What’s on the Menu for Meal Kits?

Although consumer interest in cooking at home rose during the early, lockdown phase of the pandemic, growth in new product introductions in the meal kit category began to slow in mid-2020 and hasn’t yet rebounded. Nestlé’s home meal delivery service, Freshly, ceased operations last month, but market researchers forecast continued sales growth in the meal kit category, and opportunities exist if companies know what and whom to target.

Data from Innova Market Insights show that the compound annual growth rate (CAGR) for new meal kit launches declined 20% during the three years ending in March 2022 in the United States, and 11% for that same time period globally. In the United States, introductions began to fall off in the third quarter of 2020, Innova reports.

Research firm Technavio forecasts a CAGR of nearly 11.3% for meal kit sales between 2020 and 2025, reaching $11.1 billion worldwide, and with more than half (54%) of that growth in North America. Key players will include meal kit companies like Blue Apron, HelloFresh, and Mindful Chef, Technavio predicts, along with major grocery chains like Albertsons and Ahold Delhaize.

“Growing consumer interest in meal kits might contribute to a boost in sales, but it doesn’t automatically follow that there is an increase in new product launches,” says Lu Ann Williams, global insights director at Innova. “It could simply be that existing products are selling in greater numbers. With people heading back to the workplace or going out more, meal kits can tap into added demands for quality with time-saving convenience. Consumer needs such as affordability, good nutritional content, and plant-based ingredients are also factors that push sales of meal kits.”

Amy Marks-McGee, founder of Trendincite LLC, agrees that meal kit sales are driven by convenience and “time-saving hacks.” Brands are forging new distribution partnerships that don’t rely on subscription-based models to capture new consumers, as well as culinary innovation partnerships with celebrity chefs to “infuse newness into the market, while interesting interpretations of plant-based meals are on the rise,” she adds.

The combination of living through the pandemic and dealing with spiking inflation provides another sort of opportunity for meal kit companies, says Ayisha Koyenikan, associate director of food and drink at Mintel. “Consumers are desperate to shrug off the worries of the world and indulge in fun, pleasurable food experiences,” she says. “Give consumers new reasons to celebrate, let them get their hands messy, and reestablish the pleasure of delayed gratification.”

Alex Weinstein, chief digital officer at Hungryroot, says his company aims to make healthy eating easier—and has 45% year-over-year growth from the third quarter of 2021 to the third quarter of 2022 to show for it. “We ask questions like what foods they like, what allergies they have, and how many people are they feeding?” he says. “Based on that, we populate their cart with recipes and ingredients they like. At the core of this is personalization, getting to know the consumer. The majority of consumers take [us] up on our recommendations.”

Plant-Based Popularity

While launches overall are declining, meal kits with claims like “no additives or preservatives,” “high source of protein,” and “gluten-free”—the top three positionings among new launches from April 2019 through March 2022—have become more of a focus with new product introductions, according to Innova. Plant-based meal kits have been particularly top-of-mind, more than doubling in market share among new launches, going from 6% to 14%, making it the fourth-most-common positioning within the category.

In addition, Innova research shows that the list of features food and drink consumers found most worth paying more for was topped by fresh products and locally produced products, which Innova notes “is in line with the recurring clean-living trends, and the healthy ready meal innovations becoming increasingly prominent.”

Marks-McGee of Trendincite has noted the shift toward plant-based meal kits. Three-Michelin-starred Eleven Madison Park, a New York City–based restaurant that recently reopened with a plant-based focus, is offering a meal kit delivery service that spans all three regular meals plus snacks and dessert, she says, while the newly launched SOMOS meal kit company specializes in Mexican dishes based around rice, beans, and vegetarian entrées. “All the foods are plant-based, gluten-free, and non-GMO,” she says.

Hungryroot, which offers more than 4,000 chef-crafted recipes, believes that consumers approach healthy eating from a number of different perspectives, Weinstein notes. “Some want more vegetables. Some are thinking about keto. Some think about their carbon footprint,” he says. “Our job is to be able to understand these preferences and serve every one of these segments—and figure out which segment each customer belongs to.”

