Competition in meal kits heats up as Unilever enters fray
Consumer attitudes to mealtimes are evolving: cooking is increasingly viewed as an enjoyable, social activity and people want to know they are eating fresh, healthy meals. At the same time, consumers are also time-poor and on the lookout for solutions that provide inspiration, simplicity and convenience. This convergence of needs has resulted in a boom for the meal kit and recipe box delivery sector.
Unilever’s digital initiatives
Unilever has been progressively extending its digital direct-to-consumer channel strategy. To date, this has primarily focused on the company’s personal and care businesses. Following on from its acquisition of Dollar Shave Club in the US, the group launched two new direct to consumer brands: Skinsei in the US and Verve in the UK.
Unilever hopes innovation will boost sales
Unilever booked a slowdown in underlying sales growth yesterday. The company reported like-for-like sales rose 2.6% in the third quarter, less analyst expectations of 3.9% and the 3% rise in the first half of the year.
Much of the slowdown was related to Unilever's ice cream business, with bad weather in Europe and market share losses to a start-up competitor - Halo Top - in the US blamed for the result. Unilever noted that weak sales in developed markets were somewhat offset by a stronger emerging market showing.
In order to reverse these trends, Unilever is shaking up how it innovates. The company is reducing the number of global innovation projects it is working on while simultaneously increasing their size and speed to market. On a local level, the group is stepping up regional or country innovations.
CFO Pitkethly explained: "So far this year, we have increased the number of local launches in Unilever by more than 50%."
It emerged yesterday that Unilever is also spreading this approach to food. The company is trialling a meal kit delivery service in the Netherlands, chief financial officer Graeme Pitkethly revealed during a conference call.
“Knorr Fresh Meal kits [are] an experimental launch in the Netherlands with online retailer Picnic,” Pitkethly explained.
A win-win match
Picnic is barely two-years-old but the group’s rapid development has been noteworthy. It started as a pilot programme in Amersfoort, where it used electric vehicles to deliver groceries in much the same way as milk deliveries, using set routes and delivering at set times.
This model – distinct from most e-tailers – proved popular with consumers. The company quickly grabbed an 80% share of the local online delivery market.
This success attracted investors. Six months ago, the group completed a Series B funding round that raised €100m from NPM Capital, De Hoge Dennen, Hoyberg and Finci. To put this in context, Uber and Snapchat raised approximately €31m and €68m respectively in their Series B funding rounds.
In other words, Picnic is just the kind of high-growth start-up that multinational food companies are increasingly looking to for innovation, through either direct investment or partnerships.
And, Pitkethly stressed, for Unilever the risk and capital investment involved is minimal. “As has the test is been developed under licensing at a co-packer, if it fails, it wouldn’t have cost much. But if it succeeds, it opens up a new opportunity for Knorr in chilled foods.”
In a similar vein, Unilever formed a partnership with UK delivery start-up QuiQup. The group’s Hellmann’s brand said this summer that it hopes to “engage with a new millennial audience” when it announced the pilot this August. Initially targeting areas of London, this scheme allows consumers to chose recipes and get fresh ingredients delivered to their doors within the hour.
Lidl delivers on quality and price
Unilever is not the only large-scale multinational company eyeing the still relatively fledgling meal kit sector. Last month, Lidl confirmed that it is launching a recipe box business in Switzerland. Announcing its plans, Lidl described the move as a “simple” but “innovative and powerful” concept.
Lidl’s menu boxes include the ingredients for three “seasonal, healthy and quick” dishes as well as recipe sheets and detailed preparation instructions. The company claims around 80% of the ingredients contained in the recipes are Swiss, highlighting its local sourcing credentials.
The recipes boxes – for two or four people - are delivered weekly “to your workplace”, the company explained. There is an option of an 'original box' – which includes meat – or a vegetarian kit.
“Its target audience consists of all consumers who enjoy cooking with friends and family,” a spokesperson for the group said.
As you might expect from Lidl, the company intends to deliver on both price and quality in its first incursion into recipe boxes. Lidl said it is able to leverage its existing logistical infrastructure and processes to deliver “superior foods” at the “advantageous” price of CHF63 (€54).
Georg Kröll, CEO of Lidl Switzerland, noted the innovation makes it possible to “reconcile an active life, the pleasure of cooking and a healthy diet”.
HelloFresh still on top
While there has been a jump in activity in the meal kits arena, global market leader HelloFresh remains ahead of the game.
“The meal kit delivery market has become increasingly crowded over the last few years, which we see as a positive thing. The entry of other players into the category, including supermarkets, indicates the rising interest and success of online models in the food market,” HelloFreshUK CEO Claire Davenport told FoodNavigator.
The German company pioneered the recipe box category when it was founded six years ago. Today it has operations in ten countries worldwide: the USA, the United Kingdom, Germany, the Netherlands, Belgium, Luxemburg, Australia, Austria, Switzerland and Canada. With about 1.3m active customers, HelloFresh delivered 33.7m meals in the 3-month period from 1 April 2017 to 30 June 2017.
HelloFresh’s experience in the “challenging” meal kit market leaves it well-placed to retain its leadership position, Davenport insisted. “Succeeding in the meal kit market is demanding – amongst many factors, clever logistics and intelligent product development are key requirements. This might be one reason why we’ve seen many new players come and go. As a pioneer in this category, we have gathered extensive experience over the years. This experience, combined with a tailor-made infrastructure, is the foundation of our unique business model. Moreover, HelloFresh goes beyond just being a food retailer. We are a business that is deeply rooted in our customers’ daily routines and preferences.”
HelloFresh operates as an integrated food manufacturer and the company has seven fulfillment centres around the world. The group also believes its “unique procurement set-up” creates a further “competitive moat”. More than 50% of the food is directly sourced from local producers and the company believes this means lower sourcing and storage costs as well as fresher food for the end consumer.
HelloFresh plans to grow
HelloFresh – which is already one of the fastest-growing companies in Europe - does not plan to tread water. Earlier this month, the company detailed plans to launch an initial public offering on Frankfurt Stock Exchange that is set to raise €250-300m. Capital will be invested to support long-term growth, the group revealed in its prospectus.
“We want to use the IPO proceeds to invest systematically in additional growth. More specifically, we are planning to invest in equipment, automation and real estate. We also intend to gain strategic flexibility to further develop our business, add product lines or make add-on acquisitions,” Devenport explained.
The company does not currently intend to enter new markets. Instead, the German group is focused on expanding its presence in existing markets. Product development and extending HelloFresh’s appeal will be key to attaining this goal.
Innovation has been a cornerstone of HelloFresh’s success to date and will continue to be key moving forward. The company is deepening its appeal by delivering products targeting families and festive shoppers, while also extending its reach in bricks-and-mortar retail, Davenport revealed.
“There is always room to innovate and 2017 is a perfect example of this. In the UK, we have launched a number of innovations, including extending our offering into retail with a one meal box at Sainsbury’s and introducing specialty one-off boxes with our first ever Easter box, as well as a Christmas box later this year.
“In addition, we have received very positive feedback about our newly launched Family Box, which has been created by HelloFresh’s very own family chef, Andre. Priced at £53.99 (€60.30)… the Family Box has been specifically designed with busy parents in mind, taking the hassle out of meal-planning, prep and cooking, so that they can spend less time in the kitchen and more time with their family.”