the money they've raised on building infrastructure that you could argue could become kind of redundant now, which makes you wonder what Albertsons is actually paying for. But for Plated, in order to go mass market, they've got to bring prices down, and for that you need buying power, and that's where I see the real gains. Albertsons has serious buying power." 

Terra's Kitchen CEO: The Amazon/Whole Foods deal changed everything

As to whether this deal is likely to start a domino effect in the industry, he noted that several leading CPG companies had recently invested in or partnered with meal kit companies [Nestlé USA,Campbell Soup​, Unilever​, Coca-Cola​,PepsiCo​], he said:

"From an investment perspective, the Amazon/Whole Foods deal definitely changed things. We were originally looking to go to the finance community to raise capital, and the Amazon deal made the finance world freeze. But at the same time, strategic players - CPG companies and retailers - started to open their eyes and say we really need to be looking at this, so the news today is only going to expedite that. 

"For us, we've been in conversations with potential strategic partners for about four weeks, we're loving those conversations because there is so much potential synergy in terms of product distribution or customer acquisition."

amazon-echo

“I’d say that strategic investors - people in the food business - see the Amazon Whole Foods deal as a huge wakeup call​, they see that this channel is alive and growing and feel that Amazon is going to take all the share unless we do something."

Mike Demko, CEO, Door to Door Organics

Meal kit infrastructure

At Terra’s Kitchen​ (which launched on the west coast in summer 2015 and the east coast in March 2016), flexibility and agility are at the heart of the company's business model, which keeps costs down by tapping into existing infrastructure, said McDeVitt.

“Most meal kit companies do everything themselves from scratch, so they’re buying massive warehouses, hiring all these employees, forecasting, buying food to order, so they are having to raise a lot of money.

“But when I started looking at this market, I felt that there were already companies out there supplying food, so why not just plug into infrastructure that’s already there?” ​added McDevitt, who works in partnership with FreshRealm​, a subsidiary of fresh prepared food/produce company Calavo Growers​,​which compiles meals at Calavo facilities across the country on Terra's Kitchen's behalf, leaving McDevitt to focus on acquiring – and keeping - customers, and constantly improving user experience.

plated prep

"This will give Albertsons some of the differentiation it needs to become more relevant, especially given how rapidly the grocery space is evolving," ​Kantar retail analyst Elley Symmes told FoodNavigator-USA.

"Albertsons - through Safeway - is rolling out online shopping services but I think Plated is targeting a different shopping occasion and different shopper groups.

"What this also gives Albertsons is access to technology that it can apply to its larger business, and for Albertsons to try and build the capabilities in-house that companies like Plated have spent five years developing would divert time, energy and resources they need to spend on the core business, so this deal makes a lot of sense. 

"In some ways it also makes more sense for a retailer​ to buy or invest in meal kit companies than for a CPG company," ​she argued, because they already have direct relationships with consumers via stores and digital channels, and there is a risk that if a meal kit company becomes too associated with a packaged food brand, it could impact consumer perceptions of the authenticity and culinary credentials of the service. 

So can we expect further M&A in the meal kit space? Yes, predicted Symmes, who noted that lot of meal kit companies have been burning through cash and need to raise more to keep going, making a partnership with a strategic buyer that can provide instant access to customers very appealing. "But I think what we'll also see someone acquiring a third player such as Instacart or Shipt."

Safeway-Albertsons

For Albertsons, the deal marks a “strategic step for the company as it continues to focus on innovation, personalization, and customization​,” said the retailer in a press release. “Among the key projected outcomes of this deal is for Plated to become the first omnichannel meal kit offering with national scale​.”

"Today's consumer is looking for a variety of personalized shopping alternatives, and this transaction is the latest example of Albertsons Cos. meeting our customers wherever and however they like to shop,​" said CEO Bob Miller.

Plated CEO Josh Hix added: “As meal kits continue to gain traction in the marketplace, we believe the winning formula combines choice, flexibility, culinary expertise, and the ability for customers to buy across channels, all of which we are now singularly positioned to deliver in collaboration with Albertsons Cos."

Boise-based Albertsons Cos. operates stores across 35 states and Washington, D.C., under 20 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs.

andy levitt purple carrot ceo

"With the Albertsons acquisition of Plated, food retail trends are moving towards an integration of online and offline options to meet and service customers wherever they wish to shop. It's no longer one or the other, largely driven by the huge signal from Amazon with their acquisition of Whole Foods."

Andy Levitt, CEO, Purple Carrot

What's for dinner tonight?

Interested in navigating the direct to consumer meal kit/delivery space? And what about healthy vending?

Checkout our awesome line up of speakers at FOOD VISION USA 2017​ ​, featuring execs from Chef'd, Terra's Kitchen, Sun Basket, PeaPod and Farmer's Fridge.

Food Vision USA signature strip

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