Dive Brief:

• Albertsons is phasing out Plated's subscription meal kit service and adding the brand to its lineup of Own Brands private label products, according to a press release. Subscriptions will be phased out by the end of November.
• The company’s Own Brand marketing and product development team will take over management of Plated as an "in-house culinary brand." Albertsons will expand the Plated brand with new product offerings across more store locations during 2020.
• The decision to bring the meal kit brand into its private-label offerings comes after "extensive testing of the meal kits’ in-store performance" throughout Northern California Safeway locations.

Dive Insight:

Albertsons has been trying to find the right approach with Plated since purchasing the brand two years ago for $200 million. At the time, the grocer described the investment as a way to meet the rising demand for in-store meal solutions and prepared foods, and quickly launched across hundreds of Albertsons’ U.S. store locations.

Earlier this year, however, Albertsons scaled back the offering’s Idaho footprint while also cutting 10% of Plated’s corporate staff. The company’s CEO and co-founder Josh Hix stepped down in January without much explanation three months after the other co-founder, Nick Taranto, exited the company.

Albertsons' decision reflects the difficult economics of the meal kit business, where customer churn is high and marketing costs are steep. Competitor Blue Apron has floundered since going public. Meantime, meal kit companies and retailers have focused on broadening meal kits' appeal by offering prepared ready-to-eat and ready-to-heat options in addition to the traditional step-by-step cooking model. 

“Our vision for Plated includes an expanded set of products that goes far beyond a dinner-based solution and into a comprehensive in-house culinary brand,” Geoff White, Albertsons' chief merchandising officer, said in a statement. 

Although meal kit usage is increasing according to Nielsen data, retailers face a variety of challenges including short shelf life, in-store merchandising and right-sizing their assortment. 

An added challenge for Albertsons will be shifting operations completely in-house. The grocer has been successful scaling brands like O Organics and Signature Select, but steering a meal kit company through a major transition will be a new venture.

Most large-scale grocers have incorporated meal kits into their assortments, whether through private label lines or partnerships with brands like HelloFresh. Whole Foods recently began offering Amazon meal kits and added Ayesha Curry’s meal kit line this summer. Like Albertsons, Kroger is using customer insights and culinary expertise from recently acquired meal kit brand, Home Chef, to develop a lineup of prepared meals.