Can Product Managers Have Their Meal- Kit And Eat It Too?

by drjim on April 2, 2018

Meal-kits are hot stuff, but is there room for more players in this market?

Meal-kits are hot stuff, but is there room for more players in this market?
Image Credit: Kurman Communications, Inc.

I’m pretty sure that we’ve all felt this way at some point in time. We come home from work, we’re exhausted and then all of sudden we realize that we have nothing planned for dinner. If you are like me, this is the evening that you end up calling out for pizza or grabbing something from McDonalds. Not quite the home cooked meal that you were hoping for. What if there was a way that everything that you needed in order to prepare a home cooked meal could be right there in your kitchen when you needed it? All you’d have to do is throw it together. It turns out that this can be done and in fact this market is getting ready to explode.

The Meal-Kit Market

So just exactly what is the meal-kit market? This is a market where companies ship parcels to customers that contain everything that the customer will need in order to create a meal at home. The parcels contain such things as ingredients and recipes that consumers who are looking for an easier way to cook at home can use to make a meal.

So far this market has been dominated by startup firms such as Blue Apron and HelloFresh. However, things are starting to change. The product managers at the big food companies, such as Tyson Foods, Campbell Soup, and Hershey, are starting to change their product development definition and work with online couriers. Their goal is to find ways to challenge the existing meal-kit companies. The motivation of these big food companies is to try to find a way to reclaim profit on ingredients that they already make.

The big food companies current make both commodity meats and packaged foods. What they are trying to do is to find a way to put a stop to a consumer shift away from packaged foods. This big food firms bring a large collection of foods to this market and that may not be a good thing. Their arrival is going to crowd a market that is currently already starting to show some strain. In the past year, 6 meal-delivery firms have closed down or restructured which goes to show how difficult it can be to start this type of firm.

How To Enter The Meal-Kit Market

One of the challenges that both new and existing firms have in this market is with the customers that they are going after. Studies have shown that only 3% of consumers have ever tried a meal kit. Additionally, meal kits cost US$10 on average while most consumers can make a meal for $4 per person. The product managers at the big food companies believe that their barriers to entry into this market are low. However, they will have to change in order to overcome the perception that their food is of lower quality and less fresh than that of their startup rivals.

Getting involved in the meal-kit market is very important for the big food companies. Studies are showing that younger shoppers are spending less at the grocery stores that they rely on. One such study revealed that 54% of consumers indicated that they were willing to try a meal-kit and at the same time anticipated that they would cut back on their grocery store spending. The big food companies get roughly 85% of their sales from grocery stores and these sales have been declining for the past three years. Big food company’s product managers see getting involved with meal-kits as a way to combat the double threat of ecommerce and online grocery. Oh, and if they are successful this should look good on their product manager resume.

The existing meal-kit companies believe that they don’t have anything to fear from having the big food companies enter their market. The meal-kit companies didn’t exist a six years ago and now there are over 150 different firms competing in the $1.5B U.S. market. The startup firms believe that it will always be the company with the best products that will win. Some of these startups are starting to hedge their bets. They are doing this by diversifying their distribution into supermarkets as well as courier services. The reason that they are doing this is because it is not clear that consumers will make meal-kit cooking a permanent habit.

What All Of This Means For You

Product managers at big food companies are facing a problem. Customers see their products as being less fresh and of lower quality than other alternatives. These customers are starting to turn towards a new way of making meals at home: meal-kits. The big food product managers are going to have to look at their product manager job description and take action or else they are going to see their markets start to shrink.

The meal-kit market consists of firms that ship ingredients and recipes to customers who then use them to create meals at home. As more and more customers do this, the big food companies will lose profits on the foods that customers won’t be buying from them. As big food companies move into the meal-kit market, things are going to get crowded. Only 3% of customers have tried meal-kits. However, customers who say that they will try a meal-kit, indicate that they will then start to purchase fewer groceries. The existing meal-kit companies don’t fear the entry of the big food companies in their market because they believe that the best food will always win.

As their traditional markets start to change, the big food product managers need to go in search of new profit opportunities. The meal-kit market offers some attractive options and the big food companies believe that they already have the food that is needed by any meal-kits that they make. The product managers are going to be challenged to show that their food is both fresh and of high quality. If they can do this, then perhaps consumers are going to have more options when they decide to cook at home using a meal-kit!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: How many times per week do you think that big food companies can get people to cook at home using a meal-kit?

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What We’ll Be Talking About Next Time

As product managers we believe that we are reasonably smart people. We know what our customers want. That means that we work with our development teams, design a product development definition, and then we create products that will solve problems for our customers. However, I think that we can all agree that we don’t know everything. Is it possible that our products could be used in ways that we can’t even imagine? It turns out that the answer is yes and the people who can show us, of course, are our customers.

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