How the pandemic fed the growth of food subscription services
Online shopping for everything from groceries and prepared meals to pet supplies and home goods has soared during the pandemic, speeding faster growth of subscription services that already had been on the rise before the COVID-19 outbreak hit.
Consumers newly accustomed to ordering essentials online found subscription services as a reliable, convenient and safe way to stay stocked on goods they were buying regularly and the rise in subscriptions often tracked other pandemic-era trends including the shift to more at-home dining. The model has also proved attractive to businesses seeking reliable ongoing revenue streams amid the uncertainty.
Total enrollment in all types of subscription programs surged 48% in 2020 over the previous year, and there was a 25% increase in the food and beverage category, according to relationship commerce firm Ordergroove.
The average food and beverage subscription order had a value of $52 and, in the category that can include everything from prepared meals and meal kits to fresh produce and other grocery and restaurant items, tea was the top purchased item in 2020.
“We have a couple of customers that are in that kind of meal kit or bundled food category, but the majority are replenishment firms,” Ordergroove Chief Revenue Officer Ralph Robertson said.
Subscription services have proven particularly popular for items like snacks and beverages, he said.
One category that thrived last year was produce. Companies including Imperfect Foods and Misfits Market surged in popularity as consumers sought safe sources of fresh fruits and vegetables and growers and suppliers needed new buyers as many foodservice channels shut down overnight. Both companies have expanded from produce to offer many other food items that subscribers can add on to their regular orders.
“Many of our suppliers and partners had large surpluses of produce and other items that typically would have gone to restaurants, hotels and other food service establishments,” an Imperfect Foods spokesperson said in response to emailed questions. “For example, popcorn that would have been sold to movie theaters and snack trays destined for airlines were left over in mass quantities.”
Those products allowed Imperfect Foods to expand its array of offerings, helping grow its business 229% last year as it attracted new customers and existing subscribers made larger and more frequent purchases, the company says.
The company has also seen growing demand for its expanding array of private-label foods that are available exclusively to subscribers.
“Last month, we also introduced our new private label health and beauty line as our customers expressed a need for those kinds of grocery items. As we continue to expand the private label segment of our business, we expect the demand and retention of our services to increase,” the spokesperson said.
The pandemic also had consumers eating more at home and seeking options like meal kits and prepared meal services to make meal prep easier and quicker.
About 10% of consumers reported ordering prepared meals in June and July of 2020, up from 6% in the same period in 2019, NPD Group’s Darren Seifer said. There was some data showing demand for prepared meal services was on the rise before the pandemic hit, he said, but the desire to stay out of stores while still putting a variety of meals on the table likely spurred faster growth.
That said, price is a factor too.
“The biggest reason people cancel these subscriptions is because they say they’re too expensive,” Seifer said.
Companies can counteract those perceptions by stressing the value of having someone else do the work, he said. That appeals to people looking for shortcuts and also looking to cut food waste.
Sustainability has been a core value that’s attracted consumers to Imperfect Foods.
“Our mission is founded upon building a better food system for everyone, and a large part of that is to eliminate food waste. In 2020 alone, our sourcing strategy has saved over 50 million lbs of food and avoided over 20,000 tons of carbon dioxide, our last mile delivery model avoided more than 12,000 tons of carbon dioxide emissions, and over 70% of our material waste was diverted from landfill,” the company spokesperson said.
It’s not just groceries and meal kits that are on the rise
The Third Place in San Francisco offers area restaurants, bars, tea shops and other merchants the ability to create subscription services that provide regular revenue sources and also help the businesses foster connections and loyalty with customers.
The startup has signed about 70 businesses since launching late last year, the San Jose Mercury News reported. Customers pay a monthly fee that can range from $30 for boxes of local baked goods to $300 for wine and cocktail packages from Salt Collective’s high-end restaurants.
In some categories the surge in subscriptions went along with another pandemic-era trend. Many people suddenly stuck at home all day adopted pets both for companionship and to provide a home for dogs and cats in need. Earlier this month, pet products subscription provider Barkbox reported a 47% increase in subscription shipments and a 66% jump in new subscribers for the quarter ending Dec. 31.
Subscriptions in the pet supplies category surged 340% in 2020 from the previous year, according to Ordergroove’s data, with an average order value of $59.
Other categories that booked strong growth were home goods and beauty, which saw 288% and 117% increases, respectively.
The country’s still in the midst of the pandemic, but with the vaccine rolling out there’s hope of a return to something more like normal in the coming months. That doesn’t mean consumers will abandon the services that served them well during unprecedented times, Ordergroove’s Robertson said, noting that 84% of global consumers have shopped online at some time.
“I think what we’re seeing just in terms of our customers and in the industry more broadly is that changing consumer behavior is likely here to stay,” he said.
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