Albertsons Acquires Plated As The Meal Market Recalibrates
The meal kit market is going through a rapid and fascinating period of growth, retrenchment and repositioning.
The latest development: Albertsons is buying Plated for an undisclosed price, marking the first purchase of a prepared meals company by a supermarket chain.
As the lukewarm reception of Blue Apron shows, this is a market that is filled with both great promise (breathtaking growth) combined with a shaky business model (high acquisition costs and low customer retention).
The key players in the meal kit market include Blue Apron, Hello Fresh, Home Chef and Plated, but there are also a variety of more niche players focused on regions or a focus on food types. That’s a lot of people competing for the same space. Amazon’s acquisition of Whole Foods also puts an omnichannel focus on this category and Amazon has a tie-in with Martha Stewart and Marley Spoon.
There are a number of adjacent players in the space that offer a different approach rather than meal kits. There are dietary driven programs like Diet To Go and Fresh Diet. Freshly just received backing from Nestle as the major food manufacturers are starting to take note. Another one to watch in this space is Fresh by Transform, which focuses on refrigerated, all-natural meals with a tie-in to high profile trainers Chris and Heidi Powell. In this category, the focus is on fully prepared meals, which offers a bigger dose of convenience than meal kitting, likely reaching a different customer looking for tighter portion control and specific health requirements.
Not to be outdone, Kraft has partnered with Oprah on a meal program that will target more traditional brick and mortar retail distribution.
In my follow up to the poorly received Blue Apron IPO, I suggested “that these models must adapt, from creating a more efficient way for customer attraction towards having a more convenient way to access their meals. Clearly, developing a retail or brick and mortar partnership, seems to make a lot of sense as well as potentially partnering with other grocery e-commerce providers.”
Well, I’m either prophetic or lucky in predicting the Plated and Albertsons deal. There are clearly benefits and challenges associated with the deal. Plated gains access to roughly 2,300 physical stores and over 35 million customers per week. Simple cross promotions and awareness should help bring down customer acquisition costs. More promising but trickier to pull off will be providing Plated branded meal kits in stores. This makes complete sense from a customer convenience point of view but also has significant supply challenges (Plated has a D2C driven model today) as well as the practicalities of demand forecasting and shrink. One of the benefits of the current model is making meals on demand, which minimizes waste.
I suspect that like many deals, this is one of many dominos to fall. It would not be a surprise to see other e-commerce and brick and mortar mash-ups occur as well as big manufacturers get into the act.
Neil Stern for Forbes