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How Meal Kit Maker Chef'd Plans To Get Inside Your Kitchen (And Maybe Already Has)

Dozens of brands rely on Chef’d to run their meal kit businesses. Next, it wants to turn grocery shopping into something more like Netflix.

  • <p>Beef tenderloin</p>
  • <p>Chef'd L.A. facility</p>
  • <p>Cajun blackened salmon</p>
  • <p>Chef'd L.A. facility</p>
  • <p>Beef bourguignon</p>
  • <p>Chef'd L.A. facility</p>
  • <p>Braised halibut</p>
  • <p>Chef'd L.A. facility</p>
  • <p>Fish tacos</p>
  • <p>Chef'd L.A. facility</p>
  • <p>Chicken en papillote</p>
  • 01 /11 | ADA

    Beef tenderloin

  • 02 /11

    Chef'd L.A. facility

  • 03 /11 | Atkins

    Cajun blackened salmon

  • 04 /11

    Chef'd L.A. facility

  • 05 /11 | New York Times

    Beef bourguignon

  • 06 /11

    Chef'd L.A. facility

  • 07 /11 | New York Times

    Braised halibut

  • 08 /11

    Chef'd L.A. facility

  • 09 /11 | Men's Health

    Fish tacos

  • 10 /11

    Chef'd L.A. facility

  • 11 /11 | Women's Health

    Chicken en papillote

Meal kits are the Ikea furniture of cooking. They arrive in boxes as disassembled meals, with pre-portioned ingredients, step-by-step instructions, and some assembly required. And, recently, there's a version for absolutely everybody:

The New York Times cooking section launched its meal kit in July, for the crowd that wants to gently simmer a beef bourguignon to perfection and master other sometimes intimidating recipes pulled from the paper's cooking section without shopping for their ingredients. Around the same time, the American Diabetes Association (ADA) created a meal kit with recipes that meet nutritional guidelines for people living with diabetes.

Women’s Health's meal kits, which arrived last year, promise "an emphasis on fresh produce, lean protein, tummy-flattening fiber, and whole grains" that "will satisfy your cravings without weighing you down," while Men’s Health assures its meal-kit customers that its recipes will make "meals that satisfy your gut without expanding it."

Weight Watchers makes a "point friendly" meal kit, and rather than dwelling on the absence of berries, dairy, legumes, fruits, and whole grains in phase one of its diet, Atkins encourages its disciples to order the ingredients for its baked meatballs and green beans, or its herbed mahi-mahi fish en papillote.

Hershey’s has a meal kit (dessert kit?), as does artisan chocolate maker Scharffen Berger. Even artificial meat producer Beyond Meat has one.

But if you follow all of these meal-kit boxes back to the warehouse that shipped them (or in many cases, read the box), you'll find just one company: Chef'd.

Like brands that popularized the meal-kit idea—Blue Apron, Plated, and HelloFresh—Chef'd, based in El Segundo, California, believes that meal kits can be a big business. One food-consulting firm estimated that category will account for $3 billion to $5 billion of the online food shopping business in 10 years But unlike these other startups, Chef'd isn't trying to build an identity solely around its brand. Instead, it wants to build an Amazon-like store that houses meal kits for every lifestyle. Its website tagline is "The First And Only Meal Store."

"I call it the Denny’s," says Chef’d CEO Kyle Ransford. "You’re drunk at 2 a.m. and you go to Denny’s so you can point at the picture and say, 'I want that.'"

Ransford, 44, and his team have built not a cooking club but a fulfillment company that turns anyone's recipes into a meal kit. It aims to be the grocery store of the future—one where recipes, whether posted by Atkins or Hershey or your personal trainer, serve as ordering slips, and all of the products come in just the size you need.

Chef'd L.A. Facility

Thinking Small

"Make sure she wears a hairnet," someone yells from across the street to the man who opens the door for me at the Chef’d’s Brooklyn fulfillment facility. Since Chef'd took over the facility seven months ago from a downsized "virtual farmer’s market" startup called Good Eggs, it's painted the exterior to match the company's bright orange logo and paid to have it tagged with graffiti. "We’re in Brooklyn," explains Ransford, who wears two hairnets. One, in blue, matches mine. The second, in white, covers his scruff of a beard.

