You make food (a competitive, capital intensive, low margin endeavor - all with rotting inventory) then you deliver it (a man hour intensive, operational & insurance nightmare). AND after you do all this, the person looks at their meal and shrugs their shoulders wondering if it was worth the $10. I am not saying Munchery was bad it was just swimming upstream.
Munchery cost a lot more than $10. Even 24 months ago when we started buying from them, it was a $10-ish monthly subscription and two meals turned into about $30 delivered. Now it's closer to $40.
We've ordered (I just checked!) 170 times. Pretty much twice a week since mid 2016.
They deliver pretty good, pretty healthy food that is worlds better than anything frozen that is ready to eat with 5-ish minutes of effort. It's awesome for two working adults.
YMMV, but my family relies heavily on Munchery and it's one of those "Silicon Valley" inventions that has made our life better. Generally the food is good and healthy and avoids a lot of waste (time and material). It's all about logistics and I hope they come through the difficult time.
I'm not surprised -- I bet more will fall. Blue Apron dominates the ad space (I struggle to understand how the unit economics work out with their podcast ad spend..), but I'm a fan of their service and started it a few weeks back. I know not all meal kit services or pre-prepared services are identical in structure, but just acquiring customers that can be very fickle must be insanely difficult with a low margin business like food delivery.
Plus they have no moat. If Amazon decided to compete in that space, they could have a service up and running in less than a year that would destroy Blue Apron and similar companies.
Amazon already offers subscription-less premium mealkits via a partnership with Martha Stewart/Marley Spoon [1] and more affordable options via their Tyson Tastemakers partnership [2].
Amazon is a logistics company that nails delivery in volumes Blue Apron cannot even fathom and Whole Foods adds pipelines for ingredient acquisition and physical locations in exactly the places where Blue Apron clients live.
I really like sun basket, and it seems to me it’s solving a simpler logistics problem with a higher value proposition then munchery.
Logistically it’s not on demand, but rather delivery with reasonable advanced notice.
For me the value proposition is very high quality meals and a forcing function to do something mindful in making them ... typically my wife and I make them together. This is helped tremendously by the fact I work from home.
I do hope the market is there to keep sun basket going.
They also give out huge coupons to acquire new users. I think they gave me a free box ($60 value?) to try it, which I did, and cancelled after a few of them. Then they keep trying to win me back with $20-40 coupons. I bet I could keep trying it, cancelling, and having them entice me back with new coupons forever.
Seems like Silicon Valley is learning that “restaurants” are hard, and thinking of things in terms of “software” and “optimization” doesn’t allow VC money to magically solve the fundamental problems. All are struggling except postmates which doesn’t carry any of the real burden themselves. They just need to make logistics and delivery cheap enough, often enough.
What I've heard from friends who've worked in pizza delivery places, as well as making it from scratch myself on occasion, the margins are insanely high. Which makes sense considering it was originally a peasant food.
Pizza dough is just flour. yeast and water. All of which cost pennies. Sauce is slightly more expensive, but you can make something which tastes pretty close to fresh with some canned tomatoes and spices which also cost pennies. Cheese is cheap, there's no need to use fresh expensive mozzarella when you're blasting it in the oven anyway, the low quality pre-grated stuff will turn out pretty good too. Toppings are usually fairly low quality, which again doesn't really matter when they're scattered on a pizza.
When I make it at home it usually costs me about £3, and that's indulging myself with better quality ingredients like fresh mozzarella and tomatoes. Delivery places can get it down to £1, including toppings, and sell it on for £10. The staff are all on minimum wage, you don't need much space if you don't have seating, and at least where I live in London 9/10 delivery drivers use mopeds which are cheap to run.
Compare that to Munchery, where looking at the site they're offering fresh vegetables and cuts of meat for probably similar prices to pizza and you can see where the problem lies. That and being based in SF I have no doubt they've gone full Silicon Valley with their offices (communal spaces, very high sq/ft per employee, high wages etc) and it becomes clear why their business model is probably not sustainable.
You don't have to work out COGS for a restaurant from first principles. Food costs are one of the most discussed and reported topics in the restaurant business, and all major food businesses optimize them.
Which means this isn't a persuasive answer to the question 'tzs asked. Lots of restaurants have low food cost. And pizza restaurants aren't the most efficient category of restaurant. Why don't the even-more-efficient kinds of restaurants deliver too, if pizza's food cost sets some kind of frontier for viable delivery?
> Cheese is cheap, there's no need to use fresh expensive mozzarella when you're blasting it in the oven anyway
If you want a crappy pizza, then yes, you can cut on quality. A good mozzarella can make the difference.
Of course you need also the other ingredients to be of good quality (and prepared in the right way): if the bread feels and tastes like cardboard there is no point in spending money on mozzarella.
