In the tech industry, the term “disruption,” referring to the drastic alteration of an industry or market, is practically a cliché. Everyone wants to “disrupt” a traditional business, often referencing an attempt to become the next “Uber” of a particular industry, referring to the private car service that has upended the taxi industry. These startups are looking to outsource the daily chores and nuisances that take up consumers’ time and energy, from laundry (Washio) to mailing packages (Shyp) to storage (MakeSpace). And now a new group of tech-savvy entrepreneurs have set their sights on disrupting the food industry.
For our recent Creative Concepts TrendSpotting Report on meal delivery services, Datassential looked at a number of these companies, from the ingredients, dishes and flavors you’ll find on the delivery menu to the ways they are using technology to set themselves apart. We also surveyed consumers for their opinions, from their interest in and experience using these services to the factors that are most important to them.
Focusing on 3 markets
Currently these startups are centered on three markets: prepared meal delivery, meal kit delivery and grocery/packaged goods delivery. Companies like SpoonRocket, Munchery, Sprig and Caviar, for instance, serve complete, prepared meals, many prepared by chefs with impressive backgrounds. Sprig’s executive chef, Nate Keller, was previously the executive chef at Google, where he oversaw 40,000 healthy, locally-sourced meals every day. The company has also worked with on-trend chefs like Stuart Broza, of San Francisco’s State Bird Provisions (one of the hottest restaurants in the country), whose three meal options sold out in 11 minutes.
Services like HelloFresh, Plated and Blue Apron, meanwhile, are attempting to make it easy to prepare a fresh, healthy meal on a weeknight. For most of these services, customers choose three-to-four dishes from about twice that many options, which are delivered on the day of their choice. Each dish is meticulously pre-measured — ingredients may include a small plastic bag holding a tablespoon of curry powder, for instance, or two slices of bread wrapped in plastic. Customers use recipe cards to make each meal, with an average preparation time of around 30 minutes. These companies market the enjoyment and creativity of fresh cooking without a trip to the grocery store to source unusual items, or the waste and expense of purchasing full bottles or boxes of ingredients for a single dish.
Almost all of these meal delivery services focus on health, freshness and on-trend ingredients — you’ll find plenty of quinoa and kale salads. In fact, when we asked consumers which features were most important when choosing a delivery service, 48% chose fresh ingredients. Most entrees are priced at around $10, often featuring highly-stylized food photography and enticing descriptions of each dish. And while some services are simply delivering meals or goods from existing restaurants or stores, keeping overhead low, others have their own kitchens and warehouses.
Grocery and goods delivery services are also popping up, from both major players — Amazon, Wal-Mart and Google are all testing fresh grocery delivery — or from startups like Instacart (which is partnering with Whole Foods) and Boxed, a company aiming to be the delivery alternative to warehouse clubs like Costco and Sam’s Club. Postmates promises on-demand delivery of “almost anything,” from coffee to a new computer, as long as their couriers can manage it, while startup Drizly partners with local wine and liquor stores to deliver wine, spirits and beer to customers.
A new consumer market
Of course, meal and grocery delivery have been around for years, from the iconic milkman of the ’50s to the ubiquity of pizza delivery today. The grocery delivery service Peapod began in 1989, and a number of tech-based food delivery services launched (and failed) during the tech boom of the 90s. So what makes investors think these companies will succeed this time around?
For one, the market has changed. Consumers are now far more comfortable with technology and online shopping. Most of these delivery services are phone apps, taking advantage of the modern consumer’s always-connected lifestyle to allow them to order a meal, track its delivery status, and leave feedback directly from their cell phone.
And, as urban populations continue to grow (the United Nations predicts urban areas will grow by 2.5 billion people by 2050), these services also make more economic sense, catering to a population of young consumers who are less likely to own a car, while densely populated areas keep transit costs low and give them access to a large labor pool (many of whom work as independent contractors).
These companies are also relying on “big data” to drive efficiency. SpoonRocket, for instance, is attempting to deliver most meals in less than 10 minutes from the time a customer places an order. They do this by constantly crunching the numbers, dispatching drivers who use custom-built cars with built-in warming compartments to the most popular neighborhoods. Many of these companies rely on data to personalize meal preferences, aid in recipe creation, determine new markets for expansion, and drive down delivery times (the consumer’s desire for instant gratification is one of the main pain points for any delivery service).
If the amount of investment in the industry is any indication, at least a few of these startups are likely to become full-fledged players. Both Blue Apron and HelloFresh have raised $50 million in funding, Instacart has raised $44 million, Munchery $25 million, Postmates $22 million, etc., while the combined GrubHub/Seamless restaurant delivery company raised $192 million in their initial public offering earlier this year. And entrepreneurs are testing new concepts all the time, with new ideas aimed at more focused markets. Food technology is now a hot investment opportunity for venture capitalists, who invested about $4 billion in the segment in just the first six months of this year, according to Rosenheim Advisors — double the amount invested in 2013. And, according to our research, over a third of consumers love the idea of meal and grocery delivery services, while over a fifth have already used them.
Even the milkman is making a comeback — delivering organic milk fresh from the farm, of course.
Maeve Webster is the senior director of Datassential, a supplier of trends, analysis and concept testing for the food industry. To subscribe to the Creative Concepts TrendSpotting Report mentioned in this article, contact Webster at 312-655-0596 or [email protected].
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