Avinash Kumar - Sep 18, 2019

Meal kits aren't just for wealthy, it could be the key to curbing hunger

Today, 1 in 8 Americans or about 13% of the total US population receive Supplemental Nutrition Assistance Program (SNAP) benefits which help low-income households in obtaining nutritionally adequate diet (CBPP, 2018). In FY 2017, SNAP provided benefits to approx. 42.1 million people living in 20.8 million households each month (FNS, 2019). Capture1SNAP is the largest nutrition program administered by the United States Department of Agriculture (USDA), under the Food and Nutrition Services (FNS). SNAP benefits are based on maximum level of benefits determined by Thrifty Food Plan (TFP). TFP is prepared by USDA’s Centre for Nutrition Policy and Promotion (CNPP), which provides a representative healthful and minimal-cost plan based on market basket of food items that low-income households purchase with limited resources (TFP, 2006). The methodology to calculate TFP was first established in 1975, which was revised in 1983, 1999, and most recently in 2006. With each revision the composition of the market basket gets updated based on the changes to dietary guidelines. Importantly, however, the updates are done subject to the constraint that the total cost of the basket remains constant in inflation-adjusted terms at $650 per month for the reference family of two adults and two children (USDA, 2019). The TFP specifies a market basket including types and quantities of food that households can purchase, cook, and consume at home in order to obtain nutritional diet at minimal cost.

Capture2When the TFP was first established in 1975, most families had a non-working adult in home who was likely to prepare meals from scratch. Today, however, an increasing number of low-income families have either single working parent or both working parents. Nearly half (44 percent) of SNAP participants lived in a household with earnings in FY 2017, and these households made up about one third (32 percent) of the SNAP caseload. More than half (55 percent) of households with children had earnings.

Today, the ways that Americans prepare food and the types of foods Americans consume have changed significantly since SNAP was introduced in the 1960s. The data from American Time Use Survey (ATUS) shows that women’s time on meal preparation and clean-up has reduced significantly across various income categories. Women from low-income category spend approx. 3 hours less per week on meal preparation in 2012 as compared with 1965, similarly, women from middle- and high-income categories spend approx. 6 hours less per week on meal preparation in 2012 as compared with 1965. This evolution has been enabled in part by rapid changes in food production technology, allowing consumers to purchase more foods that have been processed or prepared, and in turn require less of the individual’s’ time to prepare food. This revolution in food technology over the past several decades has helped drive a transition from time spent preparing food to time spent in other activities, ranging from nurturing children to more time spent in job market, especially among women. USDA, in 2000, released the publication “Recipes and Tips for Healthy, Thrifty Meals” which provides recipes and preparation time based on 1999 TFP for two weeks of meal. Rose (2007) estimated that for the reference household of four person, the time involved in food preparation (excluding transportation to and from grocery store, grocery shopping, or cleaning-up after meal) for USDA advised recipes is 16 hours per week. Davis and You (2011) carried out similar study and estimated an average weekly preparation time of 13 hours. The time demand of 13-16 hours per week on food preparation is well in excess of the time historically and contemporaneously allocated by households according to reports on time use survey AUTS. The gap between the time required to prepare food in accordance with the 1999 TFP and time used to prepare meals rose to 5-8 hours per week.

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Mancino and Newman (2007) studied the effects of family characteristics, such as income, employment status, gender, and family composition on food preparation decision. They found that the relationship is weak est among men, stronger among women, and strongest of all among full-time workers and single parents. Regardless of income and marital status, women spend more time preparing food than men do. Mancino and Newman (2007) estimated that non-working women spend just over 70 minutes per day preparing food, whereas women who work part-time spend 53-56 minutes per day and full-time working women spend 38-46 minutes per day preparing food. Moreover, having children living in household increases the time women spend preparing food, suggesting that, among women, family resources significantly affect the amount of time allocated to preparing food. In fact, they found that working full-time and being a single parent appear to affect the time allocated to preparing food more than an individual’s earnings or household income does. An estimate of time needed to follow recipes from the TFP is approx. 80 minutes a day. Mancino and Newman (2007) found that many low-income households – those with two adults or those headed by a single parent that work less than 35 hours a week – may able to allocate enough time for food preparation, however, low-income women who work full-time spend just over 40 minutes per day and thus may have difficulties meeting the implied time requirement as per the TFP plan.

All the studies indicate that low-income households face a lot of challenges in allocating appropriate amount of time for food preparation, however, the TFP model ignores all such challenges. The TFP is prepared through a mathematical optimisation model, which puts no constraint on the amount of time required to prepare the food. There exists a trade-off between food price and time needed to prepare the food. The TFP calculation puts all the weight on the price and none on the time required. The TFP makes an assumption that low-income households can spend an unlimited amount of time preparing food from scratch, and therefore have shifted toward food items that are low cost but more time intensive. As a result, in order to create a market basket that is both nutritionally adequate and meets the constant-cost requirement, the optimisation process ends up substituting more labour, which is costless in the model, for preparation of food at home. Recent efforts have been made to incorporate more convenient and commercially prepared foods (read frozen foods) into the TFP market basket. How much does these recent changes in the TFP market basket serve low-income households in appropriately allocating time in food preparation? Food preparation involves more than processing and preparing meals. It involves outlays of money in terms of the costs for raw ingredients and transportation (to and from the grocery store) as well as outlays of time for shopping, grocery processing, and cleaning up. Each of these inputs has a price that the consumer pays either directly (e.g. raw ingredients, transportation fuel etc.) or indirectly (e.g. opportunity cost of time). As the price of time goes up, the consumer will typically substitute away from food preparation that is more time intensive and move towards prepared or partially prepared foods (Ziliak, 2016).

