Dive Brief:

• Nielsen Fresh data shows meal kit sales at U.S grocers totaled $80.6 million during the past year. According to Supermarket News, numerous mainstream grocers, including Whole Foods and Kroger, are cashing in on the trend with kits that typically cost between $10 and $20.
• A study by Morningstar estimates 19 million Americans will have tried meal kits by 2021, with 11 million people making regular orders by that time.
• Supermarkets must compete with strong online competitors like Blue Apron, which recently filed for an IPO. Blue Apron's prospectus showed net revenue grew from $78 million in 2014 to $795 million in 2016, but at the same time its losses increased to $55 million last year from $31 million two years earlier.

Dive Insight:

Although online companies such as Blue Apron and Plated started the meal kit trend, they certainly don’t own customer loyalty in the space. With so many startups spending big as they jockey for market share, many are struggling to turn a profit.

It all adds up to a great opportunity for grocers who are looking for fresh-focused growth and have the merchandising savvy to capitalize on meal kits’ popularity. Grocers jumped on the bandwagon early by offering branded meal kits. Now, mainstream players like Kroger and Publix are coming out with their own store brand kits that leverage their fresh capabilities and offer higher margins.

Nielsen numbers show 36% of consumers say they’re interested in buying grocery-store meal kits even though online options exist. A recent Harris Poll found one in four adults have tried using a meal kit, and 70% returned following the first purchase.

But other statistics show meal kits remain a niche market. According to research conducted last year by The NPD Group, only 3% of consumers, or 8 million people, have tried meal kit services — and about half of those quickly canceled their subscriptions.  

For retailers, success will come down to how well they merchandise their meal kits and how enticing their formulations are. The kits have strong grab-and-go potential and could sell well at or near checkout. In addition,  retailers also will need to consider how to effectively differentiate kits in their stores because they are separate from prepared foods and represent a different value proposition.