Convenient meal kit companies like Blue Apron are a booming business, and new research shows that they’re cutting into consumer spending at brick-and-mortar grocery stores.
Data from purchase intelligence firm Cardlytics suggests that meal kit subscribers spend less on groceries, with specialty grocery stores like Whole Foods and Trader Joe’s taking the greatest hit.
Cardlytics is an Atlanta-based company that analyzes credit and debit card purchases by analyzing data from more than 120 million bank accounts. They can track where people spend their money, but not what they buy.
The company looked at spending on meal kit subscription services like HelloFresh, Blue Apron and Plated from 2014 to 2015. Those services deliver boxes of perfectly proportioned ingredients to subscribers’ homes, along with recipes. Subscribers get the satisfaction of cooking a meal at home without the hassle of heading out to the grocery store.
These customers make up a growing piece of America’s $400 billion dinner market. FORBES estimates that Blue Apron’s sales will top half a billion in 2016, up from an annualized rate of $100 million in November 2015.
Cardlytics found that subscribers spent less in grocery stores once they’d converted to meal kits, decreasing their spending in specialty groceries by 7.6 percent, and in traditional groceries (like Publix or Wegman’s) by 6 percent. Subscribers visit both categories of stores less frequently, and check out with smaller baskets. Overall grocery spending goes down by 6.3 percent, driven by fewer trips to the grocery stores.
HelloFresh CEO Ed Boyes has an idea as to why that might be.
“Consumers tend to turn to specialty grocery stores when they choose to cook from scratch at home,” he told FORBES in an email. ”These are ingredients that consumers struggle to find in a traditional supermarket,” and they tend to buy more than they need for a one-time use. That’s wasteful and inefficient.
A quick survey of the recipes on the sites of HelloFresh and its competitors shows that many do include unusual ingredients like tilefish, pomegranate molasses and garam masala. What’s more, Cardlytics research shows that subscribers to meal kits are much more likely to use other convenience retailers, including Amazon Prime , Uber, 1-800 Contacts and GrubHub.
That suggests convenience is very important to meal kit subscribers. It’s logical, then, that they may be less inclined to visit specialty groceries when they’re getting exotic ingredients delivered to their homes on a regular basis.
A spokesperson for Blue Apron said they compete with grocery stores on price and quality, not just convenience. They described a unique supply chain that provides fresher and cheaper food than grocery stores, along with unusual vegetables like “fairytale eggplants”.
A Cardlytics spokesperson suggested that the people who subscribe to meal kits typically do more of their shopping at specialty grocery stores, which may explain why that category is impacted more.
For now, Trader Joe’s and Whole Foods have no plans to directly challenge meal kit subscription services, company spokespersons told Forbes.
The decline in spending is particularly significant because the people who subscribe to meal kit services are valuable grocery shoppers. Even when they become subscribers, they spend 28% more per grocery trip than average food shoppers do, with an average tab of $52.47 — although they visit less frequently.
Groceries aren’t the only casualty of the meal-kit industry. Meal kits also adversely affect casual dining, Cardlytics found. Before they commit to a subscription, meal kit users heavily patronize casual dining (Chili’s, TGI Friday’s) establishments. Casual dining took up a full 37.2 percent of their total food spending before they subscribed, and decreased to 34.2 percent after.
Fast food, fast casual and fine dining establishments don’t lose out in the same way.