What's on the menu for meal kits?

June 19, 2020

The pandemic is giving the meal kit industry a much-needed boost. Meal kit services are enjoying a surge in demand as legions of people cook from home amid COVID-19 stay-at-home orders. That development is welcome for an industry that was crowded with more than 100 competitors and stagnating before the coronavirus struck. The share of the population using meal kits has grown to 7% since the pandemic began, up from 5% all of last year.

However, now more than ever, the meal kit companies need to prove their value. There are a few trends emerging in an effort to win over customers in the long term.

More companies are partnering up with traditional CPG giants to improve scale and efficiency. One such partnership includes Kraft Heinz incubator Evolv, which just launched a new meal kit delivery service, SupperUp, in partnership with Instant Pot.

Solving the meal kit economics for the customer is also key to move it from a novelty item to a daily staple. The no-subscription startup SupperUp, which is being piloted in Illinois before a national rollout, delivers flash-frozen ingredients that can be put directly into the popular pressure cooker. The recipes serve four and work out to $5.50 to $7.50 per serving.

Going gourmet is another direction companies are taking. The pandemic has inspired some established restaurants to introduce meal kits of their own. Chick-fil-A, which started testing meal kits in 2018, recently added a $14.99 chicken parmesan meal kit for two to its menus nationwide. Denny’s last month launched five meal kits, including breakfast for up to six and a slow-cooked pot roast for eight.

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Meal Kit Up-and-Comers:

Marley Spoon is a meal kit company that services both the high-end and the low-end market. It has a collaboration with Martha Stewart, coupled with Amazon distribution, but also a budget option called Dinnerly. Customers pay $5 per portion, which means two people can order three meals each for about $39, including an $8.99 shipping charge. To feed a family of four costs about $69. That price puts Dinnerly well below the price of its competitors.

Home Chef is a Chicago, Illinois-based meal kit and food delivery company that delivers pre-portioned ingredients and recipes to subscribers weekly in the United States. It delivers three million meals monthly to its subscribers. On May 24, 2018, Kroger announced they were acquiring Home Chef for $200M with an additional $500 million in incentives if certain targets are met by Home Chef. The meal kits began to be stocked at Kroger stores in the middle of 2018.

Sun Basket is a San Francisco-based subscription meal delivery service that ships members fresh organic and sustainable ingredients and recipes every month, allowing them to cook their own meals. The company serves customers who have strict dietary restrictions, offering paleo, gluten-free and vegetarian options, among others. It is one of the few meal kit companies that is USDA - Certified Organic. The ingredients are sourced from California farms.

Funding & Deal Highlights:

Coralville-based startup IDx filed paperwork last week indicating it has raised $12.5M in funding.

Menlo Park, California-based Orca Bio closes on a Series D financing worth $192M, bringing the total raised since 2016 to $300M. The round was co-led by Lightspeed Venture Partners and an undisclosed investor. New and existing investors included 8VC, DCVC Bio, ND Capital, Mubadala Investment Company, Kaiser Foundation Hospitals, Kaiser Permanente Group Trust and IMRF.

Proprio, a Seattle, WA-based surgical navigation company, raises $23M in Series A financing.

Volkswagen said Tuesday it has invested another $200M into QuantumScape, a Stanford University spinout developing solid-state batteries as the automaker bets on a next-generation technology that will unlock longer ranges and faster charging times in electric vehicles.

Degreed lands $32M for upskilling in a down market.

Credit-focused fintech startup Upgrade raises $40M after reaching a $100M run rate.

TripActions gets its lifeline. The company has raised $125M in debt financing convertible at IPO, led by Greenoaks Capital and Vista Credit Partners.

Headless CMS company Contentful announces that it has raised an $80M Series E funding round led by Sapphire Ventures, with participation from General Catalyst, Salesforce Ventures, and a number of other new and existing investors. The company has now raised a total of $158.3M, and it is approaching a $1B valuation.

Dumpling, a tech startup that helps individuals launch their own personal grocery shopping services, raises $6.5M in Series A funding, according to a company press release. The company has raised $10M in total since it began.

Buckle, a technology-driven financial services company, has acquired Gateway Insurance Company, including its 47 state insurance licenses.

Clairvest Group Inc. announces that it, together with Clairvest Equity Partners VI, made its seventh investment in the waste management industry with an equity investment in Arrowhead Environmental Partners.

Ethema Health Corporation signs an LOI to purchase a majority interest in Biohazard Health Services LLC of West Palm Beach, Florida, an environmental services company providing disinfecting, testing, and training services to companies and institutions to provide their employees and customers with safe work and meeting spaces.

Totara announces that its owners have entered into a purchase agreement with Sydney private equity firm Five V Capital, under which Five V will acquire a majority ownership interest in Totara. The operations and management of Totara will remain unchanged with Richard Wyles continuing as Chief Executive Officer.

Credit Suisse Asset Management’s NEXT Investors, a leading Fintech growth equity group, announces that LUX Fund Technology and Solutions, a SaaS-based enterprise data management and reporting platform, and NorthPoint, a leading global provider of front-to-back office investment management solutions, have merged to form Portfolio BI. Portfolio BI provides a robust front-to-back platform for order management, portfolio management, and data management and reporting.

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