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As with many fast-changing business segments, meal kits appear at once flush with opportunity and fraught with risk.

In 2018, research from NDP Group suggested the meal kits category had doubled in four years and was on track to reach $400 million in Canada. At the time, 13% of Canadians had used meal kits at least once, with 11% having done so in the last year, and 42% of Canadians claimed they would be interested in participating in the category. Globally, the meal kit delivery service market is expected to reach US$8.94 billion by 2025, according to Hexa Research, representing a compounded annual growth rate of more than 17% since 2017.

Yet when meal kit users were asked whether they would continue to purchase more, less or about the same in the future, about half of those surveyed by the NDP Canada said they would purchase less, and the other half said more, according to Vince Sgabellone, foodservice industry analyst at the NPD Group. “You always want more expansion or usage in the future… I’d hate to think that they have plateaued already.”

Today, there’s an estimated 150 meal kit companies in the world, and competition continues to heat up in an industry that is already home to Berlin-based HelloFresh (and its local subsidiary, Chefs Plate), Goodfood, among many others. The category is a hotbed of innovation and opportunity, as brands test new partnerships and models.

American fast-food chain Chick-fil-A is testing kits that allow customers to cook their own meals at home using ingredients picked up at its drive-thru or counter. Tyson Foods recently began working with Canadian multi-cooker company Instant Brands to create “Instant Pot Kits” designed for cooking in 20 minutes. And WW Canada (previously known as Weight Watchers) recently made its foray into food delivery through a partnership with meat subscription box service TruLocal.

Meanwhile, established grocers and retailers are contemplating making an entrance, if they haven’t already. In December, it was reported that Loblaw has developed a “meal solutions” team to help grow its meal-kit offering. “At 4 p.m. most days, the vast majority of Canadians don’t know what they’re having for dinner,” a company spokesperson told Canadian Grocer at the time. “We believe we are uniquely capable of helping them solve that problem.” Sgabellone believes grocery retailers are well-positioned to gain market share in the future, since meal kits are a “natural extension” of online grocery delivery – and companies like Loblaw, which reported $1 billion in online sales in 2019 (double from the year before) show positive signs.

However, there have been bumps in the road for some meal kit brands and retailers.

Meal kit company Chef’d, which was founded in 2013 and even had the backing of Campbell Soup, ceased operations in 2017. Metro, which acquired a majority interest in Montreal’s MissFresh in 2017, sold that stake in December to Cook It, another Montreal-based subscription meal delivery brand. And U.S.-based Blue Apron, once referred to as “Starbucks of the meal-kit business,” is reportedly considering a sale of its company or assets, citing increased competition. Blue Apron’s valuation and customer base have plummeted since it went public in 2017, according to its most recent filing. In the last three months of 2019, its number of customers fell 37%, while revenue fell 33%, resulting in a loss of U.S. $21.9 million for the quarter.

In short, while there is plenty of room to innovate, the category continues to face significant hurdles, says Sgabellone. He says cost and value remain big hurdles for many Canadians, as does the waste produced by meal kit packaging. He believes the industry has successfully addressed the issue of meal variety, although delivery-related challenges, such as missing a shipment of perishable food, likely remains a barrier for many. A recent study by Angus Reid conducted for Dalhousie University found that nearly two-thirds of Canadians believe category prices are too high. Forty-five percent cited the temperature of the food delivered as a concern, while 32% believe they come with too much packaging.

“You’re going to see more partnerships in the future, and I think you’re probably going to see more consolidation among the brands that are already in the space, or somebody else is going to drop out,” says Sgabellone. “There are just too many players right now and not enough customers.”

While overall volume of online food sales in Canada remains in the low single digits, according to Sgabellone, much will change in the coming years as the industry progresses and customers become acclimatized to it. “The whole space of food delivery is going to change,” he says, “and meal kits are just a small part of that.”