Since the onset of the pandemic, many consumers have turned to subscription-based meal delivery services for the convenience factor and to avoid frequent trips to grocery stores. Nestlé recognized the growth of these services as a result of the broadening eat-at-home market and acquired meal delivery company Freshly last Friday for $950 million.
While the acquisition is the most significant, it is not the first business transaction between the two companies. Back in 2017, Nestlé purchased a 16 percent stake in Freshly to assess the growing market. While HelloFresh, a popular meal kit delivery service, leads the US market share with 30 percent, smaller competitors, including EveryPlate, Purple Carrot and Freshly, are gaining traction.
We've acquired @Freshly, one of the leading fresh-prepared meal delivery services in the U.S.
Founded in 2015, Freshly delivers a menu of fresh, chef-cooked meals to customers across the country.
Learn more: https://t.co/IZDIY8Wdc8 https://t.co/88Mvk5R8EU
— Nestlé (@Nestle) October 30, 2020
Since its launch in 2015, Freshly has made quite a name for itself. Differentiating itself from meal kits, the New York-based startup offers customers healthy, microwaveable meals that are ready in minutes as opposed to cooking the meal from delivered ingredients. Developed by chefs and nutritionists, Freshly capitalizes on health-conscious consumers who like the convenience of delivered meals without the fuss.
According to Nestlé, Freshly now ships over a million meals per week nationwide and is projected to do $430 million in sales this year. This is good news for Nestlé, as the acquisition also gives it access to Freshly’s exclusive consumer analytics and distribution platform. While it will continue to operate as a standalone business, Freshly will be able to take advantage of Nestlé’s research and development capabilities and maintain steady growth in a saturated market.
Steve Presley, Nestlé USA Chairman and CEO, said in a press release that while the pandemic is likely responsible for the shift to eating at home and embracing e-commerce, these trends are likely to stick around. He added, “Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the US food market and further positions Nestlé to win in the future.”
Michael Wystrach, Freshly founder and CEO stated in a note to customers that through the acquisition, the company plans to triple the number of menu offerings each week. But aside from that, he noted that meals, pricing and subscription will remain as customers know them.
“We are extremely excited to expand our relationship with Nestlé,” Wystrach added. “Our mission is to make eating healthy easy by bringing nutritious, high-quality meals directly to customers’ homes. Convenience and nutrition are driving forces in the future of food, and our becoming a part of the world’s largest food company confirms that.”
Despite their popularity, fresh and packaged meal delivery services are still a relatively new concept and in the era of COVID-19, it is only expected to grow further. By 2025, the North American market is expected to be worth around $5 billion, with the global market projected to be worth $8 billion by 2024.
The spike in demand for meal delivery services like Freshly can be attributed to the intersection of online and retail consumption with personalized, customizable nutrition. As the pandemic is edging out traditional hospitality, meal delivery services are giving consumers more time to eat at home and explore new meals and ingredients safely and conveniently.