The billion dollar opportunity supermarkets are missing

Mike Troy
Retail Leader

 Meal kit provider Blue Apron is expected to go public later this year with a lofty valuation supermarket operators wish they could command.

Blue Apron is the largest U.S. meal kit provider with estimated annual sales of $750 million and now it is planning an initial public stock offering, according to a recent Reuters article. The five year old company has selected Goldman Sachs , Morgan Stanley and Citigroup to lead an offering that could come as soon as this fall, according to anonymous sources cited by Reuters. Blue Apron, although unprofitable, was valued as high as $2 billion when it raised funds in June 2015, according to Reuters.

There has been a proliferation of meal kit providers in recent years, but a shakeout in the space could be coming soon, especially with a company such as s Blue Apron tapping public markets for additional funding needed to gain scale and outlast competitors as its looks to become profitable.

Some of those competitors include traditional supermarket retailers who have recognized that factors such as convenience and ease of preparation often trump price as the motivation for purchase, but never embraced the concept of home delivery of meal kits. This despite the fact that traditional supermarkets have all the ingredients – proximity to customers, trusted brands, preparation capabilities – to execute a home delivered meal kit offering that appeals to rapidly evolving shopper preferences. It has been estimated that the U.S. is home to more than 150 such providers with revenues of $1.5 billion.

New research from Nielsen shows that consumers across the shopper spectrum purchase meal kits, certain groups are more interested in them. For example, men are 40 percent more likely to purchase kits than their female counterparts across all generations, while Millennials and Generation X consumers are 321% more likely to purchase them than older generations, according to Nielsen. Busy families with children are also enjoying the convenience and healthy options meal kits have to offer, purchasing them 326% more than households without children.

Nielsen’s survey of more than 2,000 shoppers who purchased a meal kit in the past 12 months also showed that when it comes to meal kits, shoppers have a lot of perceptions that can be instructive for retailers and manufacturers. Eighty-one percent of consumers feel that meal subscription services are healthier than the prepared options at grocery stores. And while many consumers prefer to choose their own produce, 92% are satisfied with the quality of produce included in their meal kits, and 91% say they’re satisfied with the quality of the meat packaging.

While consumers who purchase meal kits are generally satisfied with the options available to them, retailers have an opportunity to improve their offerings to better meet consumer needs. Almost half (46%) of U.S. consumers say they would be more likely to purchase a meal kit if it were less expensive, 86 percent would like the ability to add dessert to their meal kit and 36 percent would like to be able to buy kits in their local grocery store.