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Table Of Contents

1. About 4 Definition 4 Related Terms 4 What’s Included 4 Companies 4 Related Industries 5 Additional Resources 5 2. At a Glance 6 Key Takeaways 6 Products and Services 7 Major Players 8 Key External Drivers 9 Industry Structure 9 SWOT 10 Executive Summary 10 3. Performance 12 Highlights 12 Key Takeaways 12 Executive Summary 13 Performance Snapshot 14 Volatility 20 Outlook 22 Life Cycle 24 4. Products and Markets 25 Highlights 25 Key Takeaways 25 Products and Services 26 Major Markets 28 5. Geographic Breakdown 30 Key Takeaways 30 Business Locations 31 6. Competitive Forces 36 Highlights 36 Key Takeaways 36 Concentration 37 Barriers to Entry 39 Substitutes 41 Buyer & Supplier Power 42 7. Companies 44 Key Takeaways 44 Market Share 44 Companies 45 8. External Environment 51 Highlights 51 Key Takeaways 51 External Drivers 51 Regulation & Policy 54 Assistance 55 9. Financial Benchmarks 56 Highlights 56 Key Takeaways 56 Cost Structure 57 Key Ratios 59 10. Key Statistics 60 Industry Data 60

Companies in this industry distribute meal kits that contain pre-portioned ingredients and instructions that consumers use to cook at home. This industry does not include grocery or cooked meal delivery.

BRICK-AND-MORTAR

A store with a physical presence, as opposed to an online retailer.

SMARTPHONE

A mobile phone with advanced capabilities.

PALEO DIET

A diet based solely on foods presumed to be available during the Paleolithic era.

GENETICALLY MODIFIED ORGANISM (GMO)

Any organism that includes genetic material that has been changed using genetic engineering techniques.

ORGANIC

Foods produced without the use of chemical fertilizers, pesticides or other artificial agents.

· Selling pre-portioned meal kits

· Selling pre-portions beverage kits

· Selling beverages

· Hellofresh Se

· Relish Labs Llc

· Blue Apron Holdings, Inc.

· Sun Basket, Inc.

Industries in the Same Sector

· Competitors:

· Supermarkets & Grocery Stores in the US

· Fast Food Restaurants in the US

· Complementors:

· E-Commerce & Online Auctions in the US

International Industries

· Prepared Meals Production in Australia

· Prepared Meal Manufacturing in the UK

· Herstellung von Fertiggerichten

Performance

Meal kit delivery services have become more popular thanks to remote working. Consumers can stay home and have ingredients shipped directly to them, cutting down on trips to the grocery store.

Rising prices and inflationary concerns will lead lower-income consumers to scale back on meal kits and shop in person. While this cuts into leisure time, it saves more money.

External Environment

Stay-at-home orders spiked in demand amid COVID-19 and stay-at-home orders. With limited access to grocery stores and supermarkets, meal kits became a viable substitute.

Imposing tariffs on food can result in variable costs, as wholesalers and suppliers might charge supplementary fees when import prices rise. This could erode profitability since meal kit companies engage in intense price competition.

Meal kit delivery services include meal kits containing pre-portioned ingredients and instructions consumers use to cook at home. Healthier eating habits and the growing popularity of e-commerce spurred sales. While revenue increased rapidly, COVID-19 became the catalyst for success as consumers ordered meal kits as an alternative to grocery shopping. It also paved the way for mass advertising via social media platforms, radio, podcasts and other entertainment outlets. This form of marketing remains strong, offering extra avenues of growth through an expanding market. Revenue grew at a CAGR of 20.1 to $8.2 billion over the past five years, including a 7.0% bump in 2023 alone. Remote working became a staple among many industries to prevent the spread of COVID. This change rapidly led to workers relying on meal kits. Consumers found meal kits helpful, as they cut down on trips to the grocery stores, allowing them more time to focus on work, hobbies or family. Amid the day-to-day stresses of life, meal kit delivery offers convenience without sacrificing quality. Many of these buyers work in technology-related fields with high income levels, which allows them to trade off extra food expenses solely for convenience. However, with new companies entering the marketplace, meal kit distributors must entice new consumers with discounts to stay ahead of the curve. While this may attract customers, companies will have to eat these costs, which lowers average profit. Even so, major player Hello Fresh has dominated a large chunk of the market, leading to rising profitability. Inflationary concerns have led some lower-income consumers to return to in-person grocery shopping, as meal kit costs have gotten too high. E-commerce retailers like Walmart, Target and Amazon have also begun delivering food and with already established brand familiarity, some consumers will turn to them instead. Smaller meal kit distributors that don't generate profit may be forced to exit or risk being acquired. Higher-income consumers will keep their subscriptions intact since meal kits are often convenient. Meal kit delivery services revenue will expand at a CAGR of 2.5% to $9.3 billion through the end of 2028.

