Home Chef aims to be first meal kit company to achieve ‘sustained profitability’ in 2018

By Elizabeth Crawford contact

- Last updated on GMT

Home Chef to be first meal kit company with sustained profitability

Related tags: Marketing

Achieving sustained profitability is a basic business goal that has eluded many in the highly competitive meal kit category, but a top executive of Home Chef says the company may be the first to achieve it in 2018 in part by following the lead of the tortoise – and not the hare.

“For us, it has just been slow and steady growth”​ sustained through reliable sales and returning customers rather than trying to be the biggest player by stealing a point of market share here and there with aggressive and expensive marketing campaigns that require multiple rounds of fundraising or going public, Chief Revenue Officer Rich DeNardis told FoodNavigator-USA.

“To us, it doesn’t feel like a winner-takes-all market, so there is no need to race to be a big as humanly possible,”​ he explained.

Rather, he said, “our perspective is this is a long-game, and our goal in 2018 is to prove the category can continue to grow and brands in the category can continue to grow meaningfully, but do so in way that is profitable.”

The company’s approach so far is paying off with Home Chef growing quickly in just two years from delivering only 70,000 meals a month in 2015 to delivering nearly 2.5 million meals a month today.

A diverse advertising strategy

DeNardis attributes this success in part to the company’s decision to diversify its online marketing strategy and embrace “1970s marketing”​ offline – including television, radio and direct-mail, which are channels some experts say are not worth the money or effort.

“We think of ourselves as a digitally native brand – so digital first in everything that we are doing,”​ but that doesn’t mean advertising only on Facebook and Google, DeNardis said.

He explained: “Almost 100 cents of every dollar of digital advertising goes to either Facebook or Google, and historically speaking, we have been big advertisers on both of those platforms – particularly relative to our size. But now we are looking at places online where there isn’t quite as much competition and there are different audiences.”

For example, he said, the company is now focusing on leveraging influencer relationships, such as with bloggers, “to tap into audiences that have affinities that are driving them to different Internet properties that aren’t just Facebook or Google.”

The potential of off-line advertising

This same line of reasoning pushed the company to expand its offline marketing in 2017 as well, which it plans to continue in 2018.

“We are now a relatively large TV advertiser, we do a fair bit of direct mail and we have even done tests with radio to continue to reach audiences that may not be online,”​ such as older consumers whose children may have recently moved out and they are looking for new ways to put meals on the table, DeNardis said.

Some of these approaches have been more successful than others, DeNardis acknowledged. For example, the tests on radio were not as effective as other platforms given the kits’ visual nature.

However, this factor helped fuel success with television marketing – where it perhaps was more influential than online.

“There certainly is much more impact from displaying a beautiful food video on a 55-inch screen in someone’s living room than if you are playing it on a tiny banner or maybe a slightly larger place within a platform like Facebook,”​ DeNardis explained.

As for some marketers’ qualms that television is a less effective platform now that consumers can stream content online, DeNardis said “there is still a decent amount of live viewership,”​ and “it is not the type of thing where overnight people are making these changes to get off TV.”

And to the extent that viewers are moving online, DeNardis sees advertising on networks’ websites as a viable way to reach viewers and potential customers.

Emerging opportunities with retailers, new day parts

“Another big avenue we are looking to for growth is partnerships of different flavors, and that is where retail kind of comes into play for us,”​ DeNardis said.

“We believe there is a ton of opportunity in being able to address more on-demand type of use cases. So, customers that are on their way home from work and want to grab something at a grocery store or customers who are browsing another ecommerce portal”​ or who are taking advantage of a retailers click-and-collect model, which “are a great way for us to reach an audience of consumers looking for convenience and may be willing to pay a tiny bit of a premium.”

Partnering with retailers does open up another avenue for competition as some stores offer private label kits, but DeNardis said he isn’t worried about this as retailers have an interest in offering branded goods as well as their own products. In addition, he said, manufacturing kits is not as easy as some retailers might think – meaning that they may quickly exit the category and leave it up to the professional branded manufacturers.

Finally, DeNardis sees growth potential for meal kits in continuing customization and offering solutions to different day parts, such as lunch.

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