According to The Australian Financial Review recently, innovative web-based grocers are stealing a march on the major supermarket chains as inspiration rather than convenience underpins a new phase of growth in the $1.8 billion online grocery market.
Keith Louie, the chief executive of Aussie Farmers Direct, says busy consumers are increasingly seeking the convenience of home-delivered groceries and a solution to the daily quandary of what to cook for dinner.
The meal solutions category is now growing by more than 20 per cent a year and demand has spawned a raft of start-up food delivery businesses from HelloFresh, My Food Bag, Marley Spoon and Thomas Farms Kitchen, which deliver "meal kits" (fresh ingredients with matching recipes) to Dish'd and Gourmet Dinner Service, which supply chilled gourmet prepared meals.
Aussie Farmers Direct, which started out 11 years ago with home deliveries of milk, bread and eggs,and entered the meal solutions market last month, teaming up with Weight Watchers to deliver boxes of fresh food products and recipes using Weight Watchers' points system.
Mr Louie said the Weight Watchers boxes were popular with Weight Watchers members and people who wanted to prepare healthier meals.
"Sales have grown more rapidly than we forecast; we are selling thousands of boxes a week," he said.
Mr Louie believes the meal solutions market could be worth "hundreds of millions" of dollars over the next three to four years, helping to lift online grocery sales from about 2 per cent of the total market to around 4 or 5 per cent.
While Coles and Woolworths dominate the $90 billion grocery sector, accounting for around 75 per cent of supermarket sales, their share of the $1.8 billion online grocery market is estimated to be worth between 50 and 60 per cent.
The major chains compete online on price, range and distribution, with capacity to reach more than 90 per cent of Australian households and offer convenient click and collect options.
However, industry players say Coles and Woolworths are struggling to match smaller online food companies in providing innovative value-added services such as portion-controlled recipes and meal solutions.
Tom Rutledge, a former MasterChef contestant who runs online meal kit delivery company HelloFresh, one of seven brands owned by German web retailing incubator Rocket Internet, says the biggest problem for consumers buying groceries online is the number of decisions that have to be made.
"Meal kit services offer mental and physical convenience: you don't have to make those decisions," he said, adding that the typical HelloFresh box has just 26 items.
Aussie Farmers and HelloFresh believe the meal solutions market will eventually consolidate and only those providers with strong supply chains, economies of scale and loyal customers will survive.
"Here at Aussie Farmers we feel we have an advantage in that we have been established 10 years, we have significant fresh product volumes in each state and we are well configured to support a meal solutions approach," Mr Louie said.
Aussie Farmers now has annual sales of more than $100 million, more than 100,000 active customers in five mainland capital cities and several regional centres, a network of about 150 franchisee drivers, who deliver groceries once or twice weekly, and more than 100 suppliers.
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