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The Spoon

Daily news and analysis about the food tech revolution

Nielsen

Study: Online Grocery Sales to Hit $143 Billion by 2025

A newly released report from Nielsen and the Food Marketing Institute (FMI) saying that online sales of food and beverages will reach $143 billion by 2025 (hat tip to Grocery Dive). Nielsen and FMI also said that this $143 billion will represent 30 percent of all omnichannel food and beverage sales.

What’s notable about these new figures is how much online grocery shopping is accelerating. In 2017, Nielsen and FMI predicted that online grocery sales would hit $100 billion by 2025. The two firms then updated their figure last year to say online grocery shopping would hit $100 billion between 2022 and 2024.

This acceleration is due in part to the logistics and delivery infrastructures being put in place by retailers. Grocery Dive writes that according to Nielsen and FMI, things like Amazon auto replenishment, two-hour delivery and the widespread availability of buy online and pick up at stores are contributing to the boost in online sales.

We’ve written before about how grocery retailers are in a Field of Dreams scenario. All the major grocery chains are investing heavily in logistics and building out delivery infrastructure now for the online grocery shoppers to come. Amazon waived its delivery fee for Prime members. Walmart is rapidly rolling out its Delivery Unlimited program nationwide. Albertsons is building out micro-fulfillment centers. And Kroger is doing everything from robot-powered fulfillment warehouses to testing self-driving grocery delivery vehicles.

All this investment will (and is, evidently) moving more people towards buying groceries online.

And in what may come as a surprise, “the olds” are driving this adoption of online grocery shopping. Nielsen and FMI found that shoppers between the ages of 45 and 64 held the largest amount of omnichannel grocery spending. Gen Z shoppers still prefer to do their grocery shopping in-store.

I expect we will see continued acceleration in the space, especially as grocery stores expand the delivery of food to include things like deli and made to order meals.

NPD: 93 Million American Adults are Meal Kit Curious

The potential market for meal kits isn’t tapped out, as new research from NPD finds that 93 million adults in the U.S. still haven’t tried meal kits, but want to.

NPD said that the move from mail order to retail is attracting new customers, and the research firm lists three reasons why meal kits present a big opportunity:

  1. Users are highly satisfied with their meal kit purchases both online and in-store.
  2. Users are still experimenting with brands and formats, so their habits aren’t set yet.
  3. Meal kits can be more than just dinner, providing an opportunity for new categories and brands.

NPD also outlined who is buying meal kits:

Meal kit users are more likely to be Millennials, have households with kids, and higher incomes. Online and in-store meal kits appeal to similar demographic groups although in-store kits skew to households with children less than 13 years old and higher income levels.

NPD’s numbers mirror and reinforce a recent Nielsen survey that found that retail outlets have been the main source of growth for the meal kit industry, and that 23 percent of US households would consider purchasing a meal kit in the next six months. Nielsen also found that meal kits were being purchased by more affluent households.

All of this is to say that meal kits are–to paraphrase Monty Python–not dead yet, and in fact have the potential to be very much alive and thrive. The move into retail has been a shot in the arm for the meal kit sector and the shift is just getting underway. Kroger, which owns Home Chef, and Albertsons, which owns Plated, just started the nationwide rollout of meal kits in earnest last year.

With this much headroom to grow, we can expect to see more of a marketing push to parlay shoppers’ store loyalty into meal kit loyalty.

Nielsen: Move Into Retail Making Moola for Meal Kits

The move into retail has been a smart one for the meal kit industry, as the new sales channel helped drive meal kit growth in 2018, according to a report out this week from Nielsen (h/t Grocery Dive).

Overall, Nielsen found that meal kit users (both online and offline) have increased 36 percent throughout 2018 and that 14.3 million households purchased meal kits in the last six months of 2018 (up from 3.8 million household from the end of 2017). And Nielsen says there’s more room to grow, with 23 percent of American households saying they would consider purchasing a meal kit within the next six months.

Nielsen points out that the majority of meal kit sales still happened online in 2018, but growth came from in-store sales, which makes sense as meal kits made their debut in grocery aisles last year: Kroger purchased Home Chef, Albertsons rolled out Plated meal kits, and HelloFresh made a deal with Giant and Stop & Shop. Nielsen says that 187 new meal kit items were introduced at retail outlets last year, and that in-store meal kit sales generated $93 million over the course of 2018 with the number of in-store meal kit purchasers increasing by 2.2 million households in less than a year. This jump accounted for a 60 percent growth in meal kit users.

So who’s buying meal kits? In a blog post, Nielsen writes:

Overall, affluent consumers earning an income of more than $100k drove meal kit growth across online and in-store in 2018. Compared to 2017, these consumers increased their online meal kit purchases by 6 points and their in-store purchases by 9 points. Across both outlets, growth is also being led by consumers between the ages of 35-44, who showed a 4.3 point increase in meal kit purchases online and a 9.2 point increase in those bought in-store. Meanwhile, meal kit purchases from older consumers aged 45-54 declined 2.8 points online and 7 points in-store over the past year.

We are typically pretty bearish on the future of mail-order meal kits here at The Spoon. A lot of that sourness is driven by our own experiences with the product. Mail-order meal kits are expensive, they generate a lot of packaging waste, they are a lot of work to make, and because the ingredients are fresh, you pretty much have to make them as soon as they arrive (whether you still want that recipe or not) or else they spoil.

Meal kits in grocery stores, however, can still offer the same benefits of meal kits — pre-portioned fresh ingredients, introduction to new types of cuisine — but do it in a way that is more convenient and fits into a consumer’s existing daily flow.

And we’re really just at the beginning of what is possible for meal kits at retail as they only started rolling out last year. There is tons of head room for experimentation and innovation, whether that comes in the form of frozen foods, meal kits sold in new retail outlets like drug stores, offices, or even customized meal kits created in stores and brought out to you curbside so they can be made that night.