Selling Meal Kits at the Gold Rush

Have you got your meal kit yet? Have you invested? The meal kits are coming. Only, they’re stumbling even as they arrive. Very few of them are getting to your house, your office, even to your kid’s lunchbox. Just a couple of months ago, the thought was, you gotta have a meal kit, leave your job for a meal kit company, invest, disrupt, pack, deliver, someone get me a chef to partner with! But here’s one place the meal kits are actually headed: your grocery store. And therein lies something of a lesson.

It was the same way with HPP, with mobile canning units, cap activated mix-to-drink functional beverages, cleanses, turmeric (and before that, ginseng), energy drinks, vitaminwater knockoffs, energy shots, stevia, Splenda, and dozens of other advances that might have been incremental if we weren’t so desperate to discover the next big thing in the food and beverage industry.

It’s easy, right? You look at what one person or company is doing successfully and see yourself as the person who can really disrupt the market, or at least get your own little piece.

But so many of these things fall apart. Fads don’t become trends. You just can’t cleanse every day.

I’m fascinated by this Gold Rush mentality: it creates hundreds of short-term businesses rather than ventures that are able to take the time to create a patient understanding of the significance of an idea. I think it’s triggered by the fact that there are so many fast trains arriving at the station that entrepreneurs and gatekeepers alike feel they have to be on one, any one, even if it’s going in the wrong direction. We all contribute to this atmosphere, with our talk and its amplification via social media.

For the supermarkets, understanding that there’s so much shift in their business models on the way, it would be excusable if they wanted to take on a Gold Rush mentality: new tracks are being built all around, over, and through the idea of traditional grocery retailing. As we all know, toilet paper, 5-Hour Energy Shots and Clif Bars are soon to start descending from the sky, clutched in the claws of winged drones. So grocery stores have every right to wonder what their place will be in the retail food chain. At a time when they’re under so much pressure, the idea that they would stick to their guns and wait to find out what meal kits might mean for them is admirable. In this regard; they haven’t panicked on the battlefield, they’ve waited for the smoke to clear, and seen this trend for what it is: a way for them to bolt on something that’s value-added, higher margin, and has on-trend millennial appeal.

As of this writing, Whole Foods and Kroger are developing their own; Albertsons is about to buy another. My local vacation spot had a big display of the meal of the day, all set up for a busy family to cook it up. Apparently, it’s not that hard to do the slicing and dicing and food apportionment – if that’s the business you’re in.

Even more, they’re not as likely to lose money on the thing. Online meal kit services are: they face the operational problem that they have to build both restaurant and takeout from the ground up, and the marketing problem that they have to pay their customers to try it out. It’s as if they were starting Uber by first figuring out how to build a car.

Most grocery stores, meanwhile, are already close to having the kind of capacities that the meal kit companies needed: they have their own kitchens or work with commissary operations that are fully capable of stringing together the elements of a meal for packaging at a supermarket already. In fact, groceries already provide something of a meal kit: the rotisserie chicken, which can be transformed into hundreds of different dishes with little waste and low cost. Just as these stores are transforming their in-store lineups, it should be money on the table for them to continue to transform their grab-and-go offerings into grab-and-cook.

In this idea, at least, the grocery stores have been smart in playing the long game, even as rapid change swirls around them. They sat back to watch the meal companies immolate themselves, and now that the weaknesses of the proposition are apparent, they know that the services need them as an inexpensive way to gain consumers and build share. In other words, they’re going to make the meal kit companies act like part of the CPG environment, rather than the tech world.

So what does this mean for the beverage business? Well, on the meal kit side, Coke has figured it out already, striking deals so that recipes can be developed with its products as components or accompanying beverages. Other companies are figuring out that their branded products might make their way into these kits via ingredient or licensing deals.

But I think there’s just a broader lesson here, as well: think about the significance of the innovation and how it fits for you, rather than to assume the innovation is the business and to get into it wholesale, while taking your investors for a ride. Remember: innovation – even delivery innovation – should deliver.