How to win the meal kit market
New research shows the challenges and opportunities retailers face when entering the meal kit market.
Two separate pilot tests developed by the National Association of Convenience Stores (NACS), in conjunction the Project on Nutrition and Wellness (PNW) and the Cornell Food and Brand Lab (CFBL), showed that retailers face considerable opportunities to become players in the meal kit space, while also revealing the challenges.
The convenience store channel served as a good retail testing ground for dinner meal kits because of its fueling offer: 80% of the fuel purchased in the United States is sold at a convenience store. And consumers are most likely to fill up their vehicles during the evening rush, with 36% of drivers filling up between 3 pm and 7 pm. An even higher percentage of millennials (41%) fill up during this time frame, according to NACS consumer data. The tests were set up to examine if the appeal of one-stop shopping—whether for fuel customers or others visiting stores in the afternoon and evening hours—could grow sales for a dinner meal kit.
The first pilot test was in September 2015 at Square One Markets (Bethlehem, Pa.) in cooperation with The Six O’Clock Scramble, which provides healthy and easy to create recipes and meal plans for busy families who seek to prepare family meals in 30 minutes or less. Square One Markets’ Six O’Clock Scramble Fresh & Fast Family Dinner Kits were a set of affordable, healthy dinner meal kits for time-strapped families to grab on their way home. The recipes also were reviewed by a dietician to ensure that they complied with generally accepted dietary guidelines.
The meal kits were developed for four people and were priced to be $5 or less per person. While the sales did not match expectations, the test did garner considerable attention in the media and with the nutrition community. And it uncovered several challenges, primarily that small chain stores like Square One Markets often struggle to obtain certain fresh ingredients directly from suppliers and distributors. In addition, there were marketing challenges, especially because convenience stores were not thought of as a dinner meal destination in the market.
Some of the challenges encountered in the first test were addressed for the second test, which was launched in March 2017 at the Shaw’s 88 Kitchen store at Utah State University (USU). Unlike Square One Markets, this store did not sell fuel. The test examined whether consumers (both students and faculty) would embrace a healthy meal kit that could be purchased on campus and prepared at home. The meal kits, called “CHEF-in-a-BOX” by Aggie Eats, offered students and staff a variety of two- and four-person healthy meal options, including vegetarian and meat options.
Utah State received mostly positive feedback from faculty and students, but ultimately the meal kits presented too many logistics-related challenges, resulting in USU stopping the test before the planned end date. “Healthy Meal Kit Pilot Test” is available for download.
While consumers told NACS that they were receptive to dinner meals kits purchased at stores—77% of consumers surveyed in 2015 said that they would be interested in purchasing an all-in-one meal kit from a store, and 85% of weekly convenience store customers said they would purchase a dinner meal kit—the sales for both pilot tests did not reflect the stated interest.
Both tests demonstrate the marketing, merchandising and sourcing challenges convenience stores face in producing and selling meal kits to customers. In addition, Utah State noted that, for the average convenience store, it would likely be a more complex challenge to produce a meal kit given the resources a large university campus has.
“While consumer surveys and trends may point to opportunities, it’s also important to examine execution, especially in small-format stores where every square foot of floor space is critical. Dinner meal kits may be a concept that is still ahead of its time for smaller convenience stores. However, it still may be appropriate for larger convenience store chains that have their own distribution centers, bakeries and commissaries, or those that operate highly evolved and dedicated foodservice programs,” said Jeff Lenard, NACS vice president of strategic industry initiatives.