Amazon, Whole Foods Change Meal Kit Dynamics

One year after Amazon acquired Whole Foods Market, meal kit delivery companies are pulling out all the stops to hold onto customers.

While the eCommerce giant hasn’t started offering meals to its more than 100 million Prime members and is only testing its own kits in Seattle, the meal kit market is still preparing for the inevitable through deals with celebrity spokespeople, catering to specialized diets and offering 30-minute meal prep.

“The Amazon acquisition of Whole Foods really shook up a lot of players in the space from a thought process perspective,” Edward Yruma, managing director of equity research at KeyBanc, told CNBC. “When that happened, they all took a really hard view … what are they doing? Where could they find to grow? What could they do better?”

With that in mind, many companies are turning to celebrities to boost business. Blue Apron teamed up with supermodel and cookbook author Chrissy Teigen last month for six weeks worth of recipes. With more than 10.6 million Twitter followers and 18.3 million Instagram followers, her endorsement has already paid off for the company, one source said.

And beginning this month, Blue Apron will also roll out a series of burger kits based on the animated FOX series “Bob’s Burgers,” while competitor Purple Carrot added TB12 boxes last year through a partnership with New England Patriots Quarterback Tom Brady. These boxes are high in protein and cater to customers looking for plant-based recipes.

Grocery stores and meal kit companies are even working together to better compete with Amazon.

In August, Chef’d received $25 million from Smithfield Foods (the name behind Nathan’s Famous and Farmer John) and Campbell Soup Company, and announced that it had entered into distribution deals with Costco, Harris Teeter, Tops, Hy-Vee, Weis and Gelson’s Markets.

In addition, Albertsons acquired meal kit startup Plated in September 2017; Blue Apron partnered with Costco to test its kits at 15 locations; Kroger bought meal kit Home Chef for an initial transaction price of $200 million; and HelloFresh has announced that it would sell kits at Stop & Shop and Giant Food.

“We will continue to see more grocery stores get into this game,” Meagan Nelson, associate director of Nielsen’s fresh growth and strategy team, told CNBC via email.

And while the majority of meal kits are purchased online via a subscription service, in-store meal kit sales are on the rise. Last year, in-store sales rose 26.5 percent to $154.6 million.

“The market will evolve,” said Technomic’s Erik Thoresen. “Subscription will still exist, but won’t be the growth engine.”