Why Meal Kits Choose to Fail or Succeed

Thoughts on the closure of Chef'd from Judith Winfrey, President of PeachDish.

someone opening up a peachdish box and taking out meal kits and recipe cards

After learning about the sudden closure of meal kit company Chef’d, my first thought was “yep, there it is.” As the owner and President of PeachDish, a meal kit company based in Atlanta, Georgia since 2013, I have watched the industry carefully since I joined four years ago. A new and innovative sector in the food market, meal kits first started popping up in the US about six years ago. It’s an interesting service that solves a very real problem for many people. Namely: we’re busy. Technology is speeding up our lives. We’re working more. Our children have more activities. Commutes are longer. Leisure and self-care time are short. Having a tasty recipe and ingredients delivered to your home is convenient and it keeps life interesting. Meal kit customers learn how to cook, explore new ingredients and techniques, all while being provided something different to eat as often as they want it. The sector sits somewhere between grocery store and restaurant. The numbers run very similarly to the latter.

I’ve been baffled by the capital pouring into the space and the tech valuations meal kit businesses are receiving. These aren’t tech companies. These are food companies with perishable food inventories. Yes, we apply some technical and logistical innovations, but we’re not, as Chef’d CEO Kyle Ransford once said, “a logistics company in the end.” We are a food company and food is alive --- at least the food worth eating is. To disregard this fact disrespects the people who will eat it, not to mention the people who grow it. From what I have seen, this emerging “food tech” space, like much of the old guard food industry, is delusional and in complete denial of the fact that we are biological creatures living in a symbiotic relationship with a biological system.

null

In further support of meal kits not being fundamentally tech businesses: we’re also not building something once to sell it a million times. We’re building something once to sell it once. If we want to sell a million, we have to build a million and build the infrastructure to do so. What’s more, the thing we’re building is detailed and perishable. There is an element of art to it and delivery devices are not as elegant as they should be. Suffice to say, this is a really tough business. So tough, in fact, that a company like Chef’d having recently raised $35 million from investors including food industry giants such as Campbell’s and Smithfield, couldn’t afford to continue operations. I feel for them. And I saw it coming.

"From what I have seen, this emerging “food tech” space, like much of the old guard food industry, is delusional and in complete denial of the fact that we are biological creatures living in a symbiotic relationship with a biological system."

The manufacturing infrastructure was the next thing I thought about, more specifically the 350 employees Chef’d had acquired over the last 4.5 years. According to a piece written for the Wall Street Journal, employees received an e-mail from Chef’d CTO which read "[d]ue to some unexpected circumstances with the funding and business, I regret to inform that Chef'd has ceased all operations until our investors and lenders decide the final fate of the company. Consequently, please cease all work associated with Chef'd." I hope he went on to explain the severance packages offered and how he would be helping find new jobs for everyone who requested his assistance. I thought about the warehouse employees who will suffer most concretely from the sudden loss of work. I thought about how the executives, advisors and venture capitalists who built this money-eating beast will probably all be fine. In an article he penned for Forbes regarding the Chef’d closure, Brittain Ladd points to high customer acquisition cost and low customer retention rates as part of the problems meal kits face. I would agree with the latter. Poor customer retention speaks to problems with the value proposition—either the customers don’t like it enough or don't think it’s distinct enough to stick with it. In the latter case, customers hop from meal kit to meal kit trying them all, usually with deep discounts for first-time subscribers. Excessive customer acquisition cost has to do in part with the newness of the model. It requires a bit more education to get folks to understand a new food format and delivery method. But high CAC is driven more by competition in the space. Part of this is because of the capital poured in and the growth it requires to justify itself.

I’m grateful on both accounts that PeachDish has stayed relatively small, conservative and always focused on customer satisfaction. We chose early on not to give away free food excessively as a marketing strategy. I believe it inherently devalues the product and ultimately the brand, which in turn, devalues food and farmers.

a farmer harvesting green beans

This brings me to the next thought about the closure. I wondered about the supply chain vendors. I don’t think that Chef’d was working directly with farmers, like PeachDish does, but rather with large produce and protein distributors who will likely recover. But I do wonder, will the farmers and food producers ultimately get paid, or will they have to absorb losses? If they’re not paid, ultimately, they’re bearing the brunt of risks that Venture Capitalist took, without a chance to share the reward. Surely the loss of market will impact them. What if they can’t find anywhere else to sell their perishable goods? Then what happens? More waste: time, money, food—most importantly, food. It’s a precious resource needed desperately by many. All of these issues: the food business which treats food as an incidental by-product of the “real” business of tech or logistics; the investors who risk neglecting the very people who build the business for the chance to “make a fortune”; and the devaluing of a life- giving resource and the people who produce it. These issues point to much bigger problems. One is our food system. The other is our economic system. We’re living in a consciousness of extraction and exploitation. This is a consciousness that believes it is ok to treat people as if they are expendable and all other natural resources as if they never will be. I don’t support it. I don’t want to be a part of it. I'm happy with my meal kit business, as we have continued to focus on delivering delicious, nutritious, high-quality food to our customers, supporting small and mid-sized farms and food producers directly, and creating a culture where employees feel valued and appreciated for the work they do.

null

To our loyal subscribers, I say thank you. To the rest, I say let’s keep growing slowly. Keep it real. Keep it authentic. Keep it meaningful. Let’s do our best to take care of each other and the planet and not worry so much about the exit. Let’s be in the now.

Comments