The closure of United States based meal-kit provider Chef’d leaves a number of retailers and suppliers - including its primary seafood supplier, Anaheim, California-based Anderson Seafoods - in the lurch.
Founder and CEO Kyle Ransford notified employees that the El Segundo, California-based meal kit company was closing its doors late Monday, Business Insider reported.
"We have had some unexpected circumstances with the funding for the business,” Ransford wrote. "If we had been successful with these funding efforts, this difficult decision would have been avoided."
Chef’d did not respond to SeafoodSource’s request for comment.
Chef’d had offered more than 100 different seafood options, and around 900 other recipes via its website for several years. It had also recently expanded its meal kit offerings to several grocery chains and drug store chains, and was testing extended shelf life of its seafood meals.
“They are super-flexible, and have been a great support system, quality-wise and information-wise,” Josh Anderson, longtime fishmonger at Anderson Seafoods, told SeafoodSource in a feature article on Chef’d last month.
Anderson Seafood was delivering around 10,000 pounds of seafood monthly to Chef’d before the company shut its doors.
In addition to suppliers, numerous retailers, online customers, and employees are affected by the closure.
Its meal kits were sold in around 500 grocery stores, including Food Lion, Harris Teeter, and King Kullen. In late June, Chef’d also said it would be supplying its meal kits to Walgreens and Duane Reade stores in the New York area.
Chef’d had plans to expand to 1,000 grocery stores by the end of 2018, Chef'd co-founder and chief culinary officer Jason Triail told SeafoodSource in June.
However, food industry analysts are not surprised by Chef’d’s closure.
Because Chef’d was “late to the meal-kit game” and underfunded, it was forced to partner with companies that were not forward-looking and did not want to give up market share, Steven Johnson, grocerant guru at Foodservice Solutions, told SeafoodSource.
The online meal kit business model is often unsustainable since meal kits are “cooking training wheels” for millennials, Johnson said.
“After they learn to cook a favorite meal or two, millennials find that they can cook that same meal for less without the kit – thus dropping the subscription,” he said.
In addition, entering the grocery store market is a tricky situation for meal kit providers, according to Johnson.
“It’s the establishment of food retail, and consumers can eat for much less, buying food on sales,” he said. “Grocery retailers use that knowledge to the disadvantage of meal-kit companies.”
Getting into the retail market is “one of the worst things that an online meal-kit company can do,” wrote strategy and digital consultant Brittain Ladd in Forbes.
“To gain market share, retailers insist that online meal-kit companies drastically reduce their prices. Blue Apron had to reduce its prices by 30 percent before Costco would agree to sell the meal kits in its stores,” Ladd wrote.
Plus, he predicts, retailers will create significantly lower-priced private label meal kits, forcing meal-kit providers to lower their prices.
“This results in a business model where meal kits offered online are much pricier than meal kits offered in stores," Ladd wrote. Several will not make it and they will be out of business within the next six months."
