Last Updated: 10th March, 2021
The past decade witnessed the emergence of unique eCommerce businesses. A few of them are meal prep websites, led by incumbents like Hello Fresh, Blue Apron and Plated. There are various reasons behind the success of meal prep businesses, some of which are still relevant in 2021.
Firstly, the Millennials and Gen X population are the top demographic profiles amongst meal prep consumers, comprising around 63.7% of all buyers. They also constitute the population with maximum control over their monetary decisions. Secondly, the general consumers of meal prep businesses belong to high-income families with an average annual income up to $80,000, making the business highly lucrative.
Why are Consumers Attracted to Meal Prep Websites?
According to Numerator, a leading market intelligence organization, the three primary reasons why people like to order food from meal prep businesses are:
Such a business has three primary models as explained below:
Apart from these, the Ikea effect (stating that people add value to things that they help create themselves) also justifies the consumer psychology and desire behind ordering ready-to-cook meals.
All aforementioned stats and factors indicate the immense business potential in the meal prep industry. Considering the favorable market scenario and lack of meal prep businesses in several towns and cities, it is safe to conclude that 2021 is a right time to set foot in the meal prep industry.
Entrepreneurs interested in starting a meal prep business require to understand its viable business models. The existing meal prep businesses are relying heavily on the following models and as per our expertise in the eCommerce industry, we also suggest you to assess them for your business.
Note: Though the actual business model varies from organization to organization, its workflow remains similar. Business owners need to scrutinize and replace some processes in the model to align it with their organization. They also need to ensure that their website software supports the selected business model.
|Freshly & Hello Fresh|
|Brand Name||Year of Foundation||CEO||Revenue|
|Freshly||2012||Michael Wystrach||$430 million|
|Hello Fresh||2011||Dominik Richter||$1.17 billion|
Under this business model, consumers demand meal-kits on an on-demand and subscription basis. In subscriptions, they can select how many kits they want to be delivered per week and the business delivers those kits accordingly.
|Magic Kitchen & Fresh N Learn|
|Brand Name||Year of Foundation||CEO||Revenue|
|Magic Kitchen||2005||Greg Miller||$1 million|
|Fresh n Lean||2010||Laureen Asseo||$40 million|
Consumers with special diets and health goals require cautiously prepared meals made with handpicked ingredients. Not only these meals have long prep times but are also expensive for daily consumption. Goal-oriented meal delivery model assists the consumers requiring special diets by subscribing them to week or month-long meal deliveries.
Meals subscriptions also tend to be more affordable in comparison to placing one-time orders on food delivery platforms. Some examples of goal-oriented meals for consumers with health issues are:
Similarly, gym and fitness enthusiasts can subscribe to lean-protein, high carbs and keto diet meals as per their fitness requirements.
|Freshly & Hello Fresh|
|Brand Name||Year of Foundation||OWNER||COUNTRY|
|Healthy Choice||1985||Mark Harper||United States|
|Smart Ones||1992||The Kraft Heinz Company||United States|
Despite the ease and flexibility meal-kit delivery and goal-oriented meal delivery models provide, they are not preferred by extensively occupied consumers. Working professionals and students living alone cannot always be available at their residential address to accept routine delivery of meal-kits containing various raw ingredients. Thus, they are more inclined towards pre-cooked frozen meals like:
Pre-cooked storable meal delivery websites differ from grocery delivery websites as the products sold on them require the bare minimum efforts to prepare for eating (like reheating or adding seasonings).
Checkout the following figure to view the revenue streams compatible with the aforementioned business models.
In an ever-changing world, it gets difficult for business owners to select the correct options to launch a new business. The presence of so many variables, like supply chain setup, delivery process selection and funding options, make it difficult to validate the pre-launch actions. Thus, to speed up the business launch and refine the startup process for entrepreneurs, we have shed light on the constants that are nearly applicable on all eCommerce businesses.
Financial planning assists business owners in estimating and meeting the business’ financial requirements. To begin, you need to calculate the gross margin of your meal prep business, which is the total sales forecast minus the cost of delivering meal prep orders (cost of ingredients and preparation also in case of single-vendor meal prep businesses).Based on the gross margin, you can create a budget of all expenses (such as software cost, licensing cost, delivery cost, building maintenance, utility bills and salaries) and maintain a balance sheet. Doing so will allow you to track your expenditure on various assets and liabilities.
The official registration of a meal prep business will ensure legal protection. It will validate the business obligations towards the government and vice versa. Once a business owner obtains the license, he/she can avail tax benefits and government schemes to acquire leverage over non-registered businesses.
Several private investors also offer funding to registered businesses only, which is a massive advantage of obtaining a license. Business registration and licensing details can be acquired from state or industry-specific statutory bodies.
Some important licenses and permits that are required to launch a meal prep business are:
Visit this page to view the complete list of business licenses and permits.
In-depth competitive analysis is required to analyse the strengths and weaknesses of other businesses in the same industry. The analysis will allow entrepreneurs in the meal prep industry to identify key competitors, understand competitor pricing, analyze the existing customer experiences and evaluate the competitors’ unique selling points. Based on these details, a startup can devise a marketing strategy and revise prices to take over the existing businesses in targeted market(s).
eCommerce websites developed using page builders have a captivating front end. They are decent for creating eye-catching websites but lack the dedicated features to conduct smooth online business operations. For a meal prep business, back-end features are required for order management, catalogue management, user management, and handling deliveries. Websites developed by page builders often don’t have the required backend support and the website owner has to rely on third-party software.
Another issue that arrives when selecting the software technology is budget restrictions. Scratch development of software to support a meal prep business involves programming and testing of too many features. These features vary in prices. Thus via the scratch development method, startups and SMBs can only afford a few essential features, not all. A simple solution to this problem is to opt for readymade eCommerce solutions that require minimum customizations to get started.