Meal kit delivery services have become more popular thanks to remote working. Consumers can stay home and have ingredients shipped directly to them, cutting down on trips to the grocery store.

Rising prices and inflationary concerns will lead lower-income consumers to scale back on meal kits and shop in person. While this cuts into leisure time, it saves more money.

Meal kit delivery services include meal kits containing pre-portioned ingredients and instructions consumers use to cook at home. Healthier eating habits and the growing popularity of e-commerce spurred sales. While revenue increased rapidly, COVID-19 became the catalyst for success as consumers ordered meal kits as an alternative to grocery shopping. It also paved the way for mass advertising via social media platforms, radio, podcasts and other entertainment outlets. This form of marketing remains strong, offering extra avenues of growth through an expanding market. Revenue grew at a CAGR of 20.1 to $8.2 billion over the past five years, including a 7.0% bump in 2023 alone. Remote working became a staple among many industries to prevent the spread of COVID. This change rapidly led to workers relying on meal kits. Consumers found meal kits helpful, as they cut down on trips to the grocery stores, allowing them more time to focus on work, hobbies or family. Amid the day-to-day stresses of life, meal kit delivery offers convenience without sacrificing quality. Many of these buyers work in technology-related fields with high income levels, which allows them to trade off extra food expenses solely for convenience. However, with new companies entering the marketplace, meal kit distributors must entice new consumers with discounts to stay ahead of the curve. While this may attract customers, companies will have to eat these costs, which lowers average profit. Even so, major player Hello Fresh has dominated a large chunk of the market, leading to rising profitability. Inflationary concerns have led some lower-income consumers to return to in-person grocery shopping, as meal kit costs have gotten too high. E-commerce retailers like Walmart, Target and Amazon have also begun delivering food and with already established brand familiarity, some consumers will turn to them instead. Smaller meal kit distributors that don't generate profit may be forced to exit or risk being acquired. Higher-income consumers will keep their subscriptions intact since meal kits are often convenient. Meal kit delivery services revenue will expand at a CAGR of 2.5% to $9.3 billion through the end of 2028.

Revenue:

Employees:

Businesses:

Profit:

Performance Snapshot

What's driving current industry performance?

Pandemic effects continue to linger

· In 2020, COVID-19 forced consumers nationwide to stay home and follow quarantine restrictions. Meal kit delivery was viewed as an alternative to grocery shopping, minus the risk of infection. Companies used this to ramp up advertising across various social media outlets (podcasts, video streaming, photo-sharing platforms). While advertising was a significant part of marketing, it was taken to the next level as it was easier to reach people since they were stuck at home.

· Many industries required remote work during the pandemic stay-at-home orders and working from home remains popular with many worker segments. Consumers working from home found it easier and safer to order meals to their front door.

· The need for meal kits is slightly tapering off as some employees return to the office and the risk of COVID-19 has reduced. Even so, consumers continue to purchase meal kits to help optimize their time.

· Mass advertising during the pandemic brought meal kits to the limelight and companies have not yet taken their foot off the pedal. Even today, companies are branching out and entering sponsorships with podcast hosts, video streaming platforms, celebrities and content creators. These outlets offer their viewers discount codes for first-time users, allowing consumers to initiate a test run before committing, catalyzing growth.

