January 29, 2019
A recent Instagram experience has made me question the future of the New York City food experience. While thumbing through the “Insta”, I got hooked by an ad for yet another food delivery service. Daily Harvest is a plant-based menu meal kit that puts fresh, packaged, and healthy almost-ready-to-eat food “tubs” directly on your doorstep (or with your door man, if you can afford that).
What has ensued is a constant barrage of targeted digital ads for other competing meal kit delivery brands. One after the other, everything from Hello Fresh to Purple Carrot to green something or other, touting the convenience and sensibility of getting your meals delivered to you and ready in minutes.
These are perhaps the worst and best of times for the delivery industry. Brand connections are being formed, consumers are transitioning, new format and menu experimentation is happening, optimizing delivery and packaging tech, etc. It’s still early days and many product concepts are folding. Blue Apron just reported its fourth quarter earnings with further shrinkage in customer base. Competition is growing and yet the volume of food delivered is exploding globally.
There are different levels of meal-kit readiness. Some deliver groceries, some deliver pre-measured ingredients and recipes, some (like Daily Harvest) go a step further and put everything in one tub ready for either heating or blending. The final stage is the hot, fully prepared ready to eat kit. Seamless and UberEats territory. New innovations in packaging and delivery are making it even more convenient for the end user. All of these options and business models reflect on the bigger trend - namely, the demise of traditional restaurants and grocers.
Before all of this, there were essentially two options: Get your butt to the grocery store and cook or go out to eat. Pizza delivery and Chinese takeout were the two socially acceptable prepared food categories but they didn’t really bite into Greek diner marketshare or other casual haunts. Clearly, delivered food tubs will not replace fine dining or local culinary experiences, but it’s the death of a thousand cuts the dining establishment, the ecosystem that will need to adjust.
Admittedly, I am considering Daily Harvest but only because I live in New York. And by New York I mean Manhattan. The best, most accessible restaurants are now arguably in Queens and Brooklyn.
As for groceries and cooking, if you’ve been to the Whole Foods in Union Square during rush hour then you know how stressful the experience can be. Flashing screens, crowded isles, long queues, and then the arduous journey home complete with heavy bags and a backpack full of gym clothes and laptop accessories.
Seamless and UberEats have already become a ritual in my home. Semi-prepared delivery options like Daily Harvest seem like the healthier and cheaper way to go. Pre-measuring ingredients is also said to be good for the environment, since it reduces food waste.
Side note: Startup idea - a universal packaging system for meal kits. We desperately need it. Reuse, reduce, recycle.
Supply Chain Economics
The package waste issue will get solved eventually. It’s New York’s dine-in establishments that have me somewhat concerned. The efficiency from a cost and supply chain perspective is unbeatable. Source, bundle, and ship the product from one location. Eat, work, sleep from one location. If economics is what you’re after, then meals ready to eat are the way to go.
It’s a major cultural rework. Traditional grocers and restaurants clearly need to innovate or die. Maybe efficiency is a good thing as the world reaches carrying capacity. But what will these incremental gains in efficiency do to the New York visitor experience? Will the independent restaurant survive the onslaught of food tubs biting into already thin margins? Those that live here will find new avenues and venues to get inspired through food. More dinner parties perhaps. WeEat restaurants, perhaps?
I recently had a chat with my good friend Tony Powe, a veteran NYC restaurateur that managed to hold on to his West Village establishment (kitty corner from the Spotted Pig) for twelve years. Tony looks back fondly on those days, yet sighs a breath of relief when asked about navigating the art and science of the restaurant biz of New York City.
We’re talking about thin margins here vulnerable to unanticipated screw-ups, one bad order, one bad review, faulty equipment, a top chef quitting. Add to that,competition from the delivery platforms e.g. UberEats and the meal kit delivery brands, and living on the edge takes on a new meaning for restaurant operators in New York.
A recent New Yorker article talked about how delivery orders are impacting restaurants. In short, they are either losing money or just breaking even. Pick up your phone and order direct if you want to help your favorite local spot out. Warning: this will require reading a long series of numbers etched into your Amex.
The delivery apps take a huge chunk. UberEats charges 35% off the order value. There’s a reason why it’s the company’s most lucrative division. For restaurants, home delivery is now the marketing tool used to lure customers in on higher-margin in-store visits.
