Why delivery is beating meal kits

Customer retention for delivery orders is easily besting meal kit services, says RB’s The Bottom Line.
Scott Mitchell

Two recent trends promised at one point to upend the restaurant industry: at-home delivery from third-party delivery services and home-based meal kits.

So far, it seems, delivery is winning out. And it’s not particularly close.

The data firm Technomic, a sister company of Restaurant Business, compared customer retention at third-party delivery services Grubhub, DoorDash and Postmates with a pair of meal-kit services, Blue Apron and Hello Fresh.

The third-party services easily bested the meal kit companies. After a year, the third-party services’ customer retention ranged from 54% to 65%.

The meal kit companies? Fifteen percent for Blue Apron and 11% for Hello Fresh.

“Delivery is winning out versus the meal kit business,” Joe Pawlak, managing principal with Technomic, said at the Restaurant Leadership Conference in Phoenix.

None of this is to say that meal kits don’t have value, or a set of fans. Consumers want things easier, and, for many people, the ability to skip a grocery store visit and still make a quality meal at home is worth the money. These services have their place in the world.

The problem is that, as these services emerged, they were portrayed as a major competitor with the restaurant industry, which already faced competition from grocers, convenience stores and other sources. All of those industries are strong competitors, but meal kits are not. They are largely a niche product for a certain subset of consumers that has been marketed to a general audience.

Their market share is just not that big, in other words, and certainly not big enough to put a major dent into the restaurant industry, at least not without some major fundamental changes.

If anything, third-party delivery has already provided the restaurant industry with its response to the meal kit trend.

The fact is, when it comes to easy, there is nothing better than restaurants. Ultimately, both services are about improving convenience for consumers willing to pay a fee for that convenience.

While consumers who prepare food from meal kits get fresher meals, they still have to prepare the meal and clean the dishes. Order delivery from a restaurant and there are no dishes to do, unless you insist on using your own plates.

In a battle for convenience-oriented consumers, the more convenient option will always win.

It’s the same reason pizza chains like Papa John’s and Domino’s are more successful than the take-and-bake chain Papa Murphy’s. While Murphy’s has its strengths, giving customers fresher meals, the fact that people have to bake the pizza themselves makes the option less convenient.

It’s probably time to put to bed any idea that the meal kit business, at least in its current form, represents any significant threat to the restaurant business.

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