Consumer preferences alter products

· Companies offer meal kits specifically designed to fit a consumer's dietary needs. Consumers have trended toward various diets, including vegetarian, vegan, keto or paleo, while avoiding foods that are not organic or classified as genetically modified organisms (GMOs).

· Companies that constantly develop new recipes to fit ever-changing preferences find more success than those that don't.

· Other companies have begun experimenting with nonfood-related products, primarily beverages and snacks, to gain a competitive edge. Wine has quickly risen to the ranks as a nonfood-related item that consumers indulge in with their meals.

· While integrating new products can be costly, many companies are willing to pay the premium to prevent a total drop in profitability.

Companies struggle to maintain profit

· Profit is low or even negative because of the nature of meal kit delivery logistics. Purchasing food, ensuring its safety, packaging and shipping cut into expenses.

· Newer meal kit providers offer consumers steep discounts, sometimes even taking a loss to attract customers. While this method can help bring in new customers, it still poses massive risks if customers cancel their subscriptions after their trial period. Many companies are altering plan prices to find a solid middle ground.

· Profit remains positive for most businesses, resulting from Hello Fresh's immense market concentration. Many companies are operating in the red, most notably major player Blue Apron.

Competition is on the rise

· Low and even negative profitability continues to be a deterrent for newer companies that are hoping to gain customers.

· Many new companies have joined the industry to cater to different dietary restrictions. While this can provide short-term benefits, the constant change in consumer preferences may cause niche companies to fall out of favor as individuals move on to the latest dietary fad.

· Even as new meal kit delivery distributors have emerged, many have fallen out of favor and either closed or were acquired by a larger company. While unknown companies may have great product ideas, they do not have the capital and supply chain to support them, leading to massive consolidation.

What influences industry volatility?

COVID-19 accelerated demand

· COVID-19 forced consumers to stay home for an extended period, leading to rising demand for meal kits. Consumers could minimize the risk of catching the illness by ordering meals directly to their doorstep.

· To prevent the spread of COVID-19, and in response to government stay-at-home orders, many businesses nationwide implemented remote working policies. Now, employees are able to work more efficiently by reducing the time they need to spend on grocery shopping.

Remote work continues to thrive

· COVID-19 restrictions have ended, but remote work remains popular with workers and has become a mainstay in many industries. Demand continued to thrive through 2023, leading to significant revenue swings.

· Even though remote working is still heavily practiced, many businesses require in-person attendance, slightly reducing the need for meal kits. Nonetheless, many consumers still use meal kits on weekends or after work.

How do successful businesses overcome volatility?

Economies of scale

The ability to purchase ingredients and produce meal kits on a large scale can reduce per-unit production costs, adding to profitability.

Ability to control stock on hand

Industry operators need to be able to control inventory levels to ensure their supply meets customer demand as well as to minimize food wastes.

What's driving the industry outlook?

Traditional shopping experiences are making a comeback

· Without COVID-19 restrictions, consumers are returning to grocery stores to purchase ingredients and prepared foods.

· Inflationary concerns have caused consumers to cut back on meal kits and cook their own meals using store-bought ingredients. While meal kits can provide convenience, the cost can be too high for some consumers to justify.

· While remote working is ongoing at many businesses, many employees have returned to the office and brought their lunch or bought it nearby. This can cause subscribers to scale back the number of meals they receive or cancel their subscriptions entirely.

Competition lowers retention rates

· Even as new entrants offer steep discounts, the chance of retaining a customer is low, as many consumers will sign up solely to take advantage of that first discount before moving to another company right after.

· Consumers who follow dietary trends may change their preferences and take their business to another company. This can harm new entrants since many offer massive discounts for first-time users. If they cannot retain them afterward, it feeds into negative profitability.

· Large e-commerce and bricks-and-mortar retailers (think Target, Walmart and Amazon) have expanded their food delivery services, deterring consumers from meal kits.

Smaller companies face the looming threat of consolidation

· Even though more meal kit delivery distributors will form, many of these entrants may be subject to acquisition by more prominent players. Smaller operators lack large companies' supply chain and logistical infrastructure, which is a disadvantage.

