The share of subscribers to meal box services in Canada, such as Goodfood or HelloFresh, has fallen to 8.4% in 2021, compared to 12.8% in 2020. With this, the meal box industry in Canada may have peaked.
Posted at 7:30 p.m
The lunchbox concept has the same connection to food that IKEA has to furniture. The assembly of the elements remains the only step to be carried out, giving the buyer the impression of being the general contractor, or almost. Home-delivered meal kits make consumers feel like chefs for a moment. Throughout the pandemic, this meal solution has enjoyed unprecedented popularity, providing ideas for families looking for culinary inspiration.
However, sales in this sector tell us that the lunchbox industry in Canada may have peaked in recent months.
Most Canadians have returned to normal life, becoming nomadic again and spending less time in the kitchen. According to a recent survey conducted by Dalhousie University in partnership with Caddle, 8.4% of Canadians now subscribe to a packed lunch service. This represents a decrease from the 12.8% recorded in November 2020, just months after the pandemic began.
While 69.1% of Canadians have never subscribed to a meal box service, 22.5% have stopped using one after trying it. Only 3% of respondents now plan to use the service for at least another year. Only 9.8% of people think they will use such a service in the future but remain unsure. These percentages are very low and customer retention is really becoming an issue in this industry.
Most lunchbox users are Gen Z at 14.5%, followed by Millennials at 12.1% and Gen X at 7.9%. Baby boomers bring up the rear with a meager 3.2%. Among provinces, the current highest usage rate is British Columbia at 10.4%, followed by Quebec at 9.3% and Alberta at 9%. Ontario follows the national average at 8.4%. The lowest rate in the country is found in Manitoba at 4.5%.
Among Canadians who use lunch boxes today, just 15.8% had never ordered these kits before the pandemic. Considering the market has been flooded with discounts and coupons for months to get consumers excited about some of these services, that percentage is surprisingly low. In fact, for a while, many meal kit suppliers partially subsidized their own demand.
Of those who use these services, 66.1% order these kits on a daily or weekly basis. The top motivators for ordering include convenience (57.7%), saving time (30.4%), and avoiding meal planning (15.4%). Lunch boxes are designed to encourage households to reduce food waste, but the facts are often anecdotal. HelloFresh remains the most popular service with 32% of respondents, followed by Goodfood with 24.6%. Chef’s Plate, owned by HelloFresh, is third at 14.9%.
By some estimates, the meal kit market in Canada is probably worth about $1.1 billion today, compared to just $5 million more than 10 years ago. At its peak in 2020 and 2021, the market surpassed $1.5 billion. A remarkable achievement for this market segment, even if we are noticing that demand is falling.
However, the relatively high prices and polluting packaging seem to discourage consumers from meal kits. The average price per meal is usually between $8 and $13 per person. Despite this price, these kits still require work, and you still have to do the damn dishes. Overall, 78.1% of consumers abandoned the service because the prices were too high and 67.5% stopped using the service because of unsustainable packaging.
A real threat to these services is emerging from the big distributors. Grocers have improved their delivery. Some chains also offer meal boxes in different shapes. The retention rate of online grocery sites is also much higher. According to Nielsen IQ, online grocery shoppers return for a second order more than 80% of the time. Loyalty undoubtedly works in our grocer’s favour. We could see more cooking sets offered by the grocers themselves or by restaurant chains using our grocers’ distribution network to reach customers physically or virtually.
Some Canadians will stick with packed lunches, but the industry faces major challenges. The economy is normalizing, pushing consumers to spend less time at home, and the cost of groceries is likely to push prices higher. The concept remains excellent, but the formula requires a new approach.