Food delivery is booming, but price is an issue for consumers: Survey
Canadians are crazy about food delivery.
In 2019, Canadians ordered nearly $1.5 billion in meals using a food delivery app (such as Uber Eats and Skip the Dishes), according to Restaurants Canada. The meal-kit industry, with services like Hello Fresh and Chefs Plate, has roughly tripled in five years and is expected to exceed $400 million in sales in 2020, according to NPD Canada.
While business is booming, a new Angus Reid/Dalhousie University study suggests service providers have to address major issues if they want to remain successful. In a survey of more than 1,550 Canadians, nearly two-thirds of respondents (64%) believe the prices are too high. The temperature of the food delivered was an issue for 45% of respondents, followed by over-packaging (32%).
READ: Metro sells its stake in MissFresh
Price and over-packaging were also issues for meal-kit users (42% and 39%, respectively), which may be why meal-kit providers struggle to convert consumers into regular users. The survey found that 21% of Canadians have used meal kits at some point, but only 4% are ordering them regularly.
“I think the price is a big challenge,” says Sylvain Charlebois, scientific director, Agri-Food Analytics Lab Faculty of Agriculture, Dalhousie University. “And what comes up a lot is the packaging issue. It turns a lot of people off... Both issues are going to be very difficult to resolve
However, Charlebois believes meal-kits are still an attractive solution for consumers. “It reduces food waste because you basically cook what you need, and it’s convenient,” he says.
The penetration rate for food delivery apps versus meal kits is much higher, according to the survey. A total of 67% of Canadians under 34 have used a food delivery app, versus 15% for Canadians 55 and older. Provinces with the highest user rates are Manitoba and Saskatchewan (both at 48%), followed by Ontario and Alberta (both at 44%). Quebec has the lowest penetration rate at 26%.
OPINION: Sizing up meal kits
Given food delivery apps are a $1.5 billion business, Charlebois says grocers will be interested in taking a piece of the action. With a ‘grocerant’ concept or internal foodservice capacity, a grocer can create a new brand exclusively for meal delivery, he says. The concept is similar to what restaurants are doing with “ghost kitchens,” which can involve creating a new brand or menu items that are only available through a third-party service.
“A ghost kitchen would support a brand owned by a grocer, so a grocer wouldn’t have to necessarily invest in a kitchen and infrastructure,” says Charlebois. “As soon as you see that amount of money