USDA includes among its goals and objectives: to increase food security and reduce hunger by increasing access to food, a healthful diet, and nutrition education for low-income households. The Food Stamp Program was started to bridge the food gap existing between under-nourished citizens with overstretched hands during the Great Depression period, and the growing distress in the rural economy due to spiralling low prices of farm produce from expanding farm surpluses. Since then, the Food Stamp Program has undergone many changes to achieve its goals and objectives. Recently, USDA launched a pilot program that will open up online grocery shopping to those on public assistance. Within the pilot program, SNAP recipients can also enjoy the convenience of online grocery shopping, and it will be highly appreciated by those who don’t have a car, can’t afford fuel, or work multiple jobs and do not have time to shop. The Secretary of Agriculture, in a statement said, “People who receive SNAP benefits should have the opportunity to shop for food the same way more and more Americans shop for food – by ordering and paying for groceries online. As technology advances, it is important for SNAP to advance too, so we can ensure the same shopping options are available for both non-SNAP and SNAP recipients.” He further added, “We look forward to monitoring how these pilots increase food access and customer service to those we serve, specifically those who may experience challenges in visiting brick and mortar stores.” USDA has for long considered online grocery shopping to be luxury, so changing that stand is a welcome step in the right direction. While the Secretary acknowledged that SNAP should keep-up with technological advancement, he excluded the advancement happening in the food industry.

Food trends are constantly evolving, and meal kits have instigated significant change in the food industry. Prior to the introduction of meal kits, food industry in fresh foods segment had three verticals: fresh food products for market; processed food products; and foodservice (including catering, restaurants, takeout services etc.). Meal kits metamorphosed the three verticals into one, introducing an entirely new vertical for its own. These services offer consumers the convenience of having fresh, pre-portioned ingredients for meals delivered to their doorstep as an alternative to groceries, takeout and fast food. The idea of receiving recurring delivery of food items in nothing new, and should not be viewed as differently from online grocery shopping. The first meal kit was launched in 2007 in Stockholm, Sweden. It quickly gained popularity in neighbouring countries. The concept of meal kit made its way to the United States in 2012. By 2016, meal kit food delivery services generated over $2 billion in sales, overseeing an explosive growth with over 50 meal kit delivery services entering the market. The events subsequent to Blue Apron’s IPO, meal kit industry received many criticisms, ranging from meal kits being called as a fad to the questions raised on sustainability of the industry itself. Two years since the first IPO of meal kit company is too short to completely write -off the industry, however, the criticism received on its sustainability is well-justified. Meal kit industry is a quintessential example of perfectly competitive market; a large number of firms competing with identical products sold by all firms, perfect knowledge of prices and technology, and very low entry and exit barriers. In such competitive markets, business model based on delivering restaurant-quality (read fancy) meal kits through mail-order business is an outdated model without having any competitive advantage.

Today, the average cost of meal kits is approx. $10 per person per meal (ppm), while the average cost of meal for SNAP participants is approx. $4 ppm. At this price difference, it’s preposterous to imagine that meal kits can provide higher value to SNAP participants. However, the idea of meal kits for SNAP participants was first introduced by ‘Harvest Box’. The idea of ‘Harvest Box’ was novel but it was poorly executed. The US government, instead of delivering canned goods masquerading as shelf-stable or non-perishable food items, should allow private firms to compete in delivering value meal kits to SNAP participants. SNAP became the most successful program because it treats participants with dignity and autonomy, and allows competition in the grocery stores industry. The highly competitive nature of grocery stores industry makes it more efficient, driving low prices. Similarly, opening-up the meal kit industry for low-income households will bring new competition from existing grocery stores and introduce restaurants and new firms to deliver value meal kits to consumers. Low technology requirement and less capital-intensive characteristics forms low entry barrier for new-entrants into the meal kit industry, and innovative business models (e.g. hyper-localisation, franchisee, etc.) employed by such new-entrants will improve the operational efficiency, thus further bringing down the price of meal kits. Most large grocery stores have their existing meal kit brand, and USDA launching its online grocery shopping program has brought consumers closer to consuming meal kits from SNAP benefits. However, restaurants and other firms that want to cater meal kits to SNAP participants are unable to do so due to their ineligibility and inability to process EBT cards for online transaction.

Meal kit delivery services aren’t just for wealthy, in fact, they could be the key to curbing hunger and gravitate people towards fresh, healthy and nutritious food choices versus other options. In low-income families, especially families with both working or single-working parents, meal kits can improve the opportunity cost of time by reliving them from meal planning, purchasing and processing. In addition, meal kit has the potential to become a tool for families to enjoy cooking and connect around the dinner table. With all its advantages, the government should consider opening-up meal kit industry for SNAP participants. The learnings from online grocery delivery pilot program, such as safe and secure processing of SNAP benefits, and challenges involving online acceptance of EBT cards can be effectively utilised in meal kits pilot program. Moreover, allowing local businesses (like restaurants and other local meal kit companies) to operate and compete in the market for SNAP benefits will not only improve operational efficiency and bring down the prices but also improve local economic environment. Taking US federal budget for 2019 as an indicator, then Trump administration is not keen on losing the idea of ‘Harvest Box’, but by pushing ‘Harvest Box’ closer to true definition of meal kits can be win-win situation for all the stakeholders involved in the current SNAP ecosystem. The government can execute policies to diet, nutrition and health by providing broad level directions for ingredients that can be used in meal kit preparation; grocery stores along with SMBs and restaurants can realise new revenue stream leading to higher economic multiplier effect; and finally, the SNAP recipients will have more autonomy, healthy food choices, convenience in preparing meal, and time to spend in other activities, ranging from nurturing children to more time spent in job market.

Written by Avinash Kumar