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Consumers and investors have a taste for meal prep

an illustration of a footlong sandwich stuffed with turkey, tomatoes, lettuce, onions and dollar bills

Illustration: Tiffany Herring/Axios

As consumers spend more time in the office, their eating preferences are shifting toward meal prep options, which could spur increased investment in the space.

Why it matters: The meal-kit and meal-prep space has seen peaks and valleys in the last eight years as players work to perfect unit economics and navigate high operating costs.

The big picture: "Consumers predominantly favor hybrid approaches to dinners that mix scratch preparation with prepared meal items purchased outside the home," per a report from the Food Industry Association.

  • A primary driver is consumers returning to work offices and spending less time at home.

Zoom in: Retail food service — the aisles of freshly prepared food in grocery stores — is driving shopping purchases.

  • Deli food service sales increased 4.2% from the year-ago period to $49.9 billion in the 52 weeks ended Oct. 7, 2023, according to NIQ data.
  • "Prepared food is a big area. That'll continue to be a growth area for grocery going forward," Carl Marks Advisors managing partner Keith Daniels says.

Another corner of the prepared meal space is meal-kit delivery, which provides ingredients for consumers to make a meal versus a pre-made, ready-to-eat dish.

  • Meal-kit delivery has seen increased consolidation as players contend with difficulties building and managing facilities and supply chains.
  • "Meal-kit delivery will also likely continue to grow. From an M&A standpoint, we may see additional activity as delivery services look for scale and cost leverage," says Daniels.

State of play: Meal-kit operator FreshRealm has consolidated a couple of those platforms, acquiring the operating assets of Blue Apron for $50 million last year and buying meal-kit provider Marley Spoon for $24 million in January.

  • Blue Apron sold to Marc Lore's Wonder Group for $103 million in November, going private after losing significant share price value.

What we're watching: Meal provider Tovala offers a somewhat hybrid approach, selling mostly prepared ingredients that can be easily assembled and cooked in Tovala's "smart ovens."

  • Tovala recently raised $45 million in debt from General Catalyst's Customer Value Fund, which is essentially "underwriting the customers that we are acquiring with their capital," CEO David Rabie says.
  • Through this fund, General Catalyst is also bearing the risk equally with Tovala if customers stop ordering predictably, for instance, Rabie says.
  • Tovala has raised over $100 million in equity and hopes to hit a full year of profitability in 2024, he says.
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