Meal kits will definitely have a lasting impact on New York culture. Perhaps it’s a bigger trend toward insularity as the artists and artisans get squeezed and the corporates move in. Sourcing ingredients, prepping ingredients, re-imagining ingredients, fighting over ingredients, the ritual of washing pots and pans, and the ritual of going to the store. All of these functions are effectively getting outsourced to third parties.
Even the act of sitting down with total strangers at restaurant starts to make less sense. This too could become an alien and ancient concept as individual and group eating culture turns insular. Perhaps this is too glum of a scenario.
Meal kits and Seamless could be what television did to the family dinner. There’s a classic sociology book called Bowling Alone by Robert D. Putnam. He described the demise of local cultural events things like neighborhood affiliations, local politics, sports teams, and bowling clubs, and pinned their downfall to the wildfire spread of television.
Why go to the market when you can sit and boob out with the family. We went from pot lucks to processed and prepackaged green beans and salsbury steak. He had data to prove it.
Madrid street life
What’s the alternative? I recently spent a week in Madrid, Spain for Fitur a big tourism expo. Every time I go to Madrid I am overwhelmed with happiness by the street culture. Sitting outside snacking on tapas and sipping on cañas. Nothing better. Going to markets, cramming in at food stands always brings me a joy not felt in New York.
Sure there is Chelsea Market but the Madrid energy is different, and it’s all about the food. It takes getting used to for a semi-introverted New Yorker. At first you want to hide. Quickly you start feeding off the social energy and adapt to the level of interaction needed to enjoy a city like Madrid.
Spanish food is always amazing but also rich and heavy. Churros, tortilla, queso, different meat delicacies. After a week, both my palate and digestion missed my green NYC diet. I think that overtime, local restaurants in Madrid will also adopt a greener menu. They will innovate on product but they will survive and arguably thrive. The Spanish could be the last to do away with their social food culture. New York could be the first.
New York restaurant owners will need to rethink how they deliver value to locals, how they utilize space and how they make money. The high cost of doing business is a killer. Especially if locals are skipping the dining experience for the convenience of home delivery. Meal kit companies are not setting up shop in the West Village, or the East Village, or anywhere in Manhattan for that matter.
They go to Jersey or Queens where they can get real estate on the cheap, and drive in their products via delivery truck. In the not too distant future we will see driver-less vans shuttling our semi-ready-to-eat harvest tubs straight into our kitchens. The margins on semi-prepped meal kits are way better.
Hot meals need to be produced much closer to the final customer. Semi-prepared is the sweet spot. Massive centralized prepping facilities complete with shipping and receiving for raw ingredients, sorting, packaging, and quality control already exist.
Meal kits in the visitor economy.
Finer dining is different,right, and visitors come for the New York night life. What concerns me is the demise of the middle layer the small independent joints that are now getting squeezed out by the efficiency monster that is American capitalism.
Here is the doomsday scenario: Locals quickly embrace delivery culture; restaurants – at least the independents – bottom out as more of us opt for Netflix and greens. Those establishments that survive are the chains, horizontal groups that can weather the storm through economies of scale at the expense of local product and experience innovation.
Will they come back?
Those in the tourism industry know that food is the leading hook that brings me back. For some, the food is secondary to the ambiance and the social connection that dining establishments have fostered in cities for centuries. Traditional dining is still clearly at the epicenter of open culture, but for how long?
Will the small joints be able to innovate fast enough to maintain the same food-driven experience that partially made NYC such a great place to visit? Perhaps this evolution will weed out the good spots from the bad. The cost of doing business amid a culture shift to home delivery, however, leaves little margin of error or experimentation. Those establishments with the flexibility to take risks in product concept design already need serious financial backing.
Eventually the empty spaces will fill up with new social places. Food will still be a part of it. It will happen, the laws of economics dictate that Manhattan real estate does not sit empty for long. But fill up with what? WeWorks, pop-ups, AmazonGos, pharmacies and banks?
If this is the future of New York, then come once sure, or come if you have to. Take a few snaps and post on Instagram. Check it off the list. But come back?
The onslaught of meal kit marketing
One day of Instagram targeted meal-kit ads.