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The $650 billion brick-and-mortar retail grocery experience has not changed materially, despite the rapid pace of disruption occurring in sectors all around it. Grocery stores are still organized functionally rather than according to shoppers’ need states. This leaves a big opportunity for another model to offer a more satisfying answer to the near daily need: “What’s for dinner?”
With 80 percent of people cooking at home three to five times per week, and increasingly seeking fresher, healthier, and simpler, more sustainable and – above all – more delicious options, it’s not surprising that meal kits have created such a stir.
Don Barnett, Chief Operating Officer and board member of Sun Basket, the leading healthy, organic meal kit in the United States explained the advantages and appeal of the emerging meal kit category as one of the keynote presentations at the sold-out inaugural Organic Grower Summit earlier this month in Monterey, CA.
At the foundation of the meal kit model – in addition to satisfying a pervasive consumer desire – is a simplified supply chain: rather than the five, six or seven steps in the typical grocery retail supply chain, Sun Basket’s food goes from farm to Sun Basket to consumer. The Sun Basket organic farm-to-fork model produces faster, fresher, better quality ingredients, and their home delivery model which ships to 98 percent of all zip codes in the US – all with just three distribution centers.
Barnet said the largest retailer in America reaches about 40% of the households in the country – less than half of Sun Basket’s reach. The Sun Basket distribution system requires significantly less capital investment than a retail supermarket chain with hundreds or thousands of brick and mortar stores.
Another significant consumer benefit is the reduction in food waste that consumers see as meal kit delivery subscribers. According to USDA research, about 35 percent of food in the brick-and-mortar retail food chain becomes waste – approximately 11 percent in the store and 24 percent in the home. Meal kits, on the other hand, sent out exactly what is needed to prepare the recipe, with very little waste. Subsequently, as more consumers care about reducing waste both from an environmental and personal economic standpoint, Sun Basket provides a significant point of difference.
The journey for Sun Basket has had both challenges and surprises along the way. Despite the emerging popularity of all-things-ecommerce, when the Sun Basket team did a survey of senior executives at major retailers three years ago, not one of them had tried a meal kit delivery service or ordered groceries online. More surprising, none of them had an e-commerce strategy in place.
Food remains one of the last major markets to be disrupted. Today, just 3-4 percent of food is bought online…but change is coming quickly. Barnett pointed to four key megatrends highlighting the growth and change in the way consumers purchase food, with a strong upside for the meal kit delivery model:
- Online grocery market is underpenetrated
- Consumers are seeking healthier, more sustainable food
- Busy consumers seek convenience and 41 percent of millennials have ordered food online
- 95 percent of people cook at home
Barnett said Sun Basket’s target consumer is the busy young family that’s health-minded but time constrained. Secondarily, they target empty nesters, the single guy and the fit female. Sun Basket approach these demographic audiences primarily through the digital channels: social media and search marketing where they can run finely targeted ads and revise them as they get data to suggest one approach is more effective than another.
Working through their e-commerce model provides Sun Basket with the kind of intimate customer data that helps the company precisely target its sourcing, recipe development and marketing-----and directly targeting each individual consumer.
Barnett said if it sounds a little like Sun Basket is more of a tech company than a food company, that’s because that’s how they think of themselves.
They are good at food. And they are good at tech. And Sun Basket is leading the charge to disrupt organic food and answer the daily question… “What’s for dinner?”