· Rising competition amongst smaller companies will also lead to fewer subscriptions which will cause some entrants to exit the industry abruptly.

· Future food safety and transportation regulations may continue to pose challenges for smaller meal kit services.

· Hello Fresh's grasp of the industry will grow even further as it continues to add smaller, niche companies to its portfolio. It is one of the few companies that records a positive profit.

Technology and sustainability remain crucial

· Meal kit delivery services will aim to leverage the ever-growing social media landscape to find customers they can hopefully retain.

· Using marketing tactics and sponsorships will be vital for companies. Many companies will pay social media influencers or YouTubers with high subscriber counts to share their products with their viewers. These promotions usually give viewers a discount code, drastically lowering meal kit prices for the first few months.

· Companies will continue to improve their e-commerce designs to enhance the customer experience by developing a more user-friendly interface for their websites and mobile applications.

· Promoting sustainability will also be a huge factor moving forward. Reducing carbon footprint through less wasteful packaging and plastic will attract environmentally conscious customers.

Why is the industry growing?

Contribution to GDP

The industry is fairly new and growth has outpaced the overall US economy. The pandemic caused a rapid shift toward ecommerce, while contributed to the industry's massive success in recent years.

Market Saturation

There are more than 300 companies in the industry, with more joining every year. The top four companies will represent more than 85.0% of revenue in 2023, though.

Innovation

While food is the primary product for meal kits, companies diversified their offerings and added beverages to the mix to attract more customers.

Consolidation

Despite the number of companies increasing significantly over the years, many of them have churned out low or negative profit. With many companies offering similar products, it has increased competition and allowed for larger companies to acquire them. Companies either must adapt to everchanging consumer preferences or risk being acquired or exiting the industry altogether.

Technology & Systems

Meal kits have eliminated the need for grocery shopping as consumers can directly order food straight to their doorstep. Upgrading mobile applications and websites to enhance customer performance also plays a key role in industry success.

Most companies offer a wide range of dietary options to appeal to different customers. Consumers can switch dietary plans or alternatives between different types of meals to see which one they prefer.

Adding different beverage and snack options helps companies generate additional revenue while distinguishing themselves from competitors. Wine has quickly become the most popular add-on offered by meal kit services.

How are the industry’s products and services performing?

Don't forget your meals

· Meals are delivered on a weekly basis based on household sizes and the number of recipes they want. The most common plans include two and four-serving plans.

· Companies have introduced a variety of different meal mixes to account for the various dietary habits of their consumers. Many plans include the option for paleo, gluten-free, dairy-free, soy-free, diabetes-friendly and vegan meals.

· Large serving plans are more expensive and, for that reason, less popular; these price points help businesses generate more revenue, though.

New services diversify offerings

· Including products that are usually only found in grocery stores lures consumers into meal kit services, as they now have a one-stop shop for all their needs.

· Common choices of add-on food include snacks, protein bars, soups, crackers, yogurts, bread and vegetables. Some companies also offer additional portions of meat on the side so the options are endless.

· With more companies entering the industry, diversification of products is needed to adapt to the rising competition.

Beverages add a boost

· Like food services, no meal is complete without a beverage, with many companies offering wines, juices, coffees and smoothies.

· The two largest companies, Hello Fresh and Blue Apron, offer wine to pair with their meal kits. Wine offerings primarily include red, white and sometimes rosé. Blue Apron also offers a wine specialty program that delivers six 500-ml monthly bottles.

· With an uptick in the popularity of health shakes and smoothies, some companies use this as the main selling point, offering customers a variety of shakes delivered straight to their door. This eliminates the need for blenders or purchasing individual ingredients.

What products or services do successful businesses offer?

Ability to provide goods and services in diverse locations

Industry operators that can serve large geographic areas can attract more customers. Facilities or warehouses near prime destinations can also help reduce transportation costs.

Ability to control stock on hand

Industry operators need to be able to control inventory levels to ensure their supply meets customer demand as well as to minimize food waste.

What are innovations in industry products and services?

