The Business of Meal Kits

The growing number of direct-to-consumer meal plan companies and the ease of use belies a deceptively complicated business model. It takes a lot of planning, and a lot of people, to get that big box of ingredients for pad Thai burgers and ginger salmon cakes to your front door. For the folks at Plated, for example, it takes close to 500 people with multiple areas of expertise, from recipe development and sourcing, to packing and shipping, to technology and marketing. Here, we take a closer look at the business of meal kits.

For many of the companies, it’s the ingredients that set them apart. And when you want something sustainable or organic, it’s not nearly as simple as running to the closest restaurant depot to buy a batch of avocados.

Sourcing organic ingredients takes a considerable amount of time at Green Chef, says CEO and Co-Founder Michael Joseph. “[Where we get our ingredients] depends entirely on type of ingredient and time of year. This can range from beets grown 20 minutes from our facilities to certified organic bouillon sourced from French Canada.” Eight people help in the process, which starts a couple months in advance.

Packing a box full of food isn’t as easy as one would think, either, as evidenced by the unique setups engineered for each meal kit company. Green Chef lines the interior of their boxes with padding designed to keep things cool and safe, while Hello Fresh divides their meals into separate boxes within the larger box, so that all the ingredients (with the exception of the proteins) are clustered together. And Plated worked with a team of MIT grads to build sustainable plant-based insulation.

Fresh ingredients are finicky, and to handle this, companies have to get creative with shipping. “We needed to finesse the way certain ingredients were shipped because ingredients like herbs are more delicate and fragile, so shipping them requires extra care,” explains Nick Taranto, co-CEO of Plated. The New York-based company has four fulfillment centers around the country that serve dedicated regions, which means fresher ingredients for the customer.

“The systems and processes we have built to support this magic have required dozens of software engineers and tens of millions of investment dollars,” explains Plated’s Taranto. Still, the technology behind selecting a meal, clicking a button, and forking over some cash is probably the simplest part of the entire ordeal. “Building the website was relatively easy,” Taranto says, “In the early days, we did not appreciate how difficult it was (and still is) to ship salmon and basil in addition to bits and bytes.”