Albertsons to Buy Meal-Kit Company Plated
Source: Wall Street Journal
Albertsons Cos. is buying the Plated meal-kit service, the first acquisition of a prepared-meals company by a national grocery chain as supermarkets scramble to keep shoppers coming to their stores.
The New York-based Plated, which does business as
DineInFresh Inc., will operate as a subsidiary of the U.S.’s second-largest grocery chain, the companies said. Customers will be able to buy a rotating selection of meals like chicken Marsala with roasted potatoes and feta-stuffed lamb burgers for delivery or pickup at Albertsons stores in coming months. They cost $10 to $12 a serving.
Financial terms of the deal weren’t disclosed. Credit Suisse Group AG brokered the acquisition, Albertsons said. The deal is slated to close by the end of the month.
Plated, once featured on the “Shark Tank” entrepreneur television show, has raised $95 million from venture-capital firms including Greycroft Partners and Formation 8. The service distributes nationally and is considered one of the five largest meal-kit providers in the U.S. Company officials haven’t disclosed the number of customers.
Diners starved for time increasingly turn to meal kits to make cooking at home easier by eliminating food shopping and recipe planning. Sixteen percent of the 1,314 adults surveyed by the Fluent marketing firm in July said they have subscribed to a meal-kit service at some point, with the number of millennials at 24%.
Venture capital flowing into the sector has led to an explosion in meal-kit options ranging from vegan to Southern cuisines, and the $2.2 billion meal-kit market has expanded rapidly. There are roughly 100 meal-kit companies.
While small compared with the roughly $1.5 trillion U.S. food industry, meal kits are slated to grow by at least 25% annually across the next five years, according to Pentallect, Inc. food-industry consulting firm.
Bob Miller, chief executive of Boise, Idaho-based Albertsons, said in an interview Wednesday: “We think there’s an opportunity to grow this thing tremendously,” adding that the supermarket will give Plated a “cost advantage” over other meal-kit companies by the scale of its food purchasing and network of 18 manufacturing plants.
There are already signs of saturation, however, industry consultants and executives say. “A shakeout is overdue and coming,” said Bob Goldin, co-founder of Pentallect. “It’s survival of the fit.”
Blue Apron Holdings Inc., the largest meal-kit company and the only public one, counts nearly a million customers but has seen its subscribers fall as the service has struggled to fulfill orders in a new East Coast facility. The New York company’s stock has lost nearly half its value after going public in June, one of the biggest valuation declines for an IPO this year.
Grocery chains such as Kroger Co. and Publix Super Markets, Inc., meanwhile, have started offering their own meal kits in stores, some for less than $20.
They have fueled competition with subscription services that require customers to take out set plans that average $10 a person, according to NPD Group Inc., a research firm.
Meal kits are more expensive than eating a normal meal at home, but cheaper than eating out. A traditional home-cooked meal averages $4 per diner, while going out to a restaurant hovers around $17 each, market research shows.
Albertsons, owner of the Safeway chain with roughly 2,300 stores, will also market the meals to millions of store customers, while Plated also continues its online and television advertising campaigns.
“We no longer have to play the game of just spending money in the media to go out and reach folks,” said Josh Hix, co-founder and chief executive of Plated, who will remain the company’s CEO under the deal. “It uniquely positions us in the market.”
Unlike meal-kit rivals, Plated with be offered through subscriptions and in Albertsons stores.
Grocery stores are struggling to keep customer traffic up as shoppers have new places to buy food, such as deep-discount stores, online grocery delivery services and meal kits. Albertsons saw its same-store sales—a key retailer metric—fall by 2.1% during the quarter ending in June, as compared with a 2.9% gain during the same period the year before. The company has postponed a long-awaited IPOuntil its sales improve.
Mr. Miller said that the company has seen improvements in same-store sales in the past two months as a record period of declining food prices eases. Amazon’s slashing of prices at Whole Foods stores hasn’t seriously affected Albertsons, as less than 13% of its stores compete directly with the natural grocer, he said.