Meal Kit Scale Economics

Plated was a meal kit delivery service that shipped pre-portioned ingredients and recipes directly to customers' homes. The business model revealed key insights about the meal kit industry economics and operational challenges.

Key Points:

• Operational Model:

  • Ships frozen ice packs (water and cornstarch) with insulation, not dry ice
  • Pre-portions ingredients with recipes
  • Initially started hand-fulfilling orders from an apartment before moving to warehouse space

• Economics & Scale Requirements:

  • High fixed costs, low variable costs structure
  • Requires significant scale to break even
  • Not profitable at small scale
  • Need for venture capital to achieve necessary scale

• Industry Dynamics:

  • Only 6 companies ever achieved real scale
  • All major players started within first 2 years of industry
  • Companies starting after year 3 failed to achieve significant size
  • Many small companies entered and exited

• Food Waste Efficiency:

  • More efficient than traditional grocery:
    • Meal kits: 3% waste
    • Grocery stores: 40% of produce wasted
    • Consumer average: 50% of purchased fresh food wasted
  • Less efficient in packaging due to individual portions

• Early Stage Operations:

  • Bootstrap period funded by credit cards
  • Initial packaging was oversized - "refrigerator sized delivery for a chicken breast"
  • Moved from apartment to warehouse within 3 months
  • Focused on food safety over packaging efficiency