Insider Q&A: Biting into meal kit madness
By MARLEY JAY
Aug. 12, 2018
NEW YORK (AP) — There's a food fight stretching from the shelves of your supermarket all the way to your front door.
Over the last few years a slew of companies have started selling meal kits that shoppers can order online and cook at home.
Walmart and Amazon.com both sell meal kits. Grocery chain Albertsons bought Plated, and Kroger bought Home Chef in a deal worth as much as $700 million.
Meanwhile Blue Apron, the first meal kit maker to go public, has seen its stock fall from $10 to $2 amid competition from those companies and others like Purple Carrot, Marley Spoon and GreenChef.
Home Chef CEO Pat Vihtelic launched his meal kit company five years ago. Sales climbed from about $1 million in 2015 to $250 million last year. Vihtelic spoke to The Associated Press about the rapid changes he's seen at his company and in the meal business in that time.
Q: What is the meal kit business like now?
A: When we would ask the question "where else would you like to see Home Chef meal kits," over 50 percent of our customer base said they would like to see us on a grocery store shelf. Kroger obviously has a big click-and-collect business and they also launched a meal kit in over 500 stores called Prepared. They were seeing very similar things in that their customer base is also evolving and wanting to see groceries and meal kits wherever they are.
This partnership with Kroger allows us to be a solution for someone who's planning ahead for the next week but also for someone who's sitting in the driveway not sure what they're going to eat that night.
Q: What are the biggest challenges you've faced?
A: We've always been careful not to grow at any cost. We've always made sure that the economics of what we're doing are sustainable and make sense, and we're not acquiring so many customers that you overwhelm your distribution center. I think scale is going to be increasingly important. We've seen our costs come down quite a bit as we've grown.
Q: Getting more and better data from customers must be critical for you. How has that helped you solve problems?
A: The meal kit market has been a little more chef driven than customer or data driven.
What we did was we built an internal tool that we use and allows us to test our menus: the pictures themselves, the title of the meal, the general menu configuration, and get a really good idea of which meals are going to work with our customer base and which ones probably won't work.
We're wasting less than 1 percent of the food we produce, and a big part of that is because we have quite a bit of visibility into the demand for the meals we produce.
Q: How have your shipping and logistics operations evolved over the years?
A: A significant component of our profitability is how much ice we put into a box. We built an algorithm that looks at the zip code of each customer and makes prediction based on actual and forecasted weather how many ice packs to put in the box. It ensures the customer experience is great and the food does arrive safe and at a good temperature.