Why it matters:
- Online sales of both groceries and meal kit deliveries doubled during the pandemic.
- These categories are expected to generate more than $190 billion in sales this year.
- Hungryroot, which combines grocery delivery with meal planning assistance, saw its sales jump by 47% in 2022 and is expected to have exceeded that growth rate in 2023.
Five years ago, before artificial intelligence became the hottest business buzz phrase, grocery delivery and meal solutions company Hungryroot began building a digital shopping assistant smart enough to pick out a week’s worth of groceries for customers and tell them how to prepare them.
Since pivoting to an AI-powered business model in 2019, Hungryroot has seen its increasingly smarter shopping algorithm drive dramatic revenue growth.
Ben McKean, Founder and CEO of Hungryroot, credits the pivot to AI-driven personalization with growing the company tenfold since 2019.
After reporting its biggest growth spurt ever in 2022, with revenues up 47% year-over-year, at $238 million, the company saw growth of 67% in the first half of 2023.
Hungryroot was launched in 2015 as an e-commerce consumer products company, initially selling six different vegetable- and noodle-based meals that were intended to be fresh, healthy, heat-at-home alternatives to frozen dinners.
Hungryroot CEO: ‘Our customers are effectively trusting us to choose their foods for the week’
The company, during its first years in business, expanded the products it sold to 60, with a line of cookie doughs proving particularly popular.
The pivot in 2019 came when Hungryroot realized that consumers didn’t want to go to multiple websites to do their grocery shopping, but wanted one convenient site to handle all of their grocery needs, McKean told CO—,
Instead of asking shoppers to fill up their online carts one item at a time, Hungryroot presents them with an already filled cart with all of the ingredients needed to make multiple meals, along with recipe choices for those ingredients.
The meals and ingredients are selected based on an initial survey of customer food preferences, as well as AI-informed wisdom based on selections hundreds of similar consumers have made previously.
“Our customers are effectively trusting us to choose their foods for the week,” McKean said. “That’s a big ask.”
“If we choose foods that they enjoy, that makes them feel better on a daily basis, that’s where we can change people’s lives and have a positive impact,” he said.
“I like to think of Hungryroot as your personal assistant for healthy eating,” McKean said.
Hungryroot can suggest over 6,000 recipes a week, and deliver the ingredients needed for any of them. Hungryroot’s business model has enabled the company to be consistently profitable, McKean said.
Capitalizing on two fast-growing markets: Online grocery and meal-kit sales have doubled post-pandemic
Hungryroot is competing with both the online grocery delivery and meal prep kit categories, but has created its own hybrid category. It aims to be able to deliver a week’s worth of groceries for a family, but also provides meal planning and prep assistance with menus tailored to the grocery order and ingredients that are pre-cut or pre-seasoned.
Online grocery sales and meal kit deliveries soared during the pandemic and are expected to continue to grow.
Sales of meal kits, such as those sold by Hello Fresh, Blue Apron, and similar companies, also doubled during the pandemic, from roughly $4 billion in 2020 to $8.2 billion in 2023, and are projected to reach $9.3 billion by the end of 2028, according to a recent report
by research firm IBISWorld.
“We had to offer something unique, and the unique element was, ‘trust us to choose your foods for the week,’” McKean said.
Tapping AI to produce customized grocery orders
In order to create a personal grocery shopping assistant, Hungryroot built an algorithm that uses two AI fields, operations research, and machine learning to produce customized grocery orders.
“A new customer takes a five-minute quiz, and all of that data – explicit preferences from the customer – is fed into our algorithm,” McKean said. “Then we use machine learning to infer new data,” based on selections customers with similar preferences liked.
Customers, when they are presented with the grocery cart selected for them by the algorithm, can delete items they don’t want or add other items. “But two-thirds of what the algorithm chooses is what our customers end up buying,” McKean said.
“The vast majority of what we sell is chosen by our algorithm for the customer. And that’s the entire value proposition,” he said. “That’s what saves them a ton of time. It is one less thing to worry about. They discover new foods. They save money because it’s less food waste.”
Doing the AI-powered pivot to customized grocery delivery also helped Hungryroot save money and avoid some of the operational pitfalls of other meal prep services.
Solving the meal-kit challenge by landing on a profitable business model
Meal prep kits, in which every ingredient for a meal is portioned into individual bags, for example a teaspoon of salt, or a teaspoon of garlic powder, are labor intensive, and require costly packaging. Hungryroot, instead of sending a cup of rice in a baggie for a recipe, will send a package of rice and recipes for several meals the rice can be used for.
Because meal kit preparation is so labor intensive for the companies, “they have limited ability in terms of how many of these meal kits they can offer,” McKean said. While meal prep companies typically offer 20 to 30 meal choices a week, he said, Hungryroot can suggest over 6,000 recipes a week, and deliver the ingredients needed for any of them.
Hungryroot’s business model has enabled the company to be consistently profitable, McKean said.
The company’s key demographic is 30- to 55-year-old women who are purchasing for their households.
“Suburban families are a core customer base for us,” McKean said. “People who value convenience and who are looking to eat healthy.”
Buying a week’s worth of groceries from Hungryroot is comparable in price to having groceries from Sprouts or Kroger delivered to your home, McKean said. But customers find the biggest value to the service is replacing restaurant meals and takeout.
“We’re 40% less than restaurant prices, and half of the dollars we’re displacing is restaurant delivery and takeout,” McKean said.
Expansion plans: Adding more grocery items, vitamins, and snacks for kids
McKean is planning to fuel future growth by continuing to expand the number of grocery items they sell, including the company’s proprietary brands and offerings from other brands. The company sells 600 different items now, up from 400 last year, and plans to expand to over 1,000. It also plans to add vitamins and supplements as well as expand its snack offerings for children.
McKean believes that Hungryroot’s unique value proposition has driven the company’s impressive growth in 2022 and 2023.
“People really like the idea of having a brand they can trust to choose their foods for the week,” he said. “Because when it works, it’s a huge time savings and a huge mental load savings.”
“It’s amazing how much time we spend in our lives thinking about food,” McKean said. “The average American spends 13 hours a week – one single waking day – thinking about, planning, shopping for, and cooking their food.”
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