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Albertsons acquisition sets the stage for meal kit service

22 September 2017

It was another rough day for Blue Apron (APRN - Free Report) shares, as the embattled meal kit delivery company lost almost 5.3% in regular trading hours.

For Plated, which has raised around $80m from a variety of investors to build a nationwide operation, the deal immediately gives it access to a physical store network (2,300 stores) through which to sell or/and market its kits, coupled with access to Albertsons' 35m customers per week and exposure via its digital marketing channels.

Albertsons Cos.is buying the Plated meal-kit service, the first acquisition of a prepared-meals company by a national grocery chain as supermarkets scramble to keep shoppers coming to their stores. "We are excited to offer our customers more online options and fresh, quality ingredients along with distinctive recipes at their doorstep or through traditional shopping trips". However, the stock is on the rebound in after-hours trading on the back of the news that a rival meal kit company has been acquired. The deal could also be an effective way to battle Amazon, which has begun testing its own meal kits.

Some meal kit services are faltering, including the largest company in the space, Blue Apron, which has seen a drop in both subscriptions and its stock price since its initial public offering - though some of that dip could be attributed to higher costs of running its new East Coast operations and Amazon's push into the meal delivery service. And do retailers that already have considerable culinary know-how and plenty of fresh ingredients on hand really need to acquire another company to put everything together?

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The amount of meal kits has grown exponentially in recent years-there are now roughly 100 delivery services in the $2.2 billion industry.

Albertsons is also aggressively expanding its e-commerce footprint, with plans to soon offer home delivery across its collection of banners.

At the same time, meal kits are proving a natural fit inside grocery stores. Some retailers are choosing to merchandise them at the front end, where customers can easily grab them for a quick purchase or tack them onto a larger shop. The meal kit category has been active, with Nestle investing in a $77 million round in the startup Freshly. Customers, meanwhile, can expect the service to continue as usual. A grocery chain store like Albertsons can delay the inevitable by expanding their offerings to their customers and the acquisition of Plated will do precisely that for them.

Albertsons acquisition sets the stage for meal kit service