Scrums of workers are busy portioning ingredients into tiny bags for Chef’d meals. One group of women scoop a red powder by the teaspoon into tiny plastic bags, gather the spice at the bottom with a shake, and then fold and seal with a yellow sticker. The air smells like curry.

Kyle Ransford

Before starting Chef’d in February 2014, Ransford had founded a bank and a real estate company. He and his cofounder, Jesse Langley, were shopping for their next business idea and looked into starting a meal-kit service like Blue Apron or Plated. Initially they thought they could outsource the actual packing and shipping to someone else. But when they searched for a company that could fill orders on their behalf, they didn't find one.

"Nobody had a grocery store in the sky, in essence, where you had all these individual items you could pick from in a way that was in pre-portioned, like you would need to make a specific meal," Langley says. "That supply chain hadn’t been created, and there wasn’t a formula out there." This seemed like the real opportunity. Ransford and a friend, Chris Growney, provided 90% of Chef’d's initial funding themselves (online grocer FreshDirect has invested in Chef'd's first round of funding, which so far totals $21 million).

It was, and remains, an ambitious project. ""It’s not so hard to put up a website and send people an email that says buy this," Ransford says, "When you need to get 60 pieces of food, make sure it’s the right size, make sure the tomato is perfect, put it in a box—than it gets harder."

Most meal-kit companies meet this challenge by selling subscriptions: Customers sign up to receive a set number of meals each week, which they can choose from a limited weekly menu. This allows fulfillment facilities to plan ahead, ordering just the ingredients they will use in a week's recipes. Rather than scheduled shipments, what Chef'd has in mind is to allow anyone to order any recipe at any time, which requires inventory of virtually every ingredient that you'd find in a grocery store, pre-packed in the tiny size you'd need to make a single meal.

Back in 2014, Ransford, Langley, and Chef'd's third cofounder, Jason Triail, ran a pilot with 30 recipes that they fulfilled on demand from a test kitchen in Manhattan Beach. After they moved into a 40,000-square-foot warehouse near Los Angeles in March 2015, they ran a pilot for Indiegogo backers with 35 recipes from 15 brands. Then they began to expand their repertoire. Every time they added a new meal, they began stocking a new ingredient in their warehouse, which they would have on hand for new recipes that called for it. Today, Chef'd offers on-demand meal kits for more than 300 recipes. It ships "hundreds of thousands" of servings per month.

Some of its partner brands, like the New York Times and vegan meal kit company Purple Carrot, sell subscriptions via Chef'd that lend themselves to an assembly-line packing procedure. But most recipes it fulfills on demand, which involves a process that looks more like Amazon's fulfillment warehouses, with workers retrieving the ingredients for each order from various shelves and bins.

At the Brooklyn facility, Ransford gives me a tour of these various shelves and bins. He stops in front of buckets filled with fast food-style packets of ketchup and honey.

"If you go to the store, the honey bear you buy is this big," he says, miming a giant pot of honey with his hands. "It’s like, how old is that honey in there before you get to the end of it?" (Perhaps this wasn't the best example—honey never spoils—but you get the point.)

Typical grocery-store sizes, like a honey bear, he says, "were made for when families cooked 20 out of every 21 meals at home." His theory is that buying ingredients in the size needed for cooking just one meal fits better with today's variety of fast-casual restaurants and endless delivery services, options that have made it easier to avoid cooking. Millennials eat out more often than older generations, and Americans now spend more money at restaurants than at the grocery store (though part of this is due to falling grocery store prices— restaurant growth has slowed since 2007).

Next to the tiny honey packets are little bags of white sugar that look like a movie-prop version of cocaine, and sample-sized pots of jam. If a new recipe involves sweets, Chef'd doesn't need to find a supplier before it can offer it on its site—it already has the ingredient on its shelves. "We will go from stocking the ingredients in recipes from the New York Times’ [weekly subscription] recipes," he says, "to stocking 10,000 ingredients that will make any recipe in the New York Times."

For New York Times: Oven-Roasted Chicken Shawarma

Meals, Not Meal Plans; Partners, Not A Brand

When I go shopping on the Chef’d website for the first time, I choose a Men’s Health steak au poivre recipe that serves two and costs $34. I find it by choosing a "gourmet" option from the website’s menu. At the time, I am feeling fancy. I could have also chosen "quick and easy," which would have led me to options like Mongolian beef (two servings for $35) and shrimp fettuccine pasta (two servings for $36). At checkout, Chef’d adds on a $10 delivery fee, bringing my two portions of steak up to $44 (Chef’d comps delivery on orders over $40).

