E-Commerce Meal Kit Market Heats Up

Supermarket chain Rewe has jumped into the recipe box delivery service, challenging successful startup models like HelloFresh. Other big retailers are likely to follow suit, but they have a lot of catching up to do.
Quelle: dpa
Here comes dinner: supermarkets are muscling in on the recipe box delivery game.
(Source: dpa)

Berlin-based recipe box provider HelloFresh delivered its first orders in 2012. The founders had bought the ingredients themselves at a supermarket and sent the meals in bags. Food retailers thought that meal-kit delivery was a crazy idea. But in the first nine months of 2016, HelloFresh had worldwide sales of €440 million – twice as much as the same period a year before.

Now retailers are suddenly electrified. German grocery store chain Rewe is the first in the country to react to HelloFresh and other similar startup outfits like Marley Spoon, Kochzauber and Kochhaus. On its website, Rewe links a database of recipes with its own delivery service. This makes buying ingredients online much simpler for customers – and issues a challenge to competitors. Both types of offers are directed at the same target group: customers who don’t want to lose time shopping but still want to cook at home.

But the services aren't exactly alike. At HelloFresh, the customer can choose from a weekly selection of prepared cooking boxes sent via express delivery. The ingredients have already been portioned out and weighed, while the number of individual dishes and servings is optional.

At supermarket Rewe, customers can choose a recipe and then select from an array of ingredients according to price and brand. The order is then sent out with Rewe’s own delivery service. “The focus is on interlocking distribution channels, creating new customer-oriented services and added value, winning over customers with new functionalities and generating additional revenues,” a Rewe spokesman said.

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Chief executive Alain Caparros has set ambitious sales targets for the Rewe delivery service: “In three years, we want to be at €800 million,” he said. At current figures, that would make Rewe the fourth-largest online retailer after Amazon, Otto and Zalando. But the company is still far from reaching that goal. The most recently-published figures show sales of around €25 million for 2014. But experts predict high rates of growth in this business, and in the meantime, the company’s sales in the area might have reached €100 million.

Rewe will certainly not be the only food retailer to enter into direct competition with the meal kit delivery services. Thomas Täuber, director of retail research at the consulting firm Accenture, believes others will follow suit. “I consider it highly likely that other players will get involved. No one can risk not entering this field.”

In November 2015, the discount chain Lidl took over HelloFresh competitor Kochzauber, and other rivals are getting involved as well. All of the country's notable food retailers have integrated recipe data banks into their websites, but aside from Rewe, most haven't linked directly to products or delivery service. New options have opened for supermarket chain Edeka, however. With the takeover of Kaiser’s Tengelmann, the market leader also acquired its delivery service Bringmeister.

The integration of recipe suggestions, ingredient purchase and delivery service brings customers an added value that binds them to the retailer, which can become part of customers’ kitchens and even manage their pantries. But retailers are still rushing to catch up with the startup competition. “And that's even though they actually have better prerequisites than the cooking-box providers,” Accenture's Mr. Täuber said. Its individually packed ingredients put HelloFresh at a disadvantage when it comes to sustainability. And supermarkets can offer a far wider selection of products at a lower price, because they buy in bulk.

But unlike the startups, supermarkets can only sell complete units instead of tailored portion sizes. Still, Mr. Täuber believes this problem can also be solved. “The next step for supermarkets lies in intelligent systems,” he said. They can thereby help customers to optimize use of the purchase in the kitchen and to plan recipes for a longer period of time, for example. And linking shopping with certain nutrition plans also becomes possible.

Regardless of how these models unfold, online business will become increasingly important for food retailers in the future – even if it only provided 1 percent of overall revenues in 2015. Margins are so slim that companies depend on every single article that generates sales and profits.


Andreas Neuhaus writes about companies and markets for Handelsblatt. To contact the author: [email protected]