There are now many types of milk alternatives freely available. As a consumer, which one is right for you? By Michelle Lau Whether you’re vegan, vegetarian, or environmentally-conscious consumer, it’s impossible to avoid the different plant-based milks (or “mylks”) popping [...]
By Alvin Mak
Are all meal kit delivery services following Blue Apron’s path downhill?
How do you cook nutritious, healthy, and delicious food all without having to plan meals yourself or buy groceries? The startup world’s answer was the revolutionary meal kit delivery system.
These services deliver cooking instructions and the corresponding ingredients for nutritious meals on a weekly basis. Some even prepare the meals beforehand, leaving the consumer with the sole responsibility of microwaving the packaged meal.
Most plans have a common selling point: they boast about their healthy and nutritious selections, which are sure to soar high above conventional restaurant take-out standards.
If most of these companies launched as early as last decade, why have they only boomed in the past 2-3 years? Why are we only just beginning to see promotional content in this area? And most importantly, where are the actual consumers?
Inspired by the aprons worn by apprentice chefs in France, Blue Apron was eager to impress –and impress it did.
Blue Apron sells chef-designed recipes along with perfectly portioned, fresh ingredients, delivered to customers every week. Instructions are simple and promise to allow customers to “experience the magic of cooking.”
Founded in a New York City apartment in 2012 by Matt Salzberg, Ilia Papas, and Matt Wadiak, Blue Apron’s initial appeal became clear after the company secured a US$3 million venture capital funding deal in February 2013. By April 2014, Blue Apron’s valuation had rocketed to $500 million, putting the company halfway to tech unicorn status.
Less than a year later, the startup reached a $2 billion valuation following a $135 million capital infusion in a new round of VC funding. It was smooth sailing so far for Blue Apron; up till this point, the company had almost made it look easy to achieve this kind of growth.
However, cracks began to appear when Emory University’s Assistant Professor of Marketing, Daniel McCarthy, revealed his estimation that 72% of Blue Apron clients would cancel their plans within six months. Doubts surfaced regarding the company’s ability to maintain customers.
Just two weeks after Blue Apron’s 2017 IPO, Amazon revealed its ground-breaking deal with WholeFoods – one that would thoroughly shake up both the online and offline grocery shopping spaces. Consumers now had an alternative cheap and easy way to have groceries delivered to their homes.
As a result of this unfortunate timing, Blue Apron stock fell by almost 50% a month and a half after the IPO, and failed to regain the traction needed in order to bounce back from the loss. Combining the IPO debacle with significant changes in senior management (two out of three co-founders have now left the company), Blue Apron suddenly found itself in dire straits.
One thing led to another, and Blue Apron’s stock fell to such depths that it was under threat of being delisted. The NYSE and Nasdaq require listings to be traded above $1, and the company traded below that benchmark for a month. Though the company made attempts to retain its listing and get its stock price back up, including a reverse stock split, its valuation had fallen more than 95% since hitting $2 billion call in 2015.
In the heat of the Covid-19 pandemic, Blue Apron was trading at $2.28 – a 98.37% decrease from June 2017. While government-mandated stay-at-home orders did boost the share price slightly, it seems that the company is on its deathbed. There are serious doubts as to Blue Apron’s ability to recover.
This Indonesian meal kit delivery service was inspired by Blue Apron. Founded in 2015, the company similarly aimed to make home cooking accessible for Jakarta’s audience. However, instead of focusing on quality ingredients like its American counterpart, it geared itself toward making grocery shopping less of a hassle.
Black Garlic boasted a selection of exclusive celebrity-chef-designed recipes and thus initially made some headway with consumers. In 2016, the company received seed funding from Convergence Ventures and Skystar Capital. At that time, Black Garlic reportedly already shipped to 1,000 unique customers.
However, the company soon experienced roadblocks with marketing. Its monthly earnings were not enough to cover the costs of growing its clientele.
In hindsight, Black Garlic’s approach to market research was also problematic: the company overestimated Indonesian demand for new-age efficient dining. Its relatively high price tag targeted wealthier customers, who were not interested in changing their grocery shopping habits given that most Indonesian middle-class families hire domestic maids. On the other hand, lower-income families without domestic helpers were unable to afford meal kit deliveries. Thus, Black Garlic’s demographic was substantially smaller than initially predicted.
Taking into account all these factors, perhaps it wasn’t so surprising when Black Garlic ceased operations in July 2017. Although the company attracted over 10,000 customers when still active, CEO and Co-founder Michael Saputra says his startup failed because the Indonesian market wasn’t ready.
In May 2018, Home Chef was sold to Kroger. The previously Top-3 meal kit delivery service faced uncertainty after the announcement of the Amazon-WholeFoods deal. Rather than ploughing forward and facing a Blue Apron situation, management opted to sell the company.
Later the same year, in July, Munchery shut down operations. The meal kit delivery company had struggled to stay afloat and navigate the challenges of the on-demand food market, despite multiple attempted pivots and changes to its business model.
The following year, in May 2019, Maple ceased operations to join Deliveroo. The company specialized in prepared meal deliveries and had failed to maintain sustainable revenues.
In the face of so many disappointing eventualities, one must ask: is the meal kit delivery model fundamentally flawed?
Hong Kong’s ecosystem
If there’s anything that serves to highlight the unpopularity of meal kit delivery services in Hong Kong, it’s the rapid growth of Deliveroo.
In 2019, despite pro-democracy protests paralyzing many of the city’s business districts, the delivery service was able to achieve 100% year-on-year growth in both revenue and order volume in Hong Kong. So far, the company’s growth shows no signs of stopping.
Deliveroo’s growth can partially be attributed to its wide variety of food options, especially when compared to the fixed meal plan provided by Hong Kong meal delivery services such as Eatology.
In addition, Hong Kong’s domestic helper situation is similar to Indonesia’s. As of 2020, Hong Kong has just shy of 400,000 domestic helpers, serving upper-middle class families and upward. The higher price range demanded by Hong Kong’s meal delivery services results in a problem similar to Black Garlic’s – the target demographic already has maids doing the shopping and cooking, but helper-less families usually can’t afford prepared meals.
Perhaps Hong Kong is also not ready for this business model. While Deliveroo continues to report booming numbers, delivery services such as Eatology and Nosh have yet to gain any noteworthy traction since their respective launches in 2017 and 2018.
The world has repeatedly signaled its ill-preparedness for meal kit delivery services, but only time will tell whether the world isn’t ready, or whether the business model is fundamentally flawed.
Header image by Krisztian Tabori on Unsplash