Meal Kit Services Are Hugely Popular — But Are They Profitable?

It’s a 1.5 billion dollar industry

For a rapidly growing number of Americans, dinner starts with a meal kit. For the last few years, Blue Apron, HelloFresh, Plated, Hello Marley, Chef'd and a dozen other companies have been hawking subscription-based, cook-it-yourself meals, complete with recipe cards, perfectly-portioned ingredients, and a monthly bill. According to a new study, the meal kit market might be over-saturated, but it's growing nonetheless.

Market research firm Packaged Facts estimates that the U.S. meal kit delivery services market will generate "approximately $1.5 billion in sales in 2016 and will grow to a multi-billion dollar market over the next five years." According to its report, the companies that pioneered the meal kit category have only been around in the U.S. since 2012. There are now more than 150 brands aiming to bridge the gap between takeout and from-scratch home cooking.

It might be awhile before meal kit delivery services make any real money.

A surprisingly high number (16 percent) of those who answered the Packaged Facts survey said they ordered prepare-at-home fresh meal kits on a regular basis. Packaged Facts did admit that this number could be inflated "due to varying consumer interpretations of the survey question terminology stemming from the relatively new concept of prepare-at-home fresh meal kits." Consumers have a dizzying array of meal kit options to choose from, including diet meal kits, juice cleanses, and packaged combinations from grocery stores or grocery delivery services.

Despite the lack of clarity regarding just how many people subscribe to meal kits (the companies themselves declined to disclose subscriber data), there is a hefty amount of investor interest in the space. Packaged Facts estimates that meal kit delivery service startups have collectively raised more than $650 million in venture capital. (Blue Apron alone has raised more than $193 million in equity funding.) But according to the study, it doesn't appear that the industry is actually profitable just yet.

"Although executives at Blue Apron, the largest meal kit marketer, claim to be making money on every meal, Packaged Facts believes that when sales are counterbalanced by the amount of funding raised by investors, no meal kit delivery service is yet profitable," reads the report. "Moreover, the costs of expansion — including establishing new facilities, hiring more workers, and enticing new customers with deep discounts — could mean it will take a long time for most meal kit services to begin making money."

Though Blue Apron won't provide exact revenue figures, a spokesperson tells Eater the company does make money on each box, "inclusive of the cost of ingredients, packaging, and shipping."

Like most startups, meal kit companies have a common goal: to disrupt the food industry. But just how disruptive will they be? Opinions differ. The Packaged Facts study predicts that meal kit delivery services will continue to see healthy growth over the next five years, with some companies going public and others falling by the wayside. Niche meal kits (those offering vegetarian, ethnic, or eco-friendly options) have more potential to establish a "unique marketing angle."

Still others hope the disruption is much more dramatic. Fabian Siegel, co-founder of meal kit service Marley Spoon (which is based in Germany, offered Packaged Facts his (arguably biased) prediction: "Supermarkets will be replaced: Amazon will take care of the pantry; meal kit delivery services like Marley Spoon will take care of the 'what we are cooking tonight.'"

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