As if Blue Apron (NYSE:APRN) didn't have enough worries, now it has to contend with a new kind of competition: beverage makers entering the meal-kit delivery market. Coca-Cola (NYSE:KO) and Anheuser-Busch InBev (NYSE:BUD) won't be making food deliveries themselves, but they're partnering with other meal-kit services. And while that can only make it harder for Blue Apron to maintain its leadership position, it's also pointing to the direction the market is heading.
A seat at the table
Meal kits are currently a $2.2 billion industry that USA Today says is expected to grow 25% to 30% over the next five years, citing data from food-industry consulting firm Pentallect. Others estimate fresh-food subscription services could grow by a factor of 10 over the next five years in just the U.S. alone, with global revenues exceeding $10 billion by 2020.
The delivery services have found in private equity (PE) a ready source of hundreds of millions of dollars. Last year (though it's now considering selling itself) Home Chef raised $40 million from PE firm L Catterton; Chef'd raised some $12.3 million in funding, and Freshly got $21 million. In 2015, Blue Apron itself raised $135 million in PE investments, which valued it at $2 billion at the time.
A healthy appetite
But Blue Apron has now likely shut the door to any of its rivals going public since its initial public offering has turned into a horror show. With Blue Apron stock losing half its value in the few weeks it's been publicly traded, other meal-kit delivery services are finding new avenues of financing, mainly big food.
Earlier this year Unilever invested $9 million in organic meal-kitter Sun Basket, which previously raised $43 million from private equity.
But rival Chef'd seems to be one of the most active in pursuing that route, just last month it raised $35 million from investments by Campbell Soup, and online grocer FreshDirect. In addition, Chef'd is partnering with dozens of chefs and brands to develop a menu of more than 650 meal kits. For example, its partnership with Weight Watchers (NASDAQ:WW) resulted in a meal plan specifically customized to the Chef'd program that features Weight Watchers SmartPoints values pre-calculated for each meal.
Chef'd is also different from Blue Apron, HelloFresh, Plated, and others, because it is not a subscription service (though it does offer subscriptions -- for example, its Weight Watchers plan). Instead, you order from Chef'd whenever you want; that can be attractive for consumers who don't want to be tied to purchasing a set number of meals every week. Chef'd meal kits are also available through Amazon.com, which is, of course, entering the market itself.
Now big beverage is moving in
It's notable that Coca-Cola chose Chef'd as its partner, pointing out to industry site BeverageDaily.com that "beverages are an integral part of the meal occasion." Coca-Cola will provide the meal-kit delivery service with beverages like Coke, Dasani water, and Gold Peak sweet tea. It's going further by pairing specific beverages with certain meals, because of their ability to complement the food.
Anheuser-Busch InBev is doing something a little different up in Canada, which means Blue Apron probably doesn't have to worry yet about the brewer encroaching too far on its turf, but it still seems like a matter of time before it comes to the U.S.
Anheuser-Busch is partnering with Canadian meal-kit service Chefs Plate. Beer will not be shipped with a pre-planned dinner, but one meal kit will include a set of Stella Artois chalices along with ingredients for "a unique, Belgian-inspired recipe ... ideal for summer hosting." It's a more subtle marketing message, but one that could expand across Anheuser-Busch's beverage portfolio, and one that could easily come south. So while ChefsPlate doesn't operate in the U.S. and Blue Apron isn't available in Canada, it doesn't mean that Blue Apron might not see such partnerships appear here at home.
A full plate
Partnerships with celebrity chefs, major consumer groups, or beverage giants could all be in Blue Apron's future. This is particularly true if such branding helps lower costs, now one of the meal-kit leader's biggest problems. According to CNBC, Blue Apron spent 14.5% of net sales on marketing, compared to just 1% for Chef'd.
But as competitors grow by tapping other sources of growth, Blue Apron remains mired, having gone public in a big show without (apparently) understanding the risks it faced. And now it has new challenges, from both Coca-Cola and Anheuser-Busch.