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John Moore | Getty Images News

Innovation11.20.14

Meals On Wheels: The Dinner Kits Delivery Business Is Booming

A new concept in meal delivery is turning startups into midmarket businesses at an exponential rate.

There’s a new player in the food business and its making investors’ mouths water at its potential for growth.

Dinner kit delivery services such as Plated, Chef Day!, Blue Apron, and Hello Fresh are leveraging time-crunched consumers’ desires to dish up a home cooked by delivering boxes of ingredients that can be prepared quickly and easily. From just a teaspoon of tarragon to a slice of salmon (you are expected to provide the salt and pepper), each item is individually wrapped and accompanied by a recipe card that explains how to prepare the meal. Think of it as a paint-by-numbers approach to gourmet cooking, no previous kitchen experience required.

Individual meals are priced around $10 for two servings, but most of the companies offer weekly or membership prices for multiple deliveries. At these rates, the delivered dinner kits are more cost effective than dining out (or ordering takeout) and each company emphasizes their use of fresh ingredients. Customers can select the meals according to their personal and health preferences, for example, vegetarian and gluten free options are also on the menu. And ordering is just a matter of ticking boxes and checking out, an e-commerce experience that has become second nature.

For the convenience of a healthy, in-home alternative to dining, these businesses are experiencing exponential growth. Blue Apron, for one, started in 2012 in Brooklyn is now selling a million meals per month and just launched an e-commerce market that will round out its grocery and dinner options offering kitchen utensils and its cookbook.

The company is also exploring working with partners to develop exclusive products. Sound familiar? Celebrity chefs such as Emeril and Giada DiLaurentiis have turned their smiling mugs into millions of dollars on products from pasta to pots and pans.

Earlier this year, HelloFresh announced a $50 million funding round which it planned to use to expand from 30 to 37 states, which is supposed to target 75% of the country’s population. In August, the two-year old Plated raised a $15 million in funding to add to $6.6 million from two earlier rounds. The Wall Street Journal reported that Plated’s founder was trying to be conservative with cash and focus on the quality of its “batch processing” of food.

Is this a trend that can stand the test of time and consumer taste? It’s tough to tell yet. Historically, though, consumer home chefs proved fickle. Not ten years ago, brick-and-mortar meal assembly shops like Super Suppers were dominating the industry.

The concept was a bit different than meal kits in that, customers ordered online and then went to the location nearest them to assemble meals from frozen ingredients to take home and make later.

The attractive part of the proposition was that by assembling the dishes themselves, home cooks could leave out offending ingredients as needed to suit their family’s taste. A customer base of women with children eagerly signed up to swig from a glass of wine and gab with friends while pulling together a weeks’ worth of dinners. No wonder the businesses topped the list of hot new franchises in 2005-2006.

But interest had waned by 2007 and then the recession set in. Though consumers were eating out less frequently, growth petered out in part because it wasn’t always convenient to prepare a batch of frozen dinners when you could cook a plate of pasta in less than the time it would take to drive to the assembly location.

In comparison, the overall concept of delivered meal kits has an advantage. Preparing in your own home is preferable and sometimes quicker than heating a dish in the oven that’s frozen solid. Watch this spot as we track how consumers’ taste buds make or break these midmarket companies.

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