There are different ways by which a business can host its website. Information technology firms describe them as hosted and self-hosted. When a business owner opts for an eCommerce software with a hosted server, the software provider firm is responsible for managing the server and hosting. The firm ensures the uptime of the website and maintenance and upgradation of the server.
However, a downside of hosted eCommerce solutions is that the website can go down when the server crashes. The solution for this problem is self-hosted services. Solutions that are labelled as self-hosted, leave the choice of hosting with the customer. He/She can opt for any type of hosting he wants.
The most popular types of self-hosting services for which entrepreneurs opt for are SaaS hosting, cloud hosting, dedicated server hosting and on-premise hosting.
Check out the following table to understand the benefits of these hosting types.
|SaaS Hosting||Cloud Hosting||Dedicated Server Hosting||On-Premise Hosting|
|In SaaS hosting, a hosting service provider (other than the eCommerce solution provider) hosts the website on a shared server and charges for it on a recurrent basis.||In cloud hosting, the website is hosted on a network of several virtual and physical servers.||In dedicated server hosting, the website owner gets a dedicated server to host his/her website.||The website owner purchases and allocates the server at his/her own physical address.|
|The hosting service provider is responsible for the maintenance of server and software/hardware upgrades.||The hosting service provider is responsible for the maintenance of server and software/hardware upgrades.||The hosting service provider is responsible for the maintenance of server and software/hardware upgrades.||The website owner is responsible for the maintenance of server and software/hardware upgrades.|
|If the server crashes, all websites hosted on the server go down.||A single server crash does not affect the uptime of the website||Server crash can affect the uptime of the website.||Server crash can affect the uptime of the website.|
|Due to multiple websites, the chances of server problems and inadequate resource allocation are high.||Resource allocation is managed easily due to the interconnectedness of various physical and virtual servers.||The chances of server crashes are comparatively lower than SaaS hosting and all storage and memory resources are allocated to a single website.||The chances of server crashes are comparatively lower than SaaS hosting and all storage and memory resources are allocated to a single website.|
|High security issues||High security issues||Low security issues||Low security issues|
|Suitable for entrepreneurs testing MVPs of their eCommerce websites or still in the initial years of startup.||Suitable for solopreneurs, startups, SMBs and mid-size businesses.||Suitable for entrepreneurs requiring large-resources and reliable security for their website.||Suitable for entrepreneurs requiring large-resources and reliable security for their website.|
Depending on the marketing strategy and estimated sales of a meal prep business, the owner will need to hire various employees. A big challenge that the business owner may face is to make business professionals trust his startup. Without the trust, it can get difficult to acquire talented individuals, which will be followed by the problem of low employee retention.
The following options can assist startup meal prep businesses overcome the aforementioned staffing problem:
Business insurance is extremely valuable for startup businesses. It has various advantages for a meal prep business, like cover against major losses and damage to important business assets.
Several business insurances also provide coverage for third-party liability, i.e., if your business causes unintentional damage or loss to a person, business or property. Other than benefits, coverage for filing lawsuits, unintentional violation of third-party copyrights and damages and losses due to natural disasters is also included in business insurance.
Note that all insurance policies are not equal and may not carry the same benefits for a meal prep business. For this reason, a 10-days or longer free-look period is provided with the insurance to policyholders. Within this period, policyholders can review the terms of the insurance and make any amends they want. They can also cancel the policy without facing any penalty in the free-look period.
The Go-To-Market Strategy involves the identification of the value proposition that a business wants to provide to its consumers and a deep understanding of buyer personas. GTM strategy involves how you want to roll your meal prep business in the market and the impression you want to create on your buyers. The GTM strategy is inclusive of several factors such as the development of MVP, pricing, selecting value proposition, marketing, etc.
To launch an online meal prep business, entrepreneurs require a website, which is the firstmost requirement in GTM strategy of an eCommerce business. The website will both validate the business idea and attract the first few customers. The easiest way to get a website for idea validation is either MVP development or using a readymade software.
The next step in the strategy is to set the pricing of the product in order to maximize profit margin. In case of a multi vendor business, the website owner should select the amount of his/her sales commission.
In the eCommerce sector, place refers to the channels through which a business distributes its services and products. In 2021, selecting an omni-channel approach is the most relevant. Omni-channel approach includes distribution via social media websites, third party advertisement, IVR system and several other online and offline channels.
This step refers to the identification value proposition and formulation of marketing strategy. For startup businesses (both multi-vendor and single vendor) in the meal prep industry, we have outlined the following approach for business promotion.
A business must identify the minimum skills and experience its employees should have to make the business viable. By outlining the key requirements for employees in both major and minor roles beforehand, a meal prep business can hire the employees required to speed up the market launch.
Processes refers to the steps and measures taken to deliver the services and products to the end customer. It involves the finalization of the business model with all changes and personalization, preparation of a sales funnel, selection of payment methods and delivery procedures.
Physical evidence is the proof of successfully conducted business operations. The proof is required for various reasons such as research and analytics, funding and for statutory reasons. The physical evidence for a meal prep business can be receipts, invoices, packaging order tracking information, etc.
According to a survey conducted by the global business consulting giant McKinsey, Millennials are 6 times more likely to find new brands more innovative. They are also 400% more likely to avoid purchasing from big brands than their parents. Ensuring continuity to disruptive patterns, the above-mentioned statistics highlight the scope for new businesses to enter in the meal prep industry and compete with the incumbents.
To match the customer experience of existing businesses, newly established meal prep businesses require to focus on the value proposition, customer support and scalability of their eCommerce site.
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