Why Major Meal Kit Companies Lose 90% of Customers in a Year | WSJ The Economics Of
The Wall Street Journal・8 minutes read
The meal kit industry in the US has seen significant growth with major companies focusing on price, convenience, and variety to attract customers, but 90% of subscribers cancel their subscriptions within a year due to low retention rates and the end of promotional discounts. Larger companies benefit from economies of scale to offer lower prices, but buying ingredients from grocery stores remains a cheaper alternative per meal, while differentiation is key for companies like Methodology offering unique pre-made meals at higher prices.
Insights
- Customer retention rates in the meal kit industry are low, with 90% canceling subscriptions annually, often due to the end of promotional discounts.
- Differentiation is key for meal kit companies' survival, as seen with Methodology offering unique pre-made meals at higher prices, challenging the industry's focus on price, convenience, and variety.
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Recent questions
Why are meal kit companies popular?
Convenience, variety, and price attract customers.
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Summary
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Meal kit industry growth and challenges
- Meal kit companies have significantly increased in the US, from 13 a decade ago to 382 now.
- Despite growth, 90% of customers cancel their subscriptions by the end of the year.
- Major meal kit companies focus on price, convenience, and variety to attract and retain customers.
- Economies of scale allow larger companies like HelloFresh to offer lower prices.
- Buying ingredients from grocery stores tends to be cheaper than meal kits on a per-meal basis.
- Customer retention rates are low due to the end of promotional discounts.
- Differentiation is crucial for survival in the meal kit industry, with companies like Methodology offering unique pre-made meals at higher prices.
