Williams-Sonoma is venturing into the meal-kit space via a new partnership with the organic and non-GMO meal kit company, Sun Basket.
Available now, customers can purchase Sun Basket subscriptions on Williams-Sonoma.com. As with Sun Basket's current service, those purchasing through Williams-Sonoma can choose meals for two or four people and customize based on dietary needs like paleo, gluten-free or vegetarian. The cost per meal averages out to $11.49, which is more expensive than major players like Blue Apron but on par with the only other USDA-certified organic meal-kit provider, Green Chef.
The co-branded meal-kits will differ from Sun Basket's current offering in that they will feature recipes from the Williams-Sonoma Test Kitchen and new subscribers will receive a "Kitchen Essentials" package with a microplane zester, a lemon press, a garlic press and a set of tongs. For customers who are already subscribed to Sun Basket's service, they will not experience any change.
For the two San Francisco Bay Area companies the marriage of their brands seemed like a natural match. "We saw it as a great partnerships with both of us focused on making cooking easy and delicious and promoting the Northern California value system," said Adam Zbar, CEO, Sun Basket.
Over the last two years, the meal-kit space hit a fever pitch with Packaged Facts estimating more than 150 players in the U.S. Together, these companies are expected to generate $1.5 billion in sales this year and balloon to a multi-billion dollar market over the next five years. But with the overall venture pullback experienced in 2016, investors have also grown wary of the space, and funding for food delivery in Q2'16 dropped to the lowest point since Q1'14.
A recent story by Fast Company also revealed that meal-kit companies may have a hard time retaining customers in this oversaturated market. Research from 1010data found that after six months only 10 percent of customers retained their subscriptions to BlueApron, and it saw similar patterns with HelloFresh and Plated. All the companies named in the report have disputed those stats.
As for Sun Basket, it said it is experiencing much higher retention than the industry average. "Our retention rates are at least five times higher than what is sourced in that article," said Zbar. The company has also grown $30 million in annual run rate (ARR) since Labor Day, and it expects to be EBIDTA positive by next year.
Zbar expects that this new relationship with Williams-Sonoma will only help boost those numbers. "A large part of getting the right type of customer to join your services is having someone who is a trusted voice, and I can't think of another brand that would be a better trusted source than Williams-Sonoma to recommend Sun Basket," he said.
This partnership could also help Williams-Sonoma Inc.'s (NYSE: WSM) sagging stock price. The company whose portfolio of brands includes Pottery Barn, West Elm, Mark and Graham and Rejuvenation has seen its stock lose 35 percent of its value over the last year, but its ecommerce business has been seen as a bright spot for the company.
For its part, Williams-Sonoma saw the collaboration as a good supplement to its existing food offerings online. "A partnership with meal-kit delivery is particularly relevant at this moment, said Janet Hayes, president, Williams-Sonoma. "It is a good adjacency to the thriving food business we have today."
When asked whether Williams-Sonoma would pursue acquisitions in the space or develop its own meal-kit in the future, Hayes was vague on prospective plans. "We are exploring all avenues and are always inspired by how to help our customers learn and be inspired to cook at home," she said.
Williams-Sonoma isn't the only retailer jumping into the meal-kit game. In October, Whole Foods entered into a relationship to begin testing Purple Carrot's meal-kits at a Dedham, Massachusetts store.