I recently subscribed to Gobble, a food delivery service after listening to this a16z podcast. Gobble along with other similar services offer complete dinner kits with step-by-step instructions on dinner preparation. They consistently provide delicious and healthy restaurant quality meals in the 500-700 calorie range.
Services like this fundamentally change our relationship with food including how we shop, cook and eat. They trend towards efficiency, nutrition and transparency by servicing customers desire to eat healthy, know where ingredients were sourced, while spending less time in the kitchen.
This is currently a mostly untapped $200B TAM (50M working people * 2 meals/day * $8/target price per meal * 250 working days/year) where a number of startups are being funded. Companies in this space can be broadly categorized as
- Restaurant ordering and take out services like Doordash, Forkable (food delivered at work), GrubHub, Yelp Eat24 , UberEats
- Readymade food delivery services like Munchery, SpoonRocket, Sprig
- Dinner kit delivery services like Blue Apron, Chef’d, Chef day, Gobble, Hello Fresh, Home Chef, Plated
Restaurant ordering and take out services
Restaurant ordering and take out services allow customers to order online and (in certain cases) deliver food. By creating a marketplace for restaurants and customers they streamline the ordering process by removing friction. This is beneficial to both parties, the restaurants have access a larger pool of customers, and the customers to a wider range of restaurants. This service enables the rise of take-out kitchens which focus solely on food prepared for delivery, without the overhead of running a restaurant.
Readymade food delivery services
Readymade food delivery services allow fresh food to be prepared and delivered at fixed times every day. While this model is well suited for densely populated areas it is not easy to scale. This is constrained by mass producing a fresh, multi-ingredient, multi process meal and delivering it to customers every single time. To scale this model, cooking might have to be outsourced and curated where it starts to resemble ordering and take out services.
Dinner kit delivery services
Dinner kit delivery services will not replace trips to the grocery store anytime soon. But by eliminating shopping and prepping for a meal they hit the sweet spot between cooking from scratch and ordering take out. This comes with the satisfaction of a healthy, delicious, home cooked meal.
Dinner kit services scale well and lends itself to consolidation, economies of scale and logistical optimization (by shipping in bulk). With Gobble, the cost of 6 meals is ~$70 ($12/meal), estimated shipping costs are $8 and packaging costs are $10 leaving $52 for food, labour and gross margins. Currently products are transferred to distribution centers in bulk and shipped to customers individually. There are opportunities for optimization by sourcing bulk foods locally and processing part of the food closer to the customers.
Both the dinner kit and readymade food delivery services are better suited to a subscription model than the restaurant ordering services in its current form. However there are opportunities to innovate in the restaurant ordering services. For example, a restaurant ordering services could facilitate ordering from 2 different restaurants and consolidate into a single delivery. A restaurant ordering service could create private, curated menus setting their own prices and having them fulfilled by restaurants, especially if they can provide a predictable supply of orders. Taking this one step further, they could offer a subscription service where users can order a fixed number of times a week for a predetermined price.
Companies like Whole foods with retail distribution centers and on-site food processing facilities have two significant advantages in offering dinner kits.
- Assembling the final product in store with locally sourced ingredients and centrally prepared sauces.
- Retail distribution centers eliminate the last mile distribution problem.
Then there are the big players. Amazon offers free one hour restaurant delivery in select regions through Amazon Prime Now; expect them to enter the dinner kit delivery market through AmazonFresh. With their massive sourcing and distribution network, they can operate efficiently at scale. Uber Eats recently entered the food delivery service, providing curated meals from local restaurants quickly.
In summary, this is a huge market with tremendous opportunities to disrupt and innovate. This is where many battles will be waged and winners prevail by offering a low-cost, high quality, frictionless service.