A wide array of choices for every person

· Consumer eating habits change rapidly as new diet trends pick up while others fall out of favor. Offering different meal plans and the option to switch the type of food being delivered offers immense flexibility for the ever-changing consumer.

· Changing the amount of portions and frequency of meals is also a deciding factor for many customers. Those with larger households may want to maximize one subscription to the fullest instead of purchasing multiple kits.

Not just food anymore

· Meal kit delivery companies are introducing more options besides regular meals as add-ons. Snacks and beverages are things consumers might want to enjoy alongside or after their meal.

· Additional offerings provide customers with a holistic shopping experience, gathering all their needs simultaneously. Giving consumers the option to purchase extra portions of certain meals has also become a popular trend.

What’s influencing demand from the industry’s markets?

Tenured workers dictates demand

· Consumers between the ages of 35 and 64 account for almost two-thirds of the customer base.

· Single parents and families are often too busy with work to go out and purchase groceries, making meal kits a viable alternative.

· Older customers that have been in the workforce for an extended period of time likely have a large income stream, which neutralities the high costs of meal kits.

The next generation supports demand

· Consumers younger than 35 make up the smallest portion of the customer base.

· Many younger consumers are in school or have just begun their careers, so they are more likely to go grocery shopping instead of purchasing meal kits.

· The shift to remote working amid the pandemic bolstered this consumer market, becoming a launchpad for many companies. While many employees have returned to the office, meal kits still remain popular as many consumers do not have the time to go shopping after a long day of work.

Consumers older than 65 provide stable sales

· Consumers older than 65 account for the second-largest portion of revenue.

· Senior citizens often stay in nursing homes where meals are provided, eliminating the need for meal kits.

· While older consumers are not as tech-savvy, they typically have younger children or relatives who place these orders, allowing them to make time for activities as meals are delivered to their doorstep.

Operating near food manufacturers helps cut shipping costs and the downtime needed to receive ingredients. This leads to faster processing and delivery to consumers.

Regions that lack public transportation are more willing to subscribe to meal kits. Driving to supermarkets or grocery stores in these areas is time-consuming.

Percentage of total industry Establishments,Population in each region

Where are industry businesses located?

A amssive customer base in the west

· The West has many establishments, since it shortens the distance between operators and food manufacturers.

· This region is home to major tech hubs, with most of them being located in California. Major player Blue Apron states that 15.0% of its customer base is located in California, which is higher than any other state.

· Due to many technology-focused jobs implementing a remote work policy, California continues to dominate in terms of customers, as many of these workers purchase meal kits.

Big cities carry the Mid-Atlantic

· Similar to the West, the Mid-Atlantic is home to highly populated cities, namely Philadelphia, New York City and Washington, DC.

· These cities have many corporate offices with employees who work long hours. These customers are the perfect target for meal kit delivery services since it helps reduce the time needed to go grocery shopping after a long day of work.

· Blue Apron states that 8.0% of its customer base is located in New York.

Being in the Southeast shortens downtime

· Many populated areas in the Southeast lack public transportation, resulting in elevated demand for meal kit delivery services.

· Florida is home to the second-largest number of establishments, behind California. It contains many highly populated cities, namely Miami and Orlando. Miami has quickly transformed into a tech hub, attracting more employees who work remotely and relying on meal kits.

How do businesses use location to their advantage?

Proximity to key suppliers

As industry operators sell pre-portioned meal kits, they must ensure that all ingredients remain fresh until they are delivered to customers. Consequently, proximity to local suppliers of raw ingredients is important to an operator's success.

Ability to provide goods and services in diverse locations

Industry operators that can serve large geographic areas can attract more customers.

Price competition is rampant among smaller companies. New entrants will often heavily discount their services to gain new customers. Even many existing companies continue to discount their plans in hopes of retaining customers.

Supermarkets and groceries offer more affordable ingredients. While traveling to stores may reduce leisure time, the price difference is worth the trip for many consumers.

What impacts the industry’s market share concentration?