Blue Apron, which offers free shipping, charges $9.99 per serving for its two-person plan; Plated charges $12 per serving; and HelloFresh charges between $8.75 and $9.90 per meal. Chef’d meals don’t have a consistent price, but dinners for two range from $7.50 per serving (kids' mac n' cheese) to as high as $24.50 (New York Times Cooking’s braised halibut with asparagus). The median and mean prices are both around $15 per serving.

That's not cheap. One reason so many of Chef'd meals cost more than competitors' meals may be its smaller scale. Blue Apron, a company with 4,000 employees, already delivers more than 8 million meals per month while Chef'd delivers less than 1 million. When I visited Chef’d, the company had 108 employees and 160 temp workers (it says it has "150 full-time equivalents"). Scaling isn't always a graceful process: A BuzzFeed article recently detailed violent, unsafe, and high-pressure working conditions at Blue Apron's Richmond, California facility. Ransford says that his brand partners send auditors to the Chef'd facility, and the company does not appear in the OSHA violation database.

Ransford says his model will ultimately be more waste-efficient than the subscription model because it can use ingredients in multiple recipes rather than ordering food for one scheduled shipment and throwing away the extras. But his prices don't yet tell that story, and it's just as easy to imagine the other scenario: "If you buy inventory and hold on to it and hope that someone shows up to buy it from you before it goes bad, there’s a lot of waste," says Blue Apron's CEO, Matt Salzberg, about the Chef'd model. (Neither Chef'd nor Blue Apron brings up the waste problem they have in common: the enormous amount of packaging required to deliver their products).

"They have to stock so much inventory," says Sucharita Mulpuru, the chief retail strategist at the retail and e-commerce event organizer Shoptalk about Chef'd. "They have different kinds of chicken. Different cuts of beef. Lamb. Shrimp. Different fish. That’s a nightmare from a storage standpoint, purchasing standpoint, shipment standpoint. That makes it difficult to get consistency in the size of boxes you're going to send, how much packaging you need."

It's too soon to say which model is a better business. Ransford says Chef'd customers want unlimited choice rather than the set menu options offered by companies like Blue Apron ("That is fun for a while," he says. "Then it’s like, why are you picking the three things that I’m eating? And why do I have to learn how to cook something new three nights per week?"), while Blue Apron's Salzberg argues that customers enjoy trying new things ("customers like curation," he says.) Similarly, Ransford argues that people don’t stick with subscriptions ("You are not building a brand, but making something people quit."); Salzberg declines to comment on how many people stick with their Blue Apron subscriptions ("Our customers who stick with us adapt Blue Apron to their lifestyles. They order week after week after week, and it becomes the way they cook dinner for their families.")

Mulpuru also doubts that either Blue Apron or Chef'd can ever compete with grocery stores. "These guys are using the most expensive method possible to get food to a consumer’s home," she says "To put it in a box and put ice packs in it and send it to someone’s house, which is so much more expensive. It’s adding costs for the customers, and customers have told us time and time again that most of them value money over the time. They would rather do the shopping themselves to save money."

"Their Brands Don't Matter"

Though it might never be able to compete with grocery stores on price (unless you do the math like Ransford does, by assuming you'd throw away a lot of what you bought at the store), Chef’d has achieved at least one advantage over its subscription-oriented peers. When partners outsource their meal kits to Chef’d, Chef’d effectively outsources its marketing and customer acquisition to them.

Many brands see meal kits as a branding opportunity. In Atkins’ case, the company wants to help people stick to its diet, not only because its executives believe the diet to be good for people (a constantly debated claim), but because Atkins’ business revolves around selling shakes, bars, and frozen meals to people who are following the diet—and it has a harder time selling them to people who have fallen off the wagon. The company has created free digital trackers; meal plans and shopping lists; and more than 1,600 recipes in an effort to help customers stick with its diet. Meal kits are another tool in its arsenal.

When the brand's kit launched earlier this month, it advertised it to its more than 600,000 Facebook fan and its internal database of people who have signed up to learn about the Atkins diet. Chef’d pays every recipe creator a $.50 per serving royalty fee when a customer chooses one of their recipes, but in exchange they get advertising worth many times that.

