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By R.J. Hottovy, CFA | 05-10-2017 02:00 PM

Meal-Kit Delivery Services Could Be Disruptive

Blue Apron, HelloFresh, and Home Chef may have seemed like fads, but they could have interesting implications across the grocery, CPG, restaurant, and online retail space.

R.J. Hottovy: If you've opened up your browser or your mailbox at any point in the past year, you may have noticed an advertisement from meal-kit delivery services such as Blue Apron, HelloFresh, or Home Chef. While admittedly, when we first heard about these services, we viewed them as more of a fad and not much of a disruptive threat; however, after getting to know these businesses and several of the management teams behind them a bit better, we think that they are worth investors' time. 

In fact, we think the reason for looking at these businesses is because they represent some of the most influential customers in the consumer space today. Our analysis shows that meal-kit delivery service customers spend approximately 27% as much as a nonmeal-kit delivery service customer in the grocery store. With this influential customer, and the halo effect they may have, we think it's worth examining for the potential implications across the grocery, CPG, restaurant, and online retail space.

For grocers, we expect to see them partner with these meal-kit delivery services to accelerate their online grocery aspirations. This has been a notoriously tough area for grocers to get into the past couple of years, but we've seen that meal-kit delivery services are starting to thaw consumer perception about getting fresh food and produce delivered to your house. For CPG companies, we look at it as a way to acquire customer data by partnering with these services and testing new products. For restaurants, we look at it as a way for them to potentially sharpen their skill set in terms of experience and convenience by rolling out mobile ordering, delivery, and improving the in-store experience.

And finally, no analysis would be complete without looking at what Amazon's plans are for this business. The company has been trying to break into online grocery for several years, and we think that the recent introduction of several of their own meal-kit delivery service options will help to accelerate that growth over the near future.

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