In a first for national grocery chains, Albertsons is buying the healthy meal kit delivery startup Plated for between $175 million and $200 million, though the final price could end up double that amount as the supermarket chain has agreed to “earnout” payments based on how Plated grows, according to the Information. Credit Suisse Group AG brokered the deal.
According to The Wall Street Journal, Plated will become a subsidiary of Albertsons and customers will soon be able to purchase a rotating selection of meals from the startup for delivery or pickup from the nearest location of the grocery store chain.
Why might Albertsons be interested in this tiny meal delivery startup? The $2.2 billion meal kit market has grown exponentially in the past few years. Meanwhile, grocery store chains must increasingly compete with meal delivery and newfound competition from grocery delivery services like Amazon Fresh.
Some meal kit services are faltering, including the largest company in the space, Blue Apron, which has seen a drop in both subscriptions and its stock price since its initial public offering — though some of that dip could be attributed to higher costs of running its new East Coast operations and Amazon’s push into the meal delivery service.
In the past year, Kroger and other grocery chains started to see dollar signs in the new industry and have started to offer their own meal delivery services. Meanwhile, Amazon’s purchase of Whole Foods, Inc. has given many grocers concern over their main brick-and-border food business. Purchasing Plated will, in theory, give Albertsons, which owns the Safeway chain with around 2,000 store locations, a new way to increase revenue and connect with a new generation of food buyers.
“We think there’s an opportunity to grow this thing tremendously,” Albertsons CEO Bob Miller told the Journal, adding his grocery chain will give the startup a “cost advantage.”
Plated co-founder Josh Hix will remain the CEO of the company after the close of the deal, according to Albertsons.