Global distribution leads to domestic dominance

· While many meal kit delivery services exist, Hello Fresh alone accounts for more than 70.0% of the market. Being the only operator based in Europe, it has built a distribution network, enabling it to cover a wide range of consumers.

· This is why Hello Fresh is one of the few companies in the industry to record a positive profit margin.

Adapt or consolidate

· While meal kits are certainly popular, the market dominance of the top four operators poses a major threat to smaller entrants.

· While new entrants may be able to capture a niche market, they do not often have the financial capabilities to effectively serve consumers. This results in the consolidation of smaller companies by larger operators, a trend that is set to pick up.

How do successful businesses handle concentration?

Economies of scale

The ability to purchase ingredients and produce meal kits on a large scale can reduce per-unit production costs, adding to profitability.

Ability to provide goods and services in diverse locations

Industry operators that can serve large geographic areas can attract more customers. Having operations in multiple locations can also reduce transportation costs.

What challenges do potential industry entrants face?

Legal

· Meal kit delivery distributors must acquire a food service and a business license to operate. An employer ID number is also required. Distributors must also follow local and state regulations.

Start-up Costs

· Operators will incur start-up costs to pay for licensing, supply chain networks and physical food. With the acceleration of e-commerce, delivery services will increase research and development costs to improve mobile apps.

Differentiation

· Competition remains high as new companies continue to pour in on a yearly basis. Consumers have a wide array of options to choose from due to the expansive range of consumer food preferences.

Labor Expenses

· Despite the rapid technology and e-commerce growth, the industry is very reliant on labor. Operators depend on skilled employees to prepare ingredients and create recipes.

Capital Expenses

· Despite the rapid technology and e-commerce growth, the industry is very reliant on labor. Operators depend on skilled employees to prepare ingredients and create recipes.

How can potential entrants overcome barriers to entry?

Proximity to key suppliers

As industry operators sell pre-portioned meal kits, they must ensure that all ingredients remain fresh until they are delivered to customers. Consequently, proximity to local suppliers of raw ingredients is important to an operator's success.

Having a loyal customer base

It is important to have a loyal customer base to attract repeat buyers, ensure continued sales and reduce customer acquisition costs. Industry operators must build customer satisfaction and adapt to customer preferences to keep them loyal.

Ability to control stock on hand

Industry operators need to be able to control inventory levels to ensure their supply meets customer demand as well as to minimize food wastes.

What are substitutes for industry services?

Prepared meal delivery services

· While meal kits save time by cutting down trips to the grocery store, consumers still must cook the meals themselves. Prepared meals, while more expensive, cover the cooking and portioning parts. Once reheated, the meal is ready.

· Prepared meals are an excellent alternative for consumers who are too busy to cook or don't know how. Despite the higher costs, customers are willing to pay an additional premium to save time.

Supermarkets & Grocery Stores

· Meal kits became popular amid COVID-19 lockdowns, but now that restrictions are lifted, consumers can easily purchase inexpensive ingredients directly from supermarkets and grocery stores.

· Going to the grocery store is more time-consuming, but with recent inflationary concerns and increasing utility costs, consumers will opt for inexpensive ingredients at the grocery store.

What power do buyers and suppliers have over the industry?

Buyers: price competition among many options

· With new companies entering at a rapid rate, many will offer steep discounts to appeal to first-time customers. Many customers will often alternate between different companies to save money.

· Established brands might temporarily see a dip in orders while customers order elsewhere. Meal prices must be lower for new brands moving forward; otherwise, customers will just look for another option. Even so, many new companies just cater to trends and must adapt quickly or risk going under.

Suppliers: food costs

· Meal kit providers purchase their food from many suppliers, which source it from farmers. Larger companies can establish long-term fixed contracts to buy in bulk and reduce expenses.

· Rising or falling demand for certain foods can disrupt a supply chain and cause meal kit providers to either raise prices or eat the costs themselves.

How do successful businesses manage buyer & supplier power?

Proximity to key suppliers

As industry operators sell pre-portioned meal kits, they must ensure that all ingredients remain fresh until they are delivered to customers. Consequently, proximity to local suppliers of raw ingredients is important to an operator's success.

