Can Home Chef Compete in the Meal Kit Delivery Market?

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Instead of just calling for take-out, the latest trend is to have meal kits with fresh ingredients delivered to your door. These ready to make meal packages has everything from the exact measurements of spices and oils to perfectly portioned amounts of protein and vegetables. This efficient, convenient way of preparing meals means there are no trips to the grocery store during rush hour and nothing goes to waste.

The calorie count per serving for the entire meal, not just ingredients, is clearly listed so those who wish to cut calories can see exactly what they are buying. Each item comes shrink wrapped and encased in styrofoam until ready to use.  The weekly deliveries can include not just dinner, but breakfast items and smoothies.

One company making news for their growth is Home Chef, who has garnered big money to facilitate expansion, In a recent press release, Home Chef Secures $40 Million in Series B Funding from L Catterton, it is noted that Home Chef’s delivery demand has increased 150 times since last year. With recent data showing that they are providing 1.5 million meals to homes over 97% of the US, there are reasons for investors to be optimistic. To keep up with customer demand, Home Chef is adding a third distribution center. in addition to their Chicago and Los Angeles centers, a new one is opening in Atlanta.

These distribution centers bring jobs as well, according to the Chicago Tribune. The more distribution centers they have the easier it will be to serve their growing customer base. Founded in Chicago in 2013, Home Chef is emerging as a leader in this wide open market for ready to make meals that work for professionals on a budget.

The Company

Pat Vihtelic, the founder and CEO of Home Chef , says that their meal kits are an easy and affordable choice for busy people who want to cook at home, but have all the ingredients delivered with easy to follow quick recipe instructions. The ingredients cost less to purchase in a kit than to shop for them in the grocery store, with Home Chef meals costing just $9.95 per serving. Pricey ingredients like truffle oil and special seasonings make these kits a bargain to consumers who don’t have the time to research recipes, go shopping and figure out how to make a tasty, nutritious meal in 30 minutes or less. Customers can choose a taste profile and select their meals from the choices. You can mix and match from the flavor profiles, and they do have vegetarian options.

Competition

Home Chef is not the only company ordering this ready to make food subscription delivery service. Plated, Blue Apron and others are offering competition. Blue Apron made headlines in 2015 due to complaints of health and safety violations and harsh work conditions, including workplace violence. Packing frozen meals in their plant caused workers to complain of frozen fingers among other workplace injuries.

Online comparisons have said that meals from Blue Apron, the leading company in this niche, cost less than some other meal subscription services such as Hello Fresh and Plated, and the controversy about the internal operations does not seem to have hurt the bottom line as a recent news story says that Blue Apron is slated to reach the $1 billion in sales mark next year and is talking to financial institutions about an IPO. Blue Apron is said to be worth $3 billion. The entire meal kit industry is currently valued at approximately 1.5 billion dollars.

Growth

The Home Chef team now consists of 600 employees and growing. Home Chef offers perks such as free delivery for orders over the minimum, and their current promotion offers a $30 coupon code toward the first order.  There are no minimum orders and you can cancel at anytime the website states. Their website interface is customer friendly and has a “chat” window for easy access to customer service. According to founder Pat Vihtelic Home Chef uses “taste algorithms” to find out what customers want and deliver good food while keeping an eye on capital efficiency. The CEO says that Home Chef sees the grocery store, rather than companies like Blue Apron as competitors. Citing a huge market for this type of home delivery subscription service, Vithtelic says they won’t be “bumping into each other anytime soon.”

Home Chef will need to continue to grow their brand, not only by increasing their production volume but by also getting positive recognition via reviews to keep up with companies like Blue Apron, Plated, and other new companies starting up to cover this large market. With so many choices, consumers are looking online to reviews like those on Revuzzle, that give the good and the bad news about ordering from Home Chef.

Some of the positives include simple to follow recipes, instruction, and support. Home Chef offers over 10 meals to choose from weekly, and low-calorie options. This review does cite that although there is a varied menu from which to choose; however, gluten free and dairy free options are currently not available. Another con listed in the Revuzzle review is that the meats and herbs are not labeled, and some of the vegetable items look less than appetizing as they were wilted when removed from the package.

Final Thoughts

The meal delivery service is another example of the popularity of subscription services, for everything from razor blades to work out clothes. As consumers see the benefit for the cost in ordering from meal subscription services, they seem destined to be around for a while. Eating healthy while saving time makes companies like Home Chef a popular go to instead of fast food. Time will tell is the investment in Home Chef by L Catterton, one of the largest private equity investment firms worldwide.


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