Amazon Flexing Its Muscles Is Likely To Worry Meal-Kit Firms: Analysis

By Steve Wynne-Jones
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Amazon Flexing Its Muscles Is Likely To Worry Meal-Kit Firms: Analysis

When Amazon announced last July that it had filed a trademark application for the delivery of 'prepared food kits', it became the latest online retailer to embrace what many analysts believe could be the next frontier in online food sales.

Last week's announcement by the tech giant, that it was starting to roll out Whole Foods deliveries in cities including Dallas and Austin, Texas; Virginia Beach, Virginia; and Cincinnati, Ohio, using its Prime Now service, was the next logical progression in that step.

Amazon's move is likely to have led to a few sleepless nights at the headquarters of Blue Apron and HelloFresh, two of the leading exponents of the meal-kit movement, which also features firms including Gobble, Home Chef, Sun Basket, Plated, Green Chef and Purple Carrot.

Having barely warranted a whisper a decade ago, the meal-kit sector is now big business.

Blue Apron

Launched in 2012, New York-based Blue Apron is the biggest US player to tap into the meal-kit phenomenon, and, as such, it has arguably the most to lose from Amazon's continued encroachment into its sector.


The company recently announced its fourth-quarter financial results, which saw the business post a 13% decline in net revenue, to $187.7 million, with the company scaling back its marketing operations 'substantially' during the period.

Net revenue for full-year 2017, however, rose by 11%, to $881.2 million.

Blue Apron is not taking the Amazon fight lying down, with the implementation of a series of operational improvements to its Linden, New Jersey fulfilment centre, including the implementation of enhanced recipe-planning tools.

“We are methodically implementing operational improvements to drive our business, and are encouraged by the progress we’ve made since last quarter, particularly in margin which contributed to improvement in our bottom-line performance,” Brad Dickerson, the company's chief executive, commented last week.


“We also believe there are extensive opportunities to diversify and evolve the business in new ways to expand our reach and deepen our engagement with customers, and we are sharpening our focus on these windows of opportunity,” Dickerson added.


Also concerned about Amazon's emergence as a meal-kit powerhouse is Germany's HelloFresh, owned by e-commerce firm Rocket Internet.

The company, which went public on the Frankfurt Stock Exchange last November, said at the end of January that its fourth-quarter net sales rose between 58% and 59%, to around the €250 million mark, following a rise of 49% in the past nine months.

Originally launched in Berlin, HelloFresh soon spread to London, Amsterdam and other European cities before entering the US, a move that has helped drive substantial growth at the company.


Indeed, last October, the company's chief executive, Dominic Richter, said that he felt that the company could even overtake Blue Apron as America's leading meal-kit provider in the coming years.

“Our margins and our outlook on profitability are quite different,” Richter told Reuters. “We are gaining a lot of market share in the United States. That is why we assume our listing will turn out differently.”

Now, however, both firms will more likely be keeping a closer eye on Amazon than on each other.

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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