Meal kit maker Chef’d announced last night that it was shutting down and suspending all operations in a surprise move that will reverberate throughout the sector for remaining independent meal kit companies.
According to The Wall Street Journal, the company, which had raised more than $40 million in venture funding, was unable to raise additional cash. Business Insider reports that Chef’d laid off more than 350 workers.
We actually liked Chef’d quite a bit here at The Spoon. We named it as one of our Food Tech 25 because of its diversified approach to meal kits. Chef’d offered them via mail, was one of the first to sell meal kits in-store through a relationship with Costco, and also had a number of high-profile white label partnerships with companies such as Coca-Cola, The New York Times and Campbells (which had invested $10 million in Chef’d).
Additionally, the company was striking really innovative partnerships, even within the past few months. It partnered with Byte Foods to place meal kits inside office fridges, allowing hungry workers to grab them on their way home from work. Chef’d partnered with Innit to provide meal kits through that startup’s guided cooking app. And just last month Chef’d announced a deal to put meal kits in Duane Reade and Walgreens drug stores.
When we spoke with Chef’d execs this past May, they touted how the company had spent less than a million dollars on customer acquisition as well as their packaging technology that added three times the shelf life to their ingredients.
Underneath this patina of excitement and innovation however, you could see trouble brewing for the company as a number of high profile execs such as its senior vice president for retail left the company in recent months.
Anyone who follows the meal kit sector knows that the mail order business is a harsh one. Getting meal kits by mail is expensive, takes too long, limits customer’s flexibility, and still requires a lot of work for the user. The Journal writes that the online subscription part of Chef’d business was a drag on the rest of the company.
Blue Apron, a pioneer in subscription meal kits, suffered through a number of setbacks over the past year including a rocky IPO, layoffs and CEO swaps. They recently initiated plans to sell meal kits at Costco.
The answer for many meal kit companies has been moving more into the grocery aisles. This makes more sense from a customer perspective, as it allows more flexibility and fits in with existing shopping and dinner deciding patterns. But the grocery aisles are filling up fast with meal kits and may no longer be an option for startups in the space looking for a savior. Kroger bought Home Chef, Albertsons owns Plated and Amazon/Whole Foods and Walmart have their own line of meal kits. It’s safe to assume that those retailers will push and market their own meal kits over any third party ones.
For remaining mail order meal kit companies, the future does not look so bright. HelloFresh was smart and went public early, giving it some leeway to adjust to evolving market conditions, and they are making their own retail moves. Perhaps there will be room for highly specific meal kits such as Purple Carrot, which just raised $4 million, and only offers plant-based meals.
A year from now, we could mark Chef’d shutting down as a turning point for the meal kit market — just not the one many had hoped for.