HelloFresh vs. Amazon Fresh

HelloFresh

HelloFresh

HelloFresh is starting to work with local retailers for subscription-free meal kits (for trying out the service) and a local pick-up option:

Roots will offer individual meal kits — i.e., an obligation-free way to use HelloFresh whenever you want it — as well as an in-store pick-up option for HelloFresh subscribers.

According to a release, Roots Juices is the first retailer in the United States to partner with HelloFresh, which offers meal kits with fresh ingredients and step-by-step recipe instructions.

This is an interesting direction HelloFresh is taking here. The basic model of meal kits has legs. (Because in theory, it can better fulfill the job for preparing meals created and eaten at home than a classic grocery store or classic online grocery shopping can.) But the model needs scale to work. Otherwise it is just to expansive. Meals right now can be on par price-wise with meals at inexpensive restaurants. The prices of single ingredients are naturally higher than at the local supermarket (the price one pays for being better served), but it should not be as high as an even more convenient solution. Obviously, that is not the only dimension that counts here, but it matters nonetheless.

The smallest “classic box” at HelloFresh still comes down at $69.00 for three meals for two people in the U.S. For those keeping count at home, that amounts to $11.50 per meal. (Price per meal goes down with bigger boxes, naturally.)

See also this market research by NPD from July of this year:

Trial of meal kits is still relatively low with 3 percent of the U.S. adult population (18 and older) trying a meal kit delivery service within the last year. There are, however, opportunities for growth, according to a new NPD Group study.

Saving time is the top reason given for using meal kits, which provide all of the ingredients necessary to prepare a meal. Consumers also cite the fact that it makes dinner easier to prepare and that they provide variety in their meals, finds NPD Group’s study, Thinking Inside the Box: A Fresh Look at Meal Kit Delivery Services. The freshness of ingredients and experience is particularly appealing to young adults using the kits. Those using meal kits are generally satisfied and two out of three kit users are extremely or very satisfied, but price may be a barrier for continued use and adoption by others.

Meal kits are typically used to replace an in-home dinner, but the cost of a kit is comparable to a restaurant meal rather than an in-home dinner. The average cost per in-home dinner meal is $4 and the average cost per person for a meal kit delivered to the home is $10, reports the NPD Group study, which reveals the motivations that drive trial of these services, identifies what users find most appealing, and the opportunities for the food and beverage industry.

Which brings us to Amazon Fresh.

Business Insider from May of this year on a coming expansion of Amazon (Fresh) into meal kit delivery à la HelloFresh:

“We’re expanding our relationship with Amazon Fresh to sell fresh protein as well as partner with them around innovation. We plan to launch Tyson Taste Makers, a line of chef-inspired meal kits in premium proteins for home delivery with Amazon Fresh this fall,” Smith said.

Smith didn’t share any more details around Taste Makers. But based on his description and previous comments made on his partnership with Amazon Fresh, the new service sounds like a ready-to-cook ingredients delivery service, akin to what Blue Apron and HelloFresh do.

This doesn’t sound like much right now, and certainly nothing that should worry HelloFresh et al this year. But given positive market feedback, this could easily blow out into a full blown HelloFresh competitor within a year of operation.

Remember what I wrote about Amazon Prime and Delivery Hero last year?

Making restaurant delivery a part of Prime gives Amazon a way to calculate very differently compared to companies which have to make a direct profit from the deliveries. (Remember also that every single part of the bundle serves as advertisement for the whole thing.) This gives Amazon an advantage especially in a two-sided market as is here the case. Namely Amazon can simply offer restaurants a better deal and in the process at the least(!) destroy any attempts by delivery startups at creating exclusive partnerships with restaurants.

This is still true. But as it turns out, the same dynamic might become more of a pressing problem for companies like HelloFresh.

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