Consumer Interest in Meal Kits May Be Too Late

Meal kits are becoming more popular, but not enough to counteract the industry’s economic challenges.

Research from PYMNTS’ recent study “12 Months Of The ConnectedEconomy™: 33,000 Consumers On Digital’s Role In Their Everyday Lives,” which draws from responses from tens of thousands of U.S. consumers over the course of a year, notes that meal kit subscriptions were on the rise throughout 2022. Specifically, the share of consumers who reported purchasing from online subscription services that deliver meal kits rose from 25% in December 2021 to 31% in November 2022.

Yet, despite this significant uptick, the industry appears to be in crisis. Blue Apron, for one, announced last month that it is laying off about 10% of its corporate staff and looking to dramatically reduce its expenses, intending to shave $50 million off its annual spending this year relative to last.

In fact, later that month, the meal kit provider announced that it has received a notice from the New York Stock Exchange (NYSE) stating that the company was not in compliance with continued listing standards stating that it must keep to “a minimum average closing price of at least $1.00 per share over a consecutive 30-day trading period” and a market cap of “at least $50.0 million” over the same period, with stockholders’ equity equal to or exceeding that value.

The meal kit provider intends to notify the NYSE by the end of this week (Jan. 6) that it “intends to submit a plan” to resolve both of these issues.

Meanwhile, Berlin-based multinational meal kit company HelloFresh has just pulled out of Japan less than a year after entering the country, as German news agency Deutsche Presse-Agentur reported Wednesday (Jan 4).

“The first few months in Japan have shown that there is currently no market environment that would have justified additional growth financing,” a spokesperson told reporters in Berlin, as translated by Google.

Meanwhile, prepared meal subscription company Freshly, which does not technically provide meal kits, but which operates on a similar model — delivery of meal portions to subscribers several times per week — has bowed out. The firm stated last month that it is halting direct-to-consumer (D2C) meal deliveries as economic challenges rack the company and the broader meal delivery industry.

The news came shortly after then-parent company Nestlé, noting disappointing results, announced that it was partly offloading the firm, forming a partnership with private equity firm L Catterton whereby the latter would take a majority stake in the meal provider.

As economic challenges put additional pressure on the already narrow-margined industry—for instance, rising food prices that the company must absorb part of for fear of trade-down to lower-priced food categories—it is becoming increasingly difficult for meal kit companies to find funding. Investors are proving less willing to bet on companies promising long-term profitability while racking up losses.

“The access to capital that a lot of firms have had over the last eight to 10 years has evaporated,” Joe Payne, senior vice president of Source to Pay at Corcentric, told PYMNTS in an interview.