Having a loyal customer base

It is important to have a loyal customer base to attract repeat buyers, ensure continued sales and reduce customer acquisition costs. Industry operators must build customer satisfaction and adapt to customer preferences to keep them loyal.

One company has garnered over 70.0% of the market through its extensive supply chain. HelloFresh has a large distribution network, which helps generate economies of scale.

Kroger’s acquisition of Relish Labs has broadened its customer base. Products on store shelves allow customers to try out meals and products before placing orders online.

Chart displays current year only in the PDF version of this report. You can view and download chart for all other years associated with this industry on my.ibisworld.com.

You can view and download company details on my.ibisworld.com.

Hellofresh Se

Company Details

Description

Hellofresh is a public company headquartered in Germany with an estimated 14,635 employees. In the US, the company has a notable market share in at least one industry: Meal Kit Delivery Services, where they account for an estimated 61.4% of total industry revenue and are considered an All Star because they display stronger market share, profit and revenue growth compared to their peers.

Brands and Trading Names

· Chefs Plate

· EveryPlate

· Factor

· Green Chef

· HelloFresh

· youFoodz

Company’s Industry Revenue, Market Share, and Profit Margin Over Time

What's impacting Hellofresh Se's performance?

Hello Fresh issues an apology relating to technical glitch

· In January of 2023, Hello Fresh apologized to customers who were still charged after they elected to skip box shipments. Contacting customers affected, the company announced that it has fully compensated each individual order incorrectly charged.

Hello Fresh ends operations in Japan

· In December of 2022, Hello Fresh announced that it has pulled out of Japan. The company first launched operations in Japan in April of 2022 but after disappointing revenue results, it admitted to employees that conducting operations in the country moving forward would be unprofitable.

Relish Labs Llc

Company Details

Description

Relish Labs Llc is a private company headquartered in Illinois with an estimated 800 employees. In the US, the company has a notable market share in at least one industry: Meal Kit Delivery Services, where they account for an estimated 13.1% of total industry revenue and are considered an All Star because they display stronger market share, profit and revenue growth compared to their peers.

Company’s Industry Revenue, Market Share, and Profit Margin Over Time

Blue Apron Holdings, Inc.

Company Details

Description

Blue Apron Holdings is a public company headquartered in New York with an estimated 1,549 employees. In the US, the company has a notable market share in at least one industry: Meal Kit Delivery Services, where they account for an estimated 5.5% of total industry revenue.

Company’s Industry Revenue, Market Share, and Profit Margin Over Time

What's impacting Blue Apron Holdings, Inc.'s performance?

Blue Apron given NYSE delisting warning

· After falling below the exchange's requirements for stock price and market capitalization, Blue Apron received a delisting warning from the New York Stock Exchange (NYSE) in December of 2022. The notice comes weeks after the company pledged to lay off 10.0% of its workforce.

Sun Basket, Inc.

Company Details

Description

Sun Basket is a private company headquartered in California with an estimated 400 employees. In the US, the company has a notable market share in at least one industry: Meal Kit Delivery Services, where they account for an estimated 3.5% of total industry revenue.

Company’s Industry Revenue, Market Share, and Profit Margin Over Time

Stay-at-home orders spiked in demand amid COVID-19 and stay-at-home orders. With limited access to grocery stores and supermarkets, meal kits became a viable substitute.

Imposing tariffs on food can result in variable costs, as wholesalers and suppliers might charge supplementary fees when import prices rise. This could erode profitability since meal kit companies engage in intense price competition.

What demographic and macroeconomic factors impact the industry?

The percentage of services conducted online represents the increasing use of the internet by consumers for services like grocery and meal kit delivery. As more consumers seek online sources to purchase meals, the ease of meal kit delivery has greatly benefited industry revenue.

The healthy eating index measures the percentage of the recommended diet consumed by the average American. Meal kits are customizable to fit various dietary needs and restrictions. The increasing urge to eat healthier has led consumers to purchase meal kits, increasing revenue. A rising healthy eating index can represent a potential opportunity for the industry.