When New York Times launched its subscription meal service with Chef’d this summer, it devoted the back page of the paper to an ad. "They probably spent half a million dollars in media in the last three, four weeks," Ransford says.

Chef’d meanwhile, makes about $20 on an average order of $70, while collecting its partners’ customers at a relatively low cost of about $10 per person (it does not include the $.50 royalty fee it pays to brands in this number). And once they’re in the Chef’d system, customers don’t necessarily continue to buy from the same brand that brought them there. Ransford says that 40% of people who bought a Weight Watchers subscription from Chef’d also bought an a la carte item, for instance. "Once you’ve gotten the box and tried something," he says, "it’s less about the brand. When someone comes back, it’s more, I want chicken teriyaki tonight."

"We of course don’t spend a lot of time mentioning to brands that their brands don’t matter," he adds. "but they probably matter less than they think."

Atkin's Thai basil chicken stir-fry

The Grocery Store Of The Future?

As Chef'd pays some brands a royalty fee in exchange for free advertising, it charges other a fee for sample distribution. Food companies have long used recipes to market their products (i.e., Nestle's famous Toll House cookies recipe). Providing a use case encourages customers to try a product. But this strategy has a fatal flaw: There’s nothing to stop someone from using Ghirardelli chocolate in a Nestle cookie recipe. Chef'd solves this problem by sending product samples to its customers with not just a recipe, but all of the ingredients, right in the box. Companies are willing to not only provide free products toward this effort, but actually pay Chef’d $5,000 per recipe to do it. Thus, Chef’d now offers Hershey’s S’more’s Cookies (8 servings for $20) and No-Bake Toffee Fudge Bars (8 servings for $27) alongside its meals. It's a new way of turning food into a marketing tool. Next year, Chef'd will be selling a widget to brands that allows customers to order their meal kits directly from their sites.

But Chef'd has no intention of becoming a sample distribution center. It wants to build the capability to fulfill any recipe's ingredients, anywhere online. The startup began its branded meal kits by partnering with celebrity chefs that wanted to extend their brand into home kitchens. Then it partnered with food and health brands, like the New York Times Cooking and Atkins. But eventually, it wants to partner with you.

"You can put in grandma’s meatball recipe," Ransford says. "The trainer at the gym will put up his recipes." Langley, who no longer works on Chef'd day to day, tends to be more whimsical about its mission. He imagines it like Pinterest, "where you can share your food with a community and establish a network around food" and "spread the flavor and love of Sarah’s great grandma’s meatball recipe."

In the Chef'd vision, as customers buy more and more of their food from Chef'd, the company will be able to send them to recipes that better fit their lifestyles, similar to the way that Netflix recommends movies or Amazon recommends books. Do you have kids? Do they need lunches? Do you like to eat healthy? Does your family eat pork? Chef'd will know, and it will provide recipes accordingly.

"You’re probably not buying one serving of peanut and jelly and bread," Ransford says, "but if you’re only cooking two or three nights at home and then you're getting delivery or takeout meals a couple of times per week, and you're going out a couple of times per week, it’s just a more efficient way to shop for those meals [that you make at home]."

In 12 to 18 months, Chef'd plans to have an inventory of 25,000 ingredients—basil portioned into eight different sizes, pre-cut single servings of chicken and beef, tiny bottles of fish sauce—at which point, it will be able to fulfill hundreds of thousands of recipes. When you navigate to Chef'd, it will have already picked out what you might want for dinner. And while you're browsing your favorite cooking site or your personal trainer's blog, you won't have to wonder where to find black garlic or plan a trip to a grocery store. You'll just click "buy now" and the ingredients will come to you. Heck, maybe they'll be delivered by drone. "We become the button that is the impulse buy," Ransford says.

My $44 bright orange box filled with steak arrives on a Wednesday—or at least, that's what the note on the door tells me when I get home from work. The next day I work from home so I can receive the package on FedEx's second delivery attempt. The doorbell doesn't ring. The steak delivery gets rescheduled for the next Monday, before which a Chef'd customer service agent will call me to offer a new box. In the meantime, I go to the grocery store to buy a chicken breast and a bagged salad.

Slideshow Credits: 01 / Photos: courtesy of Chef'd;

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