Founder and CEO of Marley Spoon Fabian Siegel expects his meal kits to become even cheaper than supermarkets in the future thanks to the company’s specific business model.
The direct-to-consumer approach of Marley Spoon allows the company to be more price efficient and while it cannot buy at the same prices as Woolworths or Coles, the cost for consumers is the same, and the company still generates a relatively high margin of 22 per cent.
“The reason we can supply such an affordable price competitive product is because we have a very different supply chain without any of the terrible waste which allows us to save a lot of money and compete with supermarkets,” Siegel told Inside FMCG
“Given that we are so early on and sub scale and have already relatively high margins, it tells me that there’s opportunity as we grow for prices to come down. I think in the midterm we could be even cheaper than supermarkets and then people would ask themselves why on earth would I still use the supermarket if I’m cooking anyway three to four times a week.”
The average Marley Spoon customer spends around $200-240 dollars per month on the meal kit service, money they would have spent in the past with the supermarket. This switch in consumer behaviour has piqued the interest of supermarket bosses including Coles MD, Steven Cain, who has signalled plans to implement meal kits at the supermarket in the future.
However, Siegel believes supermarkets will find it very difficult to compete with the direct-to-consumer approach that Marley Spoon implements.
“Supermarkets have realised consumers want convenience and they love meal kits, so they see it’s something that’s here to stay, its not a trends that will go away. But supermarkets haven’t understood the benefit of the meal kit, which is you bypass the shelf. The supermarket shelf is the problem. You have the same problem with any other perishable item, if you have to throw away massive amounts of products which in the end will cost you.”
“Supermarkets are actually a terrible business model because like any retail business they source things to stock and then they sell it from stock, meaning they put all these fresh things on the supermarket shelf and if you don’t pick it up they throw it out which is massive waste. Somebody has to pay for that waste and that’s the consumer. Supermarkets mark up the prices to cover up to 30 per cent of waste.”
The popular meal kit service recently expanded its weekly menu from 12 recipes to 20, something Siegel believes retailers with hundreds of stores simply can’t offer.
“That’s exactly the heart of the problem that supermarkets can’t really solve, because they don’t know who’s walking through the door. They don’t know who wants what. The beauty of our business model is we know exactly which customer has chosen what dishes for the coming week. We only supply those ingredients and fulfill the order.”
Siegel believes day-to-day grocery needs would be better served online and the traditional supermarket would then need to offer a higher end or niche experience to tempt customers to shop offline.
“The traditional supermarket is cut in the middle. We see the channel switch from offline to online and I think that will also impact the grocery space. A lot of weeknight day-to-day cooking and grocery needs will better be served by online services. The traditional offline experience of browsing through a supermarket will remain but it will be a different experience a higher end experience, niche experience.”
In March this year, Marley Spoon launched Dinnerly, a second lower-priced meal kit service. Using the same concept as Marley Spoon, Dinnerly acts as an alternative for customers looking for more basic recipes at a lower cost.
“We’ve realised there’s a big portion of the population that wants better value or cheaper options. Dinnerly was created to serve that demand where you maybe have kids, picky eaters, or a different budget. We launched in 2018 and so for 2019, this will be one direction we will focus on to really expand the reach of offering meal kits to a broader audience.”
“We never compromise on the quality of the ingredients, it’s just simpler recipes. Marley Spoon has ten ingredients on average, Dinnerly has five. So less ingredients, simpler recipes, faster to cook but in the end, it’s still cooking from scratch so much healthier than eating processed food or frozen dinners.”
Siegel also revealed that the company plans to introduce more personalised recipes in the future, by utilising the data from weekly orders.
“We’ll try to understand more and more what it is you actually like. Our customers select 3 to 4 recipes every week out of a choice of 20, so over time we can start offering custom choices really geared towards your personal tastes. The move from 12 to 20 recipes was an important first step in that direction and you will see more of that in 2019.”