Everyone's into meal kits like Blue Apron...until they're not: Sobering numbers underlie food subscription services

  • Proponents say meal kits are convenient, healthy and more cost-effective than taking the family out for dinner.
  • But some new figures obtained by CNBC show their explosive growth is tempering, with early adopters soon giving up the convenience of customized meal prep at home.

Meal kits are practically everywhere, but data suggest consumers might be getting their fill.

Proponents say they're convenient, healthy and more cost-effective than taking the family out for dinner. Yet some new figures obtained by CNBC show their explosive growth is tempering, with early adopters soon giving up the convenience of customized meal prep at home.

More than half of meal kit subscribers cancel their subscriptions within the first six months, according to data from Cardlytics, a purchase analytics firm, suggesting consumers treat their food services much like a New Year's resolution to join a gym.

In fact, nearly three-quarters of new subscribers gave up the services within a year. For that portion of the study, Cardlytics looked at around 45,000 consumers who first signed up for meal kit services in January 2016.

Those cancellations can be a big deal. Meal kit delivery services — like Blue Apron, HelloFresh and Plated — tend to give big discounts or freebies to lure subscribers. If that upfront cost doesn't pay off in converting trial runs into real subscribers, that overhead can really affect a company's bottom line.

CNBC's own culinarily challenged Eric Chemi checked out one meal from each of the three companies.

Let's eat in tonight

Despite retention problems, meal kit delivery companies are still finding new customers. Consumer spending on meal kit services increased by 236 percent from 2015 to 2016, according to Cardlytics data.

Customers find the convenience of having the ingredients premeasured and provided at once: There's no need to catalog what's already in the pantry, stop at the grocery store or dig through cookbooks for recipes.

So who's losing out? When consumers become meal kit subscribers, they naturally cut back on their food spending in other places. Quick serve, fast casual and casual dining establishments are all victims in terms of their average share of food spending.

But here's the thing: People who subscribe to meal kits aren't like the average shopper to begin with. They spend much of their total food budget on casual dining (38 percent, compared with 26 percent on average). While the average shopper spends nearly half their food budget on groceries, meal kit subscribers spend only about a third of their food budget on groceries — even before becoming meal kit subscribers.

So these are people who tend to eat at casual and fast-casual dining establishments in the first place. On the other hand, meal kit subscribers spend 28 percent more at the grocery store than the average shopper, about $52 a trip. That makes them more valuable as customers to the grocery store.

All of which suggests that people trying out meal kit delivery services are higher-end consumers, or at least have higher total food budgets than the average consumer.

According to CNBC's trial run of meal delivery services, meals cost $9.99 to $13.50 a portion. That's a good deal compared with eating at a restaurant but costlier than shopping and cooking for yourself.

The ingredients for those same meals would cost $3.98 to $11.90 at a nationwide food retailer, according to a CNBC analysis of prices. That implies healthy, double-digit margins for the meal kit delivery firms, at least for ingredients. Of course, price isn't the only consideration for where to spend your food budget.

Cardlytics data show that people who get meal kits also utilize other on-demand purchase habits, like Amazon Prime, Uber and GrubHub. It suggests that these customers are largely drawn in by the convenience of having meals organized for them rather than needing to shop for items individually. Cardlytics data are based on transactions from more than 120 million bank accounts in the U.S.

Slowing growth

Meal kits' share of food spending increased by a full 311 percent from 2014 to 2015, according to Cardlytics.

These are private companies that like to keep the cards close to their chest: None of the three companies provided subscriber or revenue figures to CNBC. Blue Apron declined to comment for this story; Plated sent a previously published press release about its new Android app and HelloFresh did not respond to multiple requests for comment.

But at least one other study found that the sector's growth in the last couple of years has slowed significantly.

Subscriber growth for meal kit delivery companies fell to under 60 percent in the fourth quarter of 2016, on a year-over-year basis, according to data cited by The Information. That's down from more than 200 percent increases each quarter of 2015.