Has Staying at Home Triggered a Meal Kit Resurgence?
April 29, 2020
Has Staying at Home Triggered a Meal Kit Resurgence?
Blue Apron sees demand soar; reports a Q1 net loss of over $20 million
By Jennifer Strailey, Winsight Grocery | Apr. 29, 2020
Albertsons may have pulled the plug on its Plated meal kit service, which shut down in November 2019, a couple of months too early. Other meal kit companies, such as Blue Apron, which was nearly delisted from the New York Stock Exchange last year, saw sales surge in mid-March and its shares shoot up 600% in just three days.
Meanwhile, shares in meal kit delivery firm HelloFresh jumped to a record high in late March after the Berlin-based company said it expected strong first-quarter sales and profit as a result of consumers staying home and cooking during the pandemic.
But it remains to be seen if Blue Apron and other meal kit companies can continue to grow their customer base and retain current users as the country loosens stay-at-home orders and restaurants reopen.
Despite seeing “a significant increase in demand for its meal kits” since the COVID-19 outbreak, New York-based Blue Apron Holdings Inc. reported a net loss of $20.1 million for the first quarter of 2020 at its quarterly earnings call on April 29. Its EBITDA (earnings before interest, taxes, depreciation, and amortization) decreased 167% year over year to a loss of $5.8 million for the quarter ending March 31, compared to a profit of $8.6 million in the first quarter of 2019.
“As planned, we have started to deliver on the first stage of our growth strategy with sequential quarter-over-quarter growth in both net revenue and customers, along with continued strength in certain other key customer metrics, which we saw even prior to the impact of COVID-19,” said Blue Apron CEO Linda Findley Kozlowski.
Blue Apron’s net revenue increased 8% and customers increased 7% sequentially from the fourth quarter of 2019, lifts which the company attributes to reaccelerated marketing efforts and the beginnings of coronavirus-related consumer shopping changes. Its average revenue per customer and orders per customer are also up, with year-over-year increases of 5% and 4% respectively, representing the fifth consecutive quarter of year-over-year improvements in both metrics.
“As we move into the second quarter of 2020, we are focused on driving customer retention and establishing longer-term consumer habits out of the heightened demand we have been seeing as a result of the impact of COVID-19, including stay-at-home and restaurant restriction orders and other changes,” continued Kozlowski. “Given this, we expect that this uptick in demand can be maintained beyond the period of direct impact of COVID-19, even as restrictions begin to be lifted.”
Blue Apron says it’s working to meet heightened demand by increasing capacity at its fulfillment centers; hiring new employees; and temporarily reducing variety in menu options, which limits the need to change production lines and allows for more time to pack meal kits. At the same time, the company says it has taken a variety of safety measures, including enhanced sanitation and social distancing at its fulfillment centers, but has not experienced any significant disruptions in its supply chain or any carrier delays as a result.
Suppliers Pursue Meal Deals
With the slew of trade show cancellations since the coronavirus outbreak and grocers too strained meeting current demand to consider new product introductions in their stores, suppliers are getting creative about reaching consumers with their newest offerings. As such, meal kits may prove their meal ticket.
Burma Love Foods, a supplier of Burmese dressings and dips inspired by its Bay Area-based Burma Superstar restaurants, was planning to showcase five new grab-and-go salads including Golden Ginger Salad, Four Way Tofu Salad and Superstar Noodles at this year’s cancelled Natural Products Expo West. The company is now exploring new ways to introduce its products to the home chef.
“Initially we saw consumers flocking to either takeout from restaurants or nonperishable grocery items like rice, grains, canned goods, as they adjusted to new health recommendations around the pandemic. But as the new normal set in and the shelter-in-place was extended, we’re seeing an uptick in fresh grocery purchases via delivery or in-person," said Hong Nguyen, product manager for Burma Love Foods. “This has definitely given us a perspective on how to be creative in our offerings. We’re currently developing meal kits that come with all the ingredients to prepare a meal at home.”
The Honest Stand, a Louisville, Colo.-based maker of plant-based cheese-style dips, had planned to introduce two additions to its flavor lineup at Expo West: Sriracha Ranch and Buffalo Blue. Given the unprecedented pressures on grocery retailers at present, The Honest Stand has decided to pause its rollout on the new products.
Instead, the innovative company is “exploring alternative and creative distribution means to help consumers gain access to [its products],” said Alexandra Carone, co-founder and chief operating officer.
“We have the capability to produce any of our plant-based products in a variety of packaging types and sizes,” she added. “With changing consumption habits, we’re talking with retailers and other alternative channel providers about ways to integrate our versatile and convenient flavor profiles into grocery delivery services, meal kit services and other avenues that add value for consumers.”
Source: Winsight Grocery Business