Dive Brief:
- Meal kit company Gobble has partnered with Walmart to sell its products through the big box store’s website, Fortune reported.
- Gobble says it stands out from other meal kit companies because it sells dishes that can be prepared in as little as 15 minutes and require a single pan. Kits cost a bit more than some others, about $24 for a two-serving meal, and about half of Gobble’s customers are 35 to 44 years old. But according to industry research, customers spend more with Gobble in their first year than other meal kit services.
- The small meal kit company is prepared to scale under the new arrangement, said Steve Robinson, Gobble’s vice president of supply chain and operations, who previously served as vice president of supply chain at Walmart. The report notes Gobble has built a vertically integrated East Coast facility and invested in automation to prepare the new site to handle product development, food manufacturing and order personalization.
Dive Insight:
Walmart clearly believes selling meal kits — whether online or in-store, its own offerings or those made by other companies — is a smart bet.
In recent months, the behemoth retailer 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.
Walmart also plans to sell more third-party meal kits on its website, serving as a portal for smaller companies to sell their wares. Walmart.com now sells meals from Takeout Kits, a California-based company that sells international-themed meal kits nationwide, as well as a few items from Pete’s Paleo, which features organic meals. At a time when retailers are searching for ways to tap into the $5 billion market, this could be a significant development for the meal kit industry and for the world's largest retailer. Last year, Mike McDevitt, CEO of Terra’s Kitchen, told The Street that Walmart had been in talks with meal kit companies, and planned to list offerings without holding any inventory, essentially serving as a sales portal and collecting a referral fee in the process. It will be interesting to see how Gobble fits into this strategy.
With Whole Foods under Amazon’s wing, Walmart may feel it has no choice but to get into the meal kit business. Other grocers, too, are getting on the bandwagon. In May, Kroger announced plans to buy Home Chef, a subscription-based, mail-order kit service, to complement its own Prep+Pared line. Costco also has partnered with Blue Apron to sell exclusive meal kits in several West Coast markets. And although Chef’d recently closed, the company was recently acquired by a California investment firm that plans to focus on in-store selling.
How all this plays out is anyone's guess. With a low barrier for entry, the meal kit market has been infiltrated with more than 150 companies and no one seems sure what a profitable business model looks like. Consumers seem to have a love/hate relationship with meal kits. They enjoy the convenience and consider kits healthier than takeout or fast food. At the same time, they dislike the excessive packaging and expense kits bring. The Gobble partnership seems like a fairly low-risk move for Walmart. It will be interesting to see if Gobble’s quality and convenience are enough to make it stand out in a crowd, even with the bonus of the Walmart partnership.
