Marley Spoon founder Fabian Siegel warns supermarkets off meal kit market

Sue Mitchell
Nov 14 2018
AFR
Marley Spoon founder Fabian Siegel has warned Coles and Woolworths off the fast-growing $300 million meal kit market, saying selling meal kits on supermarket shelves or online is “unviable” for the major chains.
Mr Siegel says major retailers in Australia and overseas have finally realised meal kits are not a short-term fad but an increasingly popular and efficient way for consumers to buy groceries for meals they cook at home.
“Consumers who have discovered meal kits … don’t stop going to the supermarkets but they are shifting a big chunk of sales away from the supermarkets to services like ours,” Mr Siegel told The Australian Financial Review.
“Supermarkets are interested in that behaviour and their first reaction is [to] put a meal kit on the shelf – but I think that doesn’t work.”
Mr Siegel said supermarkets misunderstood the business model – “it’s not a retail business where you source things to stock” – and underestimated the high-level of waste if meal kits, which typically contain a mix of protein, fresh produce and portioned dry groceries such as herbs and spices, passed their use-by dates.
“We don’t think it’s economically viable,” he said. “Marley Spoon can serve people’s cooking habits in a much more effective way than supermarkets because we have new recipes every week, we only source what we actually send, we only send you what you need so you don’t throw anything away and we don’t throw anything away.
“It’s a much more sustainable way of cooking compared with a supermarket.”
The major grocery chains risked taking their eyes off their core business to pursue a meal kit market worth between $250 million and $300 million a year in Australia, a fraction of the total $100 billion food and grocery market.
“There’s a big difference between a retail business and a manufacturing business, which we see ourselves as … [making] just in time deliveries, sourced to order, based on weekly changing menus – it’s a unique way of manufacturing and it’s not as trivial as it looks,” Mr Siegel said.
“The [supermarkets] have very complex and expensive infrastructure and if you try to force a different product category into that infrastructure it’s going to be hard to make it economically viable.”
Focus on convenience
Mr Siegel’s comments follow a report in the Financial Review last month, when new Coles managing director Steve Cain said he was “fascinated” by the growing popularity of meal kits and would look at ways to get into the market as part of Coles’ new focus on convenience.
Woolworths started selling meal kits in Metro convenience stores and selected supermarkets last year and currently offers four rotating recipe kits designed for two people and priced at $20.
In the US, Walmart has started selling meal kits in-store and online and there has been speculation it might buy or partner with leading meal kit player Blue Apron. Several US meal kit companies including Blue Apron, Hello Fresh (which is the market leader in Australia) and Plated have started selling meal kits in supermarkets and through same-day grocery delivery service Instacart.
Mr Siegel said Marley Spoon had received approaches from retailers in Australia, the US and Europe in the past 12 months to sell meal kits on supermarket shelves but was not interested. “We don’t believe it’s a sustainable business … when you think about the 30 per cent waste you see on fresh produce in general and you could even argue with meal kits it could be higher if you don’t get it right,” he said.
Marley Spoon’s revenues rose 15 per cent in the September quarter, taking sales growth for the year to date to 85 per cent, and active customers rose 38 per cent to 173,000 (including 42,000 in Australia).
However, due to higher than expected marketing costs Marley Spoon expects to lose between €32 million to €34 million (EBIT) in calendar 2018, exceeding the €25 million forecast loss in its prospectus. It now expects to break even in 12 to 24 months.
Marley Spoon shares have fallen 29 per cent in the last month and are trading at 50¢ compared with their July 2018 issue price of $1.42.