Should Your Restaurant Enter the Crowded Meal Kit Space?
Currently valued at approximately $2.5 billion, the meal kit business is booming. That means, of course, many restaurants and grocery stores are scrambling to compete with pioneering companies like Blue Apron, Sun Basket and Hello Fresh to get a piece of the action. Want in on it, too? There’s a lot to know before diving in.
“While a very small segment, meal kits are growing rapidly and provide a viable meal solution to consumers,” says Bob Goldin, partner and co-founder of Pentallect, a strategic food industry consulting firm. “Meal kits take share from both restaurants and grocery, but more the former; users generally find meal kits to provide restaurant quality offerings at a far more reasonable price than going out or ordering in.”
According to the National Restaurant Association, 49 percent of consumers say they would buy a meal kit to prepare at home if their favorite restaurant offered them. So that’s exactly what Belinda Lee, co-owner of Vero Meal Kits, did. Vero launched as an offshoot of Katie’s Pizza Pasta Osteria, a two-unit restaurant in St. Louis, Mo., with Chef Katie Collier as a partner. “We saw the meal kit market growing and wanted to be a part of it,” says Lee.
Lindsay Autry, executive chef at the Regional in West Palm Beach, Fla., believes that “people are really into food and following their favorite chefs, so I think they will always want to go out to their favorite restaurants.” That hasn’t stopped her, however, from offering her own meal kit service of sorts.
The soulful James Beard Award nominee for “Best Chef: South” and “Top Chef” finalist sells fried chicken breader and hot sauce kits at her restaurant. “I like to teach people how to cook and spread the knowledge that I have. The breader and hot sauce are a fun way to encourage people to cook at home.” The set costs $14 and is packaged in a small box, tied with a ribbon, and includes recipe cards for a fully fried chicken and brine. Of course, buyers still need to purchase their own poultry.
This technique reduces the cost of the kit for both Autry and the consumers, and since she packages everything herself, the overhead is very low. Belinda Lee agrees that labor is not a major expense when launching a meal kit business, but overhead is drastically different than in a restaurant.
“Product is the same,” she says, “but everything else is different. In a restaurant, you might have big expenses with décor and small wares and similar things, but with meal kits you have to build a huge prep kitchen and account for your packaging materials and delivery costs.”
All in all, Goldin does not believe restaurants should feel threatened–at least not yet. “As the business is still embryonic, meal kits probably shouldn’t be a top-of-mind concern to restaurants, but they are worth watching to see what works (and doesn't) from a consumer perspective.”