The Future of Food Chains

CUSHMAN & WAKEFIELD

CON S U M P T I ON

THE SUBSCRIPTION SUPERMARKET

In addition to generating additional demand for Logistics and Industrial space in the UK, this has induced competitive tension for supermarkets, who have rapidly looked to expand their meal kit and pre-prepared food offerings. Pureplay meal kit providers such as Hello Fresh and Gousto, benefit from lower total real estate costs owed to a lack of retail footprint. Operators also benefit from a lower product packaging and marketing spend with produce arriving with minimal labelling and no requirement for branding, meaning procurement costs for meal kit operators can be kept low relative to branded supermarket products. Another significant advantage for the sector, owed to its make to order approach, is its ability to rapidly pivot product ranges, specifically utilising produce that can be bought at lower cost prices owed to fluctuations in seasonal supply, and excess capacity from suppliers. From a supply chain perspective, the subscription meal kit model allows operators to utilise shorter demand led supply chains, facilitating agile operational practices resulting in better network efficiencies.

Moreso than ever, consumers are taking a liquid approach within their purchasing decisions, typically balancing time, cost, and convenience whilst looking to maximise value. The subscription meal kit market has grown rapidly over recent years, with the market now well over £1bn in the United Kingdom, rising from £420m during 2017.

As well as being labour and process intensive fulfilment of meal kits is largely undertaken by third party carriers such as DPD at current, requiring meal kit providers to be in close proximity to fulfilment hubs. As a result, fulfilment and labour costs currently form a significantly higher percentage of total operating costs for meal kit providers when compared to comparable supermarket distribution operations. As such, access to lean supply chains, affordable labour, and connectivity is critical for meal kit companies looking to manage pricing, and maximise consumer experience.

OUTLOOK

And in some cases, where scale allows integrated fulfilment solutions will likely reduce the reliance on third party fulfilment providers. This will result in greater freedom of operators to locate close to key supply hubs.

As we look to the future, growth in the meal kit industry and the scale of key operators such as Hello Fresh and Gousto is likely to unlock the potential for a greater degree of automation and integration. It is likely that new facilities, acquired to meet rising demand, will see significant automation in order to overcome labour challenges.

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