What’s for dinner? Venture capitalists have been betting big that you’ll turn to one of a growing number of food delivery services for an answer. The on-demand services range from providing ingredients and recipes to delivering pre-cooked gourmet meals to your doorstep.
Recipe and ingredient subscription services Blue Apron and Hello Fresh have each landed $193 million in total investment capital; and an ever-growing list of similar companies also have been funded generously in the past three years. Add to the category services such GrubHub and Seamless, essentially logistics companies that deliver restaurant fare, and startups like Maple and Gobble, which have their own kitchens and operate solely in the home delivery space, and you have a hot and burgeoning industry that didn’t exist five years ago.
Even Uber and Amazon are getting in on the act: UberEATS is now delivering restaurant meals in less than ten minutes in four U.S. cities; Amazon promises one hour delivery of groceries and prepared meals in a handful of markets.
But it’s not an easy business. Good Eggs, a San Francisco-based that delivered groceries and prepared food, recently closed its doors, citing the difficulties of scaling and supply chain management.
“The [companies] that succeed will be the ones that build differentiated products, solve complex operational challenges, and create brands that customers are emotionally involved with,” contends Blue Apron co-founder and CEO Matt Salzberg. His company recently opened a third distribution center and now delivers meals across the continental U.S.
Some of the startups are pivoting, too. Take, for example, Gobble, which founder Ooshma Garg launched in 2010 as a traditional prepared meal delivery service. Last spring, she changed her model and now delivers dinner kits that can be prepared in ten minutes and in one pan. Prices start at $11.95 per meal. She says the company learned that “getting food in a takeout box was not satisfying [to some working parents] because people felt guilty about not actually cooking.”
Other companies that have also iterated their models to differentiate themselves from the pack: BodyOm delivers healthy snacks similar to another service, Nature Box but it offers only raw food; Zesty competes with traditional delivery companies like Seamless by offering only healthy meals with nutritional info and calorie counts. “No one product will own the entire market,” says Garg. “A lot of these companies are complementary with one another.”
Here’s a rundown of the market and its major players:
Recipe and ingredient dinner kits: Blue Apron, Hello Fresh and Plated are the most established players and offer subscription boxes that include recipes and ingredients for three dinners per week for at least two people. Costs range from $10 – $15 per dinner, and the services offer varying degrees of customization. Smaller players such as Marley Spoon, PeachDish, Home Chef, Gobble offer a spin on the same model and may have more limited delivery areas.
Restaurant takeout. Seamless and GrubHub, which merged in 2013, are essentially mobile platforms that connect consumers with local restaurants for takeout delivery. Restaurants pay the services a commission. Unlike smaller competitor DoorDash, GrubHub does not have its own fleet of delivery vehicles, but that may be changing soon. In response to big competitors such as Uber and Amazon, who also have designs on the food delivery market and have the logistical manpower to be far more agile than most restaurants, GrubHub is rolling out its own fleet in a few test markets.
Prepared food delivery. Companies such as Munchery, Sprig, Maple and SpoonRocket prepare their own gourmet meals, often tapping into celebrity chef mojo (Momofuku’s David Chang is an investor in Maple), and delivering to local markets. They may cater to individuals, or focus on corporate clients in startup hubs such as New York and San Francisco. The sweet spot: inventive, healthy meals in the $10 range.
Niche delivery services. There are endless variations on the delivery theme – name a food preference, and there’s surely a startup that can accommodate you. For instance, Purple Carrot is a recipe and ingredient delivery service that appeals to vegans with it’s all raw, whole food, and plant-based aesthetic. Green Blender offers weekly delivery of five smoothie recipes and pre-portioned ingredients. And Fuel Food will send you five to 10 prepared meals per week, complete with calorie counts and nutritional information.
Donna Fenn is a journalist and the author of two books:Alpha Dogs: How Your Small Business Can Become a Leader of the Pack; and Upstarts: How GenY Entrepreneurs are Rocking the World of Business.
