Dive Brief:

• Walmart has started offering three different styles of meal kits in its stores, according to a company release. The kits vary according to preparation time, and include one-step meals that can be ready in 15 minutes; options that pair with the chain's rotisserie chicken; and pre-portioned kits similar to those offered by Blue Apron and Plated.
• The meal kits range in price from $8 to $15, and are currently available in 250 stores, with plans to expand to 2,000 locations by the end of this year.
• A Walmart executive told Bloomberg that the company has closely followed other retailers’ prepared food offerings, but said it was “not thrilled with the quality levels.” He said the company didn’t want to enter the space “until we were fully comfortable.”

Dive Insight:

While other retailers have built up their fresh meal offerings in recent years, Walmart has been seemingly content to sit on the sidelines. Given the company’s size and complexity, prepared meals are a significant undertaking, requiring deep investments in store equipment, staffing, offsite commissaries and more.

But the demand for fresh meal solutions has become so great, Walmart couldn’t continue to watch from afar. According to the U.S. Department of Agriculture’s Economic Research Service, consumers now spend more than $800 billion each year on restaurants and meals outside the home compared to $793 billion on meals consumed at home. Since 2003, spending on food away from home has grown 94% while at-home spending has grown 59%.

With its entry, Walmart instantly becomes a significant player in this space. Millions of consumers who stock up on groceries can now look to the retailer as a meal destination. The move could also help Walmart reach higher-income shoppers — a growing focus for the company as it continues to battle Amazon across categories, including grocery. According to Nielsen data cited by Bloomberg, higher-income shoppers are 20% more likely to buy items from the deli department.

The new line of meal kits could also boost Walmart’s slumping e-commerce growth, which has spooked investors lately. If Walmart can execute on quality in particular, the meals could spur store pickup trips, with shoppers adding groceries to their orders, as well.

Although meal kits are a $5 billion business online, they're certainly not exclusive to this channel. Kroger and Albertsons have stepped in with offerings that don’t require a subscription, and have seen early success according to reports. At the same time, research shows consumers are picking up meal kits and quickly dropping them, indicating overall enthusiasm for the trend may not be what it appears.

Walmart will face stiff competition in this space. Grocers like Wegmans and Heinen’s have a reputation for high-quality prepared meals. Other chains have jumped in as well, offering grab-and-go options as well made-to-order food stations and even in-store restaurants. Having fresh lunches, dinners and side options on hand has become a must-have for most grocers. To help revive its struggling retail division, Supervalu recently developed a Quick & Easy line of meals that, like Walmart's new offerings, include heat-and-eat as well as fully prepared meals and traditional meal kits.

Culinary innovation has become increasingly important in high-margin prepared foods, too, as grocers blur the lines between supermarket and restaurant. Kroger recently opened a culinary innovation center where chefs work away at new dishes as well as new packaged products.

Walmart’s entry into fresh meals will turn up the heat on competing grocers. But given the company’s newness to the category and its fairly standard offerings — spaghetti and meatballs, and basil garlic chicken are among its selections — other retailers should be able to stand out by offering more sophisticated fare.