Per capita disposable income measures an individual's ability to purchase meal kit services As disposable income increases, consumers are more willing to pay for meal kits with pre-portioned ingredients delivered to their homes, despite it being more expensive, solely because of the added convenience. A falloff in disposable income can force consumers to allocate money towards other expenses, representing a potential threat to meal kit delivery services.

Since companies typically sells meal kits portioned for two or four people, revenue benefits from more people seeking family meals or multiple servings.

Since crops are used in a wide range of downstream products, agricultural prices play a significant role in the prices of industry meal kits. Many companies pass price fluctuations on to the consumer. When the agricultural price index rises, meal kit prices and revenue also increase.

What regulations impact the industry?

Food safety and standards

Despite their popularity, many meal kit delivery distributors are not certified by the US Food and Drug Administration (FDA). The ingredients used come from a variety of sources, which may lead to some of them not falling under FDA regulation. While the FDA has stated it expects to change regulations on meal kit deliveries, there is no clear timeline at the moment.

E-commerce regulations

Since operators conduct business online, they are required to comply with online security laws to protect consumer privacy. The Entertainment Software Rating Board (ESRB) has established an Online Privacy Program that helps its members adhere to complex privacy rules for internet applications. The ESRB aims to protect its members from potential misconduct and fines.

Labor laws

Operators are subject to minimum wage and employee benefit regulations as employees work on an hourly basis. While the federal minimum rate is $7.25 per hour, many states have their own wage rates that are often higher than the federal rate.

What assistance is available to this industry?

COVID-19 relief

The COVID-19 Paycheck Protection Program (PPP) provided small businesses with funds that covered up to eight weeks of payroll costs. Funds were also used to cover mortgages, rent and other utility bills. While the top four operators account for most of the market, many smaller enterprises that operate on a state and regional level were able to apply for these benefits.

Tariff regulations

Tariffs on food affect a food suppliers' costs, which can trickle down and affect industry purchase costs. The United States–Mexico–Canada Agreement (USMCA) enables free trade between Mexico and Canada, lowering the cost for Canadian hogs, which are less susceptible to swine diseases due to Canada's weather.

Quarantine regulations

While quarantine regulations did not directly assistance operators, consumers turned to meal kit delivery services as an alternative to cooking since they were not allowed to leave the house.

Private support doesn't apply to the industry

The Meal Kit Delivery Services industry doesn't receive any private sector support.

Establishing a footing comes at a price as companies broaden marketing efforts to attract new customers. Newer companies are leveraging social media to target a younger demographic.

Food and dietary plan trends lead to additional expenses. Many organic and non-GMO foods are priced higher than regular food items. Even so, consumers are willing to pay a premium for these products.

Chart displays current year only in the PDF version of this report. You can view and download chart for all other years associated with this industry on my.ibisworld.com.

What trends impact industry costs?

High purchase costs engulf meal kit providers

· Purchases include all the ingredients for meal kit recipes, including produce, proteins, spices, seasonings and starches. Non-GMO and organic food have become more popular and are priced higher, elevating expenses.

· Even so, the dominance of Hello Fresh and other large markets has caused overall expenses to slip down as these companies enter contracts with suppliers to buy in bulk.

· Companies are also responsible for packaging material to ensure the food is delivered safely.

Market dominance carries profit

· New entrants record near-zero or negative profit by offering steep discounts to attract customers.

· Hello Fresh's growth and market dominance has kept profit afloat. While profitability was negative at the start of the period, it has slowly climbed due to Hello Fresh's ability to reduce expenses since it operates on a large scale.

· As companies establish themselves and carve out a place in the market, profit is expected to gradually rise.

Marketing and advertising costs are on the rise

· Marketing and advertising continue to remain a large part of success and expenses remain elevated.

· In a highly fragmented industry, businesses must increase marketing spending to attract customers and gain a competitive advantage.

· Many meal kit providers have succeeded in marketing through inexpensive social media platforms (think Instagram, YouTube and TikTok). Purchasing targeted website ads have also become popular.

Values

Annual Change

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