Are meal kits off the menu?
Market for delivered ingredients may have peaked
Meal kits are to food what Ikea is to furniture. All you need to do is put things together.
Kits empower consumers to feel like chefs, if only for a while. They have been popular, especially throughout the pandemic.
Meal kits provide ideas and some greatly needed inspiration for households running out of options for lunches and dinners. But over the last few weeks, we’ve been seeing signs that perhaps meal kit use has peaked in Canada.
For the most part, Canadians have got their normal lives back and have become nomads again, which means spending less time in the kitchen. According to a recent survey conducted by Dalhousie University in partnership with Caddle, 8.4 per cent of Canadians subscribe to a meal kit service provider today. That is down from 12.8 per cent in November 2020, when we were several months into the pandemic.
While 69.1 per cent of Canadians have never subscribed to any meal kit service, 22.5 per cent have ceased to use a meal kit service. Only three per cent are fully committed to a kit provider and expect to continue to use the service. Another 9.8 per cent believe they may use meal kits in the future but remain unsure.
Those percentages are very low. Retention of customers has clearly become an issue with these services.
The biggest users of meal kits are Gen Z at 14.5 per cent, followed by millennials at 12.1 per cent, Gen X at 7.9 per cent and finally baby boomers, at a measly 3.2 per cent. Among provinces, the highest usage rate is in British Columbia at 10.4 per cent, followed by Quebec at 9.3 per cent and Alberta at nine per cent. Ontario is at 8.4 per cent, the national average. The lowest rate in the country is in Manitoba at 4.5 per cent.
Of Canadians using meal kits today, only 15.8 per cent had never ordered meal kits before the pandemic. Given that the market was inundated with rebates and coupons for months to get consumers hooked on some of these services, that percentage is strikingly low. For a while, many meal kit providers were partially subsidizing their own demand; that’s why assessing true market loyalty toward these programs was challenging.
Also, 66.1 per cent are fully committed to them as they use them daily or weekly.
The main factors for why Canadians order meal kits are convenience (57.7 per cent), to save time (30.4 per cent) and to avoid planning meals (15.4 per cent). Hellofresh remains the most popular service at 32 per cent, followed by Good Food at 24.6 per cent. Chef’s Plate, owned by Hellofresh, is third at 14.9 per cent.
Estimates from the Agrifood Analytics Lab suggest that the meal kit market in Canada is likely worth about $1.1 billion, compared to barely $5 million more than a decade ago. That is quite an accomplishment. At its peak though, back in 2020, the market surpassed $1.5 billion.
The factors that seem to be pushing consumers away from meal kits are the price and the heavy, unsustainable packaging that comes with the delivered meals. The average price per meal is typically $8 to $13 per person, and you still have to prepare it before enjoying it and clean up afterwards.
A total of 78.1 per cent of consumers who have dropped the service felt the prices were too high. As for packaging issues, 67.5 per cent dropped the service due to overwhelming packaging. And with the cost of food these days, it is highly unlikely prices will drop anytime soon.
Grocers have also gotten better at delivering food to consumers’ homes. Some are offering meal kits themselves in different forms. The retention rate for customers of online grocery sites is also typically much higher.
Online grocery shoppers will go back to buying more food online more than 80 per cent of the time, according to Neilson IQ. That retention rate is intimidating for meal kit providers. Loyalty is undoubtedly in our grocers’ favour. We could see more kits offered by grocers or restaurant chains using grocers’ distribution networks to reach us, physically or virtually.
Some will remain committed to meal kits. You are likely to waste less food and eat healthier, for the most part. But the industry is facing major headwinds as the economy trends back to normal after the pandemic.
The path to growth is unclear at this point. What’s more worrisome, the cost of food will also be a challenge for meal kit providers struggling to keep costs in check during these turbulent times.