Kroger’s Meal Kits Could Make A Meal Of The Industry

What carries hundreds of exotic ingredients, a litany of careful instructions and an overall value of $1.5 billion?

In time, it may be Kroger’s lunch.

Photographer: Luke Sharrett/Bloomberg

With the right ingredients, the Kroger Co. might prove that supermarkets can eat up the burgeoning meal-kit industry, but that means balancing what are now sweet benefits with a few sour notes. Price and ease are key among them.

No surprise, then, that the grocery chain’s recent foray into meal-kit services, with a concept called Prep + Pared, is characteristically conservative. It is being tested in just four of Kroger’s nearly 2,800 stores, all in its hometown of Cincinnati.

However, Kroger plans to expand the test into more area stores, according to Progressive Grocer.

Not the First Grocer to Box It

It’s a fine point, but one worth making, that meal kits should not be confused with fresh prepared foods.

Fresh prepared foods, such as salads and entrées sold by the serving or by weight, are heat-and-serve. Meal kits include the ingredients and instructions to prepare and cook a full meal. They therefore appeal to a different type of consumer — one who is time-starved or curious about making interesting foods with less fuss, and without acquiring excess ingredients.

That being said, Kroger’s foray into the field may have been triggered more by its direct rivals than the meal-kit market. Among other supermarket chains selling meal kits are Giant Eagle, with Fresh in :30; Coborn’s To the Table Fresh Meal Kits, and Whole Foods, which has begun selling Purple Carrot meal kits, Progressive Grocer reports.

Separately, but worth noting: Amazon is delivering same-day meal kits by Martha & Marley Spoon, a partnership of Martha Stewart. The kits can be ordered with an AmazonFresh membership and do not require individual subscriptions.

From Zero to $1.5 Billon

It’s a lot of attention paid to an industry that, in terms of size, does not appear to present a competitive threat to Kroger or other major food sellers.

The meal-kit market, started in 2012, generated an estimated $1.5 billion in U.S. sales in 2016, according to market-research publisher Packaged Facts. It is expected to double to $3 billion in the next few years, the Packaged Facts report states.

By comparison, Kroger posted 2016 revenue of $115.3 billion, while the U.S. supermarket industry is worth $800 billion. 

However, grocery operators are battling for share of basket against many rivals that did not pose a serious threat a few years ago. Dollar stores, gas stations and drugstore chains are expanding not only to carry full lines of groceries, but also healthy grab-and-go options.

And let’s not forget the threat of restaurants. At the end of the day, Kroger is vying for share of stomach, and sales at bars and restaurants have advanced at twice the rate of retail since 2005, according to a story in The Atlantic. Perhaps Kroger recognizes that while meal kits represent small relative volume today, they are attracting a type of consumer who is important to the chain.

Sweet and Sour Market

The implications of this splintering competition have been tracked.

The average number of weekly trips to a grocery store is declining, to 1.6 in 2016 from 2.2 in 2005, according to the Food Marketing Institute’s 2016 U.S. Grocery Shopping Trends report. The supermarket is no longer even considered the primary outlet for groceries for the majority of shoppers — just 49% see it as such. In 2005, the figure was 67%.

So supermarkets turn to new revenue channels — enter meal kits. Still, investing in new, potentially labor-intensive services can be risky. This explains Kroger’s measured exploration of the concept.

The test may also be designed to measure the degree of work needed to make the kits a reliable revenue generator. For every sweet spot, there is a slight sour note. How consumers respond may determine the balance of features. Following are just a few.

Sweet: At $14 per kit, Prep + Pared is less expensive than average meal kits, which are estimated by The NPD Group to cost $10 a person, according to Progressive Grocer. This aligns with Kroger’s strategy of targeting the price-conscious shopper.

Sour: The Kroger kits are more expensive than the combined price tag of the ingredients if purchased separately. This is common among meal kits, but it may not appeal to many Kroger shoppers, a lot of whom shop it for its low prices.

Sweet: Prep + Pared is easy. It includes the ingredients and instructions necessary to prepare a meal for two in about 20 minutes. This prep time is a bit shorter when compared with other leading kit providers, including Blue Apron, Green Chef and Purple Carrot.

Sour: With recipes such as Moroccan-Inspired Spring Vegetables, Chimichurri Steak and Japanese-Inspired Beef Bowls (designed to serve two), the kits are not necessarily family friendly. While they may represent an effort to appeal to childless couples who have more time, many of Kroger’s shoppers have families.

Sweet: Prep + Pared kits can be ordered ahead of time online via Kroger’s ClickList service (also in test phase). The kits can be picked up at two designated stores.

Sour: The kits are not yet being delivered, a feature that makes subscription meal kits quite attractive (they can, for instance, be delivered to one’s office and brought home).

Sweet: Kroger is investing in a field of nutritionists and chefs through a culinary training and education center. This could lead to creative recipes and concepts for the kits, while providing Kroger a degree of kitchen credibility — in time.

Sour: While the food institute may establish a culinary reputation for Kroger, the brand is still recognized as a supermarket. The nutritional aspects of its kits, therefore, are unclear.

Put another way, Kroger’s Prep + Pared may lack the foodie appeal of Blue Apron and others, which built a following for their dedication to providing healthy, convenient meals with high-end ingredients.

However these sweet and sour notes shake out, shoppers will determine if Kroger’s test of Prep + Pared is worth pursuing. Tastes change, and meal kits — regardless of the ingredients — will as well.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

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