By Adam Salomone, CEO of The Food Loft
Albertson’s announcement on Wednesday that they had completed the acquisition of Plated marks the next stage of evolution of the meal-kit space. Coming on the heels of the Blue Apron IPO, rumors that Green Chef was open to an acquisition and news that grocers themselves are starting their own meal-kit lines, we have officially reached “peak meal-kit.” Even a year ago, new entrants were flooding the market with all manner of niche, segmented consumer offerings, and at that time (and indeed well before that), there was plenty of hand-wringing about how all this would end.
It seems we’ve firmly entered the consolidation and acquisition phase. Which is a good thing, both for competing meal-kit companies and the foodtech ecosystem at large. And, while grocery stores seem like natural distribution points for meal-kits, eliminating a lot of the delivery cost and packaging material, it was unclear exactly how such a deal might take shape.
We now have our answer, and after reading and thinking more about the partnership, it makes a lot of sense. Here are a few reasons why:
- Albertsons has a footprint in 35 states across 19 different brands and 2,200+ stores. That’s a distribution growth engine to rival Wal-Mart (well, almost). No doubt, expect to see Plated meal-kits showing up in most, if not all, of those Albertson’s locations.
- More to the point though, Plated allows Albertsons the potential to offer a much more robust set of dinner-time solutions. In the future, a consumer could conceivably walk into the grocery store and have the option of doing their grocery shopping, grabbing a meal-kit, grabbing something fresh-and-ready to go, or taking one of the meal-kit recipes on-offer that day and having the groceries delivered same-day to their home. There are some assumptions in that evolution, but it allows Albertsons to own a much greater percentage of the possible dinner-time outcomes with one acquisition (especially because Plated can provide the logistics as well as the recipes themselves, which is important in the grocery delivery example).
- Related to the above, a presence in Albertsons eliminates the 1+ week lag time between ordering a meal-kit and receiving it. And it allows for much greater customization (meal-kits just for that evening vs for three nights, etc).
- With 35MM customers coming into their stores each week, and with the notoriously high CPA for meal-kit companies (into the $100s per customer), Albertsons effectively lowered Plated’s CPA for new customers to $0. And, if those customers are coming into Albertsons stores to get the kits, they likely will pick up other items while they’re there, increasing margins and overall basket size.
- On Plated’s end, no doubt Albertsons will work to leverage their extensive inventory management to drive down COGs at the company. Margin improvement in the long-term could be substantial.
- But perhaps the most interesting and important development is this: Albertsons was gearing up for their IPO earlier this year and shelved the plans after Amazon announced the Whole Foods acquisition. Shortly after, Amazon announced plans for their own meal-kit offering. With Plated onboard, Albertsons now has a company with more logistical know-how paired with Albertsons much larger brand footprint (relative to Whole Foods). While Amazon has an uncanny ability to hack the system, and a penchant for spending money to do it, Albertsons acquisition could give them enough of a foothold in this market to be both ahead of Amazon, and to make their dreams of an IPO come true.