From the Back of the Truck to Nationwide Grocery Chain: Home Chef’s Growth Story

The meal kit market emerged almost out of nowhere in the mid-2010s — and took over the continents, one delivery box at a time.

By 2021, American meal delivery companies generated $6.7 billion in revenue and plan to cross into the double-digit territory by 2024.

Home Chef stood at the helm of the meal kit market conceptualization. Launched in 2013 as a bootstrapped project, this Chicago-based company claimed its market share from bigger competitors like HelloFresh and Blue Apron.

Home Chef’s striking growth also seized the attention of Kroger, which resulted in an acquisition deal in 2018. Home Chef remained an independent brand, but benefited a lot from Kroger’s substantial retail footprint and marketing acumen. Though a lot of brand growth ideas were initially conceived and then scaled by the founding team.

So let’s take a closer look at Home Chef’s growth story and what other brands can learn from this innovator in our brand deep dive.

Cooking Up Home Chef

Source: Home Chef Press Kit

Home Chef was founded by Pat Vihtelic — a former web developer and tech analyst for investment banks. Fascinated by the coming-of-age meal kit market, Vihtelic decided to put together a simple website to test his meal kit company idea.

For almost a year, the project stayed “scrappy”. Pat Vihtelic recounted in an interview with Built In Chicago:

“I built our first website and hired our first employee, an executive chef, through Craigslist. After developing and photographing initial recipes in my condo and several weeks of beta testing — where I made deliveries around Chicago from a U-haul truck.”

As the meal kit service was getting solid traction, Vihtelic and his co-founder Bryon Finke, decided it was time for fundraising.

During the first year, Home Chef's userbase was growing at 25%-30% each month, while only being available to 60% of the US population — from Kansas to the East Coast. The solid performance results persuaded two groups of investors to fund the project in 2014.

Extra cash went towards expanding the company’s operation. The team moved from a shared kitchen to a professional food production facility in Chicago’s West Loop neighborhood.

With better infrastructure in place, growth accelerated. By August 2015, Home Chef was shipping up to 20,000 boxes per month. The team also improved the variety of available recipes, delivery times, and ordering experience.

What set Home Chef apart from other competitors at that time was bigger meal selection. Customers could choose from 13 recipes each week. The coding team also created a unique “taste algorithm” for the website, which personalized meal recommendations. Paired with affordable prices, Home Chef has had the perfect recipe for customer acquisition.

Sizzling Growth Leads to a Tasty Acquisition

In April 2016, Home Chef raised a Series A $10 million round, and the funds went into two operational pockets: Operations and Marketing.

The same year, Home Chef opened two new distribution centers in San Bernardino and Atlanta, further extending its operational footprint across the country.

The team also doubled down on advertising. In 2016, Home Chef dropped an estimated $2 million on desktop digital ads and another $4 million on mobile ads. Interestingly, the brand chose to run ads on high-traffic websites, including those that didn’t cover cooking at all. Segmenting down to niche target audience profiles and publishers they peruse could have likely gotten Home Chef a better return on advertising spend (ROAS).

But since digital ads were cheap and consumers’ weren’t as dismissive of them as they are today, Home Chef was doing exceptionally well in the customer acquisition department. When then-CTO Matt Pulley joined in 2017, Home Chef revenue saw a 60% revenue increase to $255 million.

Home Chef’s massive success earned them third place on the Inc.’s 2018 list of the fastest growing private companies in the US. This growth started to attract the attention of traditional retail players, one of them being Kroger.

At that time, Kroger was looking to expand its digital footprint and capture new target audiences. Their competition, Walmart, was already slightly ahead in terms of online food deliveries — and Amazon had just entered the game.

Kroger already knew the appeal of cultivating online channels since their online sales rose by 66% after they started offering delivery through providers like Instacart in select markets.

Entering the meal kit market was the next frontier Kroger wanted to capture — and Home Chef was a brand many consumers already knew, preferred, and consistently used (as their growth figures suggested).

In May 2018, Kroger extended an acquisition offer of $200 million with future earnout payments of up to $500 million over five years, and Home Chef accepted it.

Growing as Part of Kroger Family

Once the acquisition had been finalized, Kroger progressively began to integrate Home Chef into its operations, and Home Chef benefitted significantly from Kroger’s nationwide retail footprint, well-established logistics operations, and exposure to some 60 million retail shoppers.

Kroger, in turn, was looking to make Home Chef an attractive upsell to its existing digital membership program, plus take the brand omnichannel — as low-prep Home Chef meals and 5-minute lunches paired well with Kroger's Prep+Pared offering.

In 2020, Home Chef remained in double-digit revenue growth territory. They’ve also achieved greater synergy with Kroger and adapted their product line to benefit more from omnichannel distribution. Kroger started retailing a selection of Home Chef meal kits on its shelves — and later expanded the product line of heat-and-eat meals and soups.

Home Chef now delivers over 7 million meals each month and surpassed $1 billion in sales in 2021. Money-wise, they overtook Blue Apron, whose recorded net revenue for the same year stood at $470.4 million. Yet, Home Chef remained in a tight battle with HelloFresh, whose US revenue rose 65% in 2021.

The above revenue growth figures are a direct result of brand awareness and consideration levels among the targeted populations. Latana recently analyzed how different meal kit brands perform in the US and why some brands are emerging on top. You can claim your copy of consumer market insights for free.

