“By the end of 2020, any standalone meal-kit company will be dead,” said Nick Taranto, chief strategy officer and co-founder of Plated, “and we’re going to put them out of business.”
Now there’s a bold prediction … or is it?
Taranto delivered his prophesy in late October during the Fast Company Innovation Festival in New York City. Just one month earlier, five-year-old Plated was acquired by grocery giant Albertsons for a reported $200 million. While both parties are still digesting the acquisition, it provides Plated with access to some 2,300-plus supermarkets operating under banners including Safeway, Shaw’s and Tom Thumb, greater sourcing volume and the use of refrigerated home delivery services. The biggest bonus: Albertsons’ 35 million weekly active shoppers — more shoppers than the entire meal kit category has attracted thus far.
Plated CEO and co-founder Josh Hix says he always believed that retail would be a critical component for Plated, noting that the company has been talking with retail companies since the early days. “Our vision from the very beginning was to apply technology to perishables and to make the experience better. With Albertsons’ scale, we have the opportunity to do both.”
Hix says most traditional food businesses start from a supply chain-first mentality; Plated has always had a customer-centric focus. The challenge is balancing hundreds of millions of order combinations each week while appealing to customers who expect personalization. He believes that the idea of elevated culinary experiences will continue to grow, and envisions the grocery experience changing with shelf staples and package foods becoming reoccurring online orders and the grocery store taking center stage for perishables.
Though Hix and Taranto say it’s too soon to know what the partnership will look like down the road, the Albertsons partnership opens the door to frequent online ordering and picking up items on the way home. The two also envision integrating with Albertsons’ loyalty program — a move that will help them understand what other foods shoppers are purchasing along with a Plated box.
The Plated acquisition is just one story in a category that has provided its share of news. In May, Unilever invested $9 million in meal-subscription service Sun Basket and days later Campbell Soup invested $10 million in Chef’d. Blue Apron made headlines in June with an initial public offering that was broadsided by Amazon’s Whole Foods acquisition, and Hello Fresh announced in October that it’s planning an IPO on the Frankfurt Stock Exchange.
Why all the activity? Bottom line: The business is not profitable or sustainable — for the entrepreneurs or the venture capitalists that initially backed these companies. Food businesses operate on razor-thin profit margins; while meal-kit providers don’t have real estate costs to manage, shipping perishable goods across the country, packaging items for exact measure and making sure that foods arrive at the right temperature is a costly proposition. So are customer acquisition costs: Most spend close $100 to attract new customers. The only way the math works is if there is scale. That seems to bode well for Plated’s future.
Maybe Taranto’s forecast is less of a prediction and more of a necessity.