Q&A   //   April 29, 2020

‘Meal kits have gotten a bad reputation’: Meal service Freshly now helps companies provide food to employees

This week, prepared meal service Freshly launched Freshly for Business, a new unit aimed at helping companies provide employees with food during their work from home stints. The company hopes to capitalize on a new and untapped revenue stream.

Food access has become a great concern nationally with supply chains disrupted and many restaurants closed. The company believes that working with employers to subsidize quarantined employees’ meals can ease obstacles. So far, Freshly’s clients include PWC and KPMG, as well as national healthcare networks — with plans to ship 50 million meals across the country through the new platform.

Founder and CEO Michael Wystrach spoke with Modern Retail, and discussed the pivot from strictly DTC meal delivery and the potential of a newfound market for remote office perks. The conversation has been lightly edited for clarity. 

How did the idea of adding meal delivery to businesses come about?
We’ve always had DTC demand from a specific set of people looking for healthy meals on a time constraint. While that’s not so much of an issue right now, getting actual food delivered to you in a timely manner is hard, especially in many urban centers where these employees are located. We began receiving corporate orders organically through our customer-facing platform a year ago from places like the Coast Guard and fire stations, which we fulfilled case by case. Until now, it was a tiny portion of our business because we weren’t equipped with the backend to scale it.

As the pandemic began, and people settled into working from home, we saw an increase in demand for employers wanting to provide ready-made meals they may normally have at work. This idea of incentivizing employees with in-office food is something Google started 20 years ago and has become popular among tech companies and many startups. The challenge of fulfilling large deliveries weekly, especially for big corporations with geographically scattered workers, made it clear there is a need for a program that’s ideally on a single platform.

How did you modify your backend to fulfill large orders amid the pandemic?
On the backend, we’ve increased capacity by 20% and are now offering more ways to deliver meals through the dedicated B-to-B portal. The model gives employers three different options: paying for everything by having us work directly with HR, subsidizing weekly portions to come out to about $5 per meal, or just have us offer discounts to employees opting in.

We’re also still competing with our own DTC demand, so we haven’t been able to scale as quickly as possible. While we’re not immediately releasing these figures, I can say we’re already seeing decent growth of week-on-week doubling in sales.

The market for meal box delivery has been overestimated over the years. How is Freshly’s growth potential different from the Blue Aprons of the world?
Meal kits have gotten a bad reputation due to Blue Apron’s early market share grab, followed by a flood of venture capital-backed duplicates. But if you look at someone like Hello Fresh, they represent the antithesis of the high CAC and cash burn many others experienced, even prior to Covid-19.

Being a health-conscious service also differentiates us at a time when Americans’ dietary choices are at the forefront of a pandemic, and this is an opportunity for a wakeup call. We think the total market for meal delivery is much higher because data shows, overall, food is going online. Ultimately, the market of people buying their food online, whether it be prepared, takeout or groceries, is here to stay.

Office culture has undoubtedly changed in the short term, now that everyone is working from home. How do you anticipate the service to scale beyond the pandemic?
Companies have long been resistant to work from home culture, and of course some industries are seeing mixed results in productivity, but there’s no doubt remote is to stay in some capacity. Many areas are likely to ease back into lifting social distancing mandates in the next year, so we foresee more companies skipping the cost of having an office. 

My hunch is that many employees would rather get free meals instead of a desk. This gives companies a chance to incentivize employees in different ways, including necessities like food or virtual workouts, without paying the rent. As a prepared meal company with the infrastructure in place, we’re equipped to fulfill those alternative office perks. That said, no customer is using us for all 21 meals a week, but we can provide one portion of their overall consumption.