Dive Brief:

• Internal research by Albertsons reveals that 80% of its customers say they want meal kits in stores, according to Pat Brown, the chain’s vice president of strategic business initiatives, in an interview with CNBC. He also said that 85% of online meal subscribers want an in-store option. Albertsons bought meal kit pioneer Plated last fall and is currently rolling the line out to stores nationwide.
• Competing grocers continue to add in-store meal kit options, including Costco, which recently added Blue Apron kits to its store mix. Meanwhile, northeast regional grocer Roche Bros. just announced it plans to offer grab-and-go meal kits from local provider Just Add Cooking. Dishes include beef stir fry and chicken marsala with polenta, and retail for $18.99 to $21.99 per two-serving kit.
• Bain & Co. estimates meal kit sales are $1.5 billion annually, and that as many as half of all grocery shoppers are aware of the trend. Nielsen states that meal kit spending is growing more than three times as fast as other channels, and that in-store kits currently account for $154.6 million.

Dive Insight:

Meal kits came of age online, but they may end up reaching their full potential on grocery stores shelves.

That’s not to say online kit sales aren’t growing. According to Nielsen, around 9% of U.S. consumers have tried a meal kit, with 6% saying they ordered online. Globally, subscription-based meal kits are expected to hit $10 billion in sales within the next two years, according to Technomic.

But companies are having a hard time carving out a sustainable business model. They have to spend a lot of money to acquire customers — and many of those they do acquire don’t stick around. An analysis by Emory University marketing professor Daniel McCarthy found that market leaders HelloFresh and Blue Apron hold on to only a fraction of their customers for more than six months. Blue Apron, which has been beset by operational woes since going public nearly a year ago, has trimmed its marketing budget, creating a healthier balance sheet while also losing customers.   

Grocery stores eliminate some of the key pain points of online meal kits. They don’t require a subscription, are often cheaper, and are available in the same space where consumers already go to stock up on food and beverages. For companies like Kroger, Hy-Vee and Albertsons that are seeing thinning margins and are desperate for promising new categories, meal kits are a huge opportunity.

At the same time, the success of meal kits expose a weakness in supermarkets. Even though they sell aisle after aisle of fresh ingredients, grocers often fail to show them how to put everything together. Sure, they feature recipes online and in-store handouts, and many have addressed the “What’s for dinner?” question with sophisticated prepared foods. But meal kits’ popularity has shown that even the most time-pressed shoppers still want to cook. Supermarkets don't do enough to make it easy and inspiring for them.    

With this in mind, the success of in-store meal kits really comes down to marketing. Grocers have to make meal kits visible, and they have to let customers know the value they offer. They should also take a page from meal kit demand and help shoppers learn and prepare fresh, easy meals. Cooking classes can fit the bill, but so can something as simple as effective cross merchandising.  

These days, just handing out recipe cards and slapping a few recipes up on their website won’t cut it for grocers.