I totally agree about toppings. These days they use turkey bologna as pepperoni. Cheese comments are right on too.
They buy Part Skim junk cheese when in USA we subside the crap out of milk (real cheese). They just skimp on every detail to maximize profit.
The regional pizza chains exist because they deliver to bad neighborhoods and stay open until 3am.
None of these places do much to prove their pizza dough.
-pizza is still good when it's merely warm (whereas pasta/chicken aren't)
-pizza doesn't come in individual servings (you don't order $2.50 slices. pizza delivery has effective $10+ order minimums)
-margins on pizza are huge (it's literally just a cheese sandwich. the cost of a large domino's pizza is <$2.50 iirc; margins on fancier food are not as high)
Profitable unit economics are an essential ingredient of pretty much every successful business, and the inability to make the unit economics work the reason for a huge numbers of failures.
I don't know the LA market if you take New York, there is already an extremely efficient low-cost food delivery market where the vast majority of restaurants do take-out and various ordering services (seamless etc) are available and very frequently used. It's going to be extremely difficult to get good market penetration with unit economics that allow for a profitable business in the long term.
A lot of people focus purely on an improved user experience (eg the magic of uber where you click and a car comes, and you just get out without paying at the end) but "disruption" of the established UX isn't enough - you need to provide goods and services at a price point where there is demand and yet somehow you still make enough to stay in business.
Pizza shops don't have a VC-funded growth trajectory built in and thus don't spend prodigious amounts of money (relative to their volume) on marketing.
Blue Apron spends about a million dollars on marketing. Every 2 days. I am using them as an example because they're publicly traded and so that number is conveniently available; I don't believe them to be grossly out of line with the other delivery startups.
(To be fair to the startups: they're attempting to change a core cultural ritual! That's not a quick or easy sell.)
I used to use it quite a bit when they launched in Seattle, but we stopped as the menu started to feel very repetitive, and with the price increases we could order form a variety of other places for the same price.
Oddly enough, there is a farewell item available for delivery Monday for $100. Wonder if it's an actual item.
Amazing concept: where you allow the general public to benefit from investor money.
Let's enjoy these dirt cheap services while they burn through investor money. It certainly won't last long. But it's great while it lasts. I enjoy my share of door dash delivery that's funded by some nice investors. /s I almost certainly won't use it when they start charging any sort of real money.
Now scale this thinking to millions of people and you have a nice little disaster.
I went to make an order from a restaurant that was about a ten minute drive from my house. On a $45 cart, I was hit with:
~$8 "service fee"
$8 "delivery fee"
And a variable tip percentage that defaulted to ~$9
Add tax to the matter and this "$45" order quickly ballooned into almost $75.
I don't mind tipping -- I've come to accept that American society refuses to let that one go -- but at these rates I decided to just place the order myself on the phone with the place, drive over, pick it up, and tip the restaurant directly.
Exactly. Some services will add a variable percentage increase to all menu prices.
It also turns out the quoted cart that Doordash gave me was $10 below actual cost at the restaurant, and from past experiences on other platforms I'm under the impression that Doordash would not have been willing to eat the miscalculation either.
That sucks, I liked Munchery quite a bit. Their ready to heat meals were pretty tasty, especially for something you could just pull out of the fridge and have ready in 15 minutes.
Their CEO did an interesting interview a while back on This Week In Startups. As I recall he seemed to reflect this serene confidence in their ability to scale and had a keen eye for the unit economics... but that being said the service just didn't make a lot of sense. I feel like the target demographic is what actually didn't scale, and the brute force of the sanity check of people getting ready made food delivered for 12-15 bucks a meal was something that didn't resonate outside an minority of the upper middle class.
Munchery costs a $10-ish monthly subscription and then 2 meals costs you about $35-$38 delivered.
We're nothing like upper middle class, and we eat munchery twice a week. It's only a bit more expensive than pizza around here, and way way better. And much healthier.
Why do you think Costco won't start doing deliveries? Amazon can target urban, suburban and rural customers. Costco -- with their current model -- only really gets suburban customers.
For sure - it's just that they do have a great presence in this category already. Ready-to-cook meals that are in an aluminum tray and only need to be shoved in the oven for 20 minutes.
The article mentions "on-demand food delivery" at least twice. What other kind of food delivery is there? Is there a startup that will bring you food while you're asleep, or after you just finished eating?
Sad to say but that is what happens when you’re in the Silicon Valley bubble solving nothing but SF/SV problems.
It would be great if more startups start across the US and the globe trying to solve problem the majority of people face rather than a small group of locals.
From my translation they make a food product the parent doesn't like as much as the food products and/or service at the other two companies.
Does that make them a bad company? Depends if you believe the products are a/the represention of the company. For some that and ads are the only window into the company.
