Georgia Wells reported in yesterday’s Wall Street Journal that, “Last year, meal startup Sprig Inc. had too many cooks in the kitchen.
“During the company’s first two years of making and delivering meals around San Francisco, each of its cooks prepared a recipe from start to finish. But quality suffered and Sprig, like the entire segment of meal startups, was under financial pressure.”
Ms. Wells noted that, “Six months ago, it brought in an airline chef and a cafeteria executive to run its kitchen like a factory. Sprig now makes its 5,000 meals a day with 20% fewer chefs.
“Sprig’s reorganization shows how startups that are trying to change the way people get their food are having to rewrite their business recipes as intense competition and tightening funding challenge the sector.
“From shipping boxes of ingredients to mailing meals and delivering hot meals on-demand, these companies are betting consumers are willing to pay for convenient alternatives to grocery stores and restaurants, but ingredients, preparation and delivery costs yield tight margins.”
The Journal article indicated that, “Sprig, which has raised more than $50 million, has taken this model to the extreme, and promises hot food, on-demand…[D]ineInFresh Inc.’s Plated, which sells ingredients for recipes customers cook at home, formerly had celebrity chefs. But their creations involved too many ingredients and steps. Plated now relies on former cooking instructors.
“Blue Apron Inc., which also sells boxes of ingredients customers can cook at home and was valued at $2 billion last year, has shortened the list of ingredients in its recipes to make them simpler for home chefs.”
Ms. Wells added that, “Venture capital’s appetite for meal startups has shrunk, putting pressure on the startups to become more lean. In the first quarter, firms forked over $609 million in funding for food startups—including on-demand meals and grocery delivery—less than half of the $1.42 billion they invested in the same period last year, according to venture-capital research firm CB Insights.
“Venture capital is drying up for startups across the board. For on-demand food startups, the concern is whether their food and delivery will appeal to enough customers to make it profitable.”