Flexitarian consumers who don’t want to adhere to a specific diet 100% of the time are always top of mind, Weinstein says. “There are companies pursuing individual niches, and doing a fairly good job for those niches,” he says. “But our belief is that consumers are much more flexitarian than sticking to specific diets. Moreover, being too narrow creates unit economics that are fairly difficult. Marketing costs are meaningfully higher than if your offering is broader.”

Data from Mintel show that 63% of U.S. consumers believe that prepared meals are too processed. As a result, the market research firm notes, “Prepared meals and meal kit brands generally reduce additives and preservatives to reassure consumers who are concerned around the processed image of prepared meals. But going one step further, and flagging up the presence of organic, natural, or locally sourced ingredients can help to meet consumers’ expectations of authenticity.”

“No additives/preservatives” is by far the most common claim that Mintel has found on meal kit launches, leveling off between 34% in 2017–2018 and 36% in 2021–2022, and “free from artificial flavoring” is the most common sub-claim in that grouping. GMO-free claims rose the most—from 8% to 13%, Mintel found, while organic and all-natural stayed mostly steady over the five-year period.

Inflation’s Impact

Mintel also sees cost-related opportunities for meal kit companies to lean into plant-based and other health-related claims. “The movement towards a more plant-based diet will receive a boost for financial reasons, as the cost of animal protein continues to rise,” Koyenikan says. “Consumers expect plant-based products to be cheaper, an issue for products containing meat analogues. Brands must help consumers switch seamlessly between meat and vegetable-based meals.”

Indeed, Mintel believes that by the summer of 2022, the cost of living in many markets already had begun eclipsing COVID-19 as the dominant influence on consumer habits. “Savvy shopper behaviors will reestablish, with value being driven by much more than just low prices,” Koyenikan says. “Opportunities exist to trade consumers both up and down as eating in to save money remains favorable.”

Data from Innova show that 50% of U.S. consumers say they’re looking for lower-cost foods in light of the economic climate, while 40% are emphasizing home preparation or cooking from scratch rather than paying for convenience foods.

Hungyroot is well aware that consumers are seeking more value than ever, which doesn’t necessarily mean lower prices, Weinstein says. “It means more output for the dollars they spend,” he says. “We find that truly differentiated offerings still attract the consumer base.” One point of differentiation is carefully calibrated serving sizes to cut down on food waste, which in a sense counteracts inflation, he adds. “All of this comes back to the value you’re offering to the consumer.”

New distribution partnerships that Marks-McGee has noted include a series forged by Blue Apron that doesn’t require a subscription and is available both on Amazon.com and Walmart.com, the latter of which is limited to four meals. She says the company also has become the first meal kit maker to partner with Planet FWD, which calculates companies’ carbon footprints.

Celebrity chefs have teamed with meal kit companies such as Home Chef, which launched Rachael Ray–branded products at 1,300 Kroger stores; they are available through mid-March  and feature recipes like the Steakhouse Burger, Buffalo-Style Turkey Chili, and Pork Chops With Sweet Onions and Apple. In addition, Marks-McGee notes, culinary streaming platform World Chef has collaborated with S.Pellegrino and Stanley Tucci to offer the Taste of Tucci kit, which includes “products sourced from Italy and fresh, seasonal ingredients.”

Product Development Trends

Meal kit companies are continuing to explore a wider array of products in response to consumer demand, according to Innova. “Consumers still want to see improvements in taste and texture, but there is a vast appetite for culinary creativity and worldwide flavor profiles,” Williams says. “The industry is responding with a large increase in a more diverse offering of ready meals, while there is also room for expansion into meal kits and inventive recipe combinations to satisfy the interest in cooking at home.”

Hungryroot’s customizable model helps play into whatever consumers are looking for, whether dietary preferences, flavor profiles, or desire for affordable prices, which has proved to be an advantage during inflationary times with unpredictable supply chains, Weinstein says. “Because we are the ones populating their carts, we have the opportunity to direct them toward alternatives they will like just as much, which are not spiking in price,” he says. “Or if a specific product isn’t available at the moment—the supply chain for grilled chicken is interrupted for a bit—we just tilt them toward alternatives.”