As skyrocketing food prices have cost-conscious consumers seeking lower-cost alternatives, The Kroger Co. is expanding the capacity of its ready-made meal and meal kit delivery business, Home Chef.
The meal solutions company announced Tuesday (July 19) a new production center in Douglasville, Georgia, to increase the number of orders the company can fulfill and to boost the efficiency of fulfillment.
“Our Atlanta facility is a foundational part of delivering high-quality meals to our customers in the south and beyond,” Home Chef CEO Erik Jensen said in a statement. “This brand new center will make our production and distribution even more efficient, so we can continue to bring fans easy, delicious recipes.”
The news comes as consumers begin to shift away from restaurants toward more cost-effective options, though their desire for convenience has not changed. As such, by offering a ready-made meal option that does not cost as much as a typical order placed via third-party food delivery channels, the company has the opportunity to gain share of stomach from restaurants.
General Mills CEO Jeff Harmening noted on a call with analysts in late June discussing the company’s fourth-quarter fiscal year 2022 earnings that the company is seeing consumers’ food spending shift.
“When we saw this in the last recession, the Great Recession, we saw that consumption of away-from-home eating was down and replaced by at-home eating,” he said. “We’re seeing the same kind of behavior starting now… and that’s because customers want to get out more, but the cost of eating away from home is more than double the cost of eating at home.”
Related news: General Mills Sees Inflation-Wary Consumers Shifting Away from Restaurants Towards Grocery
Additionally, if the United Kingdom is any indication, consumers are already turning away from restaurant aggregators toward more affordable options.
UK-based food delivery service Deliveroo announced Monday (July 18) that it is slashing its sales growth forecast in the face of a “rapidly changing macroeconomic environment,” lowering its projected gross transaction value (GTV) growth rate to 4-12% from 15-25%.
Read more: UK’s Deliveroo Catches ‘Aggregator Flu’ as Consumers Rein In Spending
Kroger’s move to expand its ready-made meal offerings is the same strategy being leveraged by Instacart with its Ready Meals Hub, which launched earlier this year. In the announcement, the grocery aggregator explicitly stated that the goal was to present “cost-effective alternatives to restaurant takeout” by offering ready-made meals from grocers’ in-store kitchens.
See also: Instacart Aims to Price out DoorDash With Launch of Meal Delivery
“With our new Ready Meals Hub, we’re dishing up inspiring, more affordable and nutritious food alternatives to restaurant delivery that make it easier for consumers to break up with takeout this year,” said Instacart Vice President and Head of Product Daniel Danker in the release. “We’re also helping retailers drive more sales and increase their ‘share of stomach’ when it comes to their customers’ daily mealtime decisions.”
The Consumer Price Index for All Urban Consumers (CPI-U), reported by the U.S. Bureau of Labor Statistics (BLS) Wednesday (July 13) revealed that food at home (i.e., grocery) prices rose 12.2% year over year in June, while food away from home (i.e., restaurant) prices rose 7.7%.
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