3 Brand Growth Lessons from Home Chef

Source: Home Chef Press Kit

Home Chef had a unique vision for being a customer-centric, affordable, and not-too-elaborate meal kit delivery service. Its brand mission isn’t to turn you into a “world-class chef”, but a more prosaic one. In the words of the company:

“Home Chef is focused on developing meals that anyone can cook and everyone will love. This includes a rigorous recipe testing process that ensures our meals will be a success each time they’re cooked”.

This down-to-earth brand positioning initially drew customers to Home Chef — and they continue to cultivate the same brand narrative post-acquisition.

That said, the company is also open to exploring new online and offline marketing channels to diversify its brand marketing and customer acquisition efforts.

Here are three brand marketing lessons other meal kit companies (acquired or self-funded) should borrow from Home Chef.

1. Leverage Customer Feedback for Brand Building

From the early days, Home Chef was meticulous about figuring out people's eating habits. It turned out, most of their users were slightly nitpicky and had a bunch of personal taste preferences to account for. The team set out to make it easier for users to choose tasty, nutrient-dense foods.

The platform’s algorithm artfully recommended recipes and Home Chef saw that people actually went with algorithmic suggestions. However, as then-CTO Matt Pulley, the team decided not to make this into a fully “done for you” experience, where the algorithm decides what you’ll eat in a week or even a month.

“The data has shown us over and over that it’s not as enticing to customers. They want to be able to choose, and we’ve really targeted that,” Pulley recounted in a podcast.

The team also practiced customer listening in other areas such as recipe development. Long-term customers were invited to a "Beta Box", where they could provide feedback on new recipes under development. In fact, a separate role was created, called a Recipe Analyst, and they were set to be responsible for analyzing customer feedback on recipes, identifying meal trends, and reporting back to the chefs on findings.

The takeaway? Voice of customer (VoC) data can be a powerful tool for shaping both your product development and your brand perception. Use input from existing customers to cross-validate your internal research and drive product development.

Separately, you can rely on audience data from brand monitoring software like Latana to better understand how recipes or menu changes after brand perception among prospective targets — and then adjust your product selection accordingly.

2. Collaborate with Influencers to Strengthen Your Brand Funnel

Home Chef originally grew through “classic” SaaS marketing strategies — cheap online ads and organic social media reach. As both channels became more crowded and Home Chef’s brand awareness reached a higher level, the company smartly decided to focus on other areas of its brand funnel — brand consideration and preference over the competition.

For that task, Home Chef turned to food influencers whose power over consumer choices has been proved time and again.

A friend posting regularly about a particular type of food could lead you to copy their food choices, scientists found. Similarly, our minds tend to naturally find oozing proteins — like melted cheese or dribbling yolk — highly attractive. And yet another study found that social media makes us think differently about the food we consume.

Because of the way visual food imagery affects our brain, influencer collaborations are a natural choice for many food brands, Home Chef included.

In 2022, in particular, there’s been a flurry of sponsorship deals with:

• Skinnytast, a recipe and cookbook franchise by chef Gina Homolka, who developed 12 meal kits for the brand.

• FitMenCook aka Kevin Curry, creator, entrepreneur, and cookbook author delivered a seasonal set of four tasty and time-saving recipes.

At the end of September 2022, Home Chef signed up Rachel Ray, a world-class chef, and well-known TV host, to endorse the brand. Over the next six months, Home Chef will release a set of unique recipes from Ray directly, much to consumers’ delight.

The takeaway? Influencer marketing is often seen as a tool for increasing brand awareness only. You enlist some folks to promote your product once or twice, then call it a day. Yet, ongoing influencer collaboration can do much more for your brand. Through multiple exposure and ongoing endorsements, influencers can help improve the levels of brand consideration, preference, and ultimately — usage among your targets.

That said: Unsuitable partnerships can dilute your brand equity or fail to translate to meaningful outcomes. So be selective with whom you’re choosing as a spokesperson for your brand.

3. Build a Balanced Brand Marketing Funnel

Influencer collaborations, digital PR, and organic social media are great for securing high brand awareness and brand recall rates. But Home Chef then spends extra effort on converting those brand-curious prospects into customers with the help of targeted ads.

The team relies on AdTech software to identify warm leads across mobile and desktop and then re-target them with personalized ads. Using The Trade Desk software, Home Chef meticulously optimizes ad delivery across geographies, formats, and frequency in order to maximize conversion rates.

This data-driven approach to customer retargeting yielded Home Chef a 12.4% lift in service sign-ups and 1.2X ROAS over one month. Clearly, since 2016, the team learned their lessons and now chooses to spend their ad budgets on granular audience segments, rather than serving haphazard, generic ads to just about anyone.

The takeaway? Prioritize meaningful marketing metrics and KPIs. Low cost-per-action (CPA) or high ad click-through rates (CTAs) aren’t a cause for celebration if your conversion rates remain painfully low. On the other hand, prioritizing conversions and underfunding top-of-the-funnel marketing initiatives won’t yield the desired results either.

Distribute your marketing budgets equitably across different stages of your brand funnel — and prioritize different marketing channels for achieving goals at each stage.

Final Thoughts

Home Chef went from a bootstrapped project to a company generating $1 billion in revenues in the span of 8 years. Undeniably, the timing was on their side — and so did the Kroger acquisition offer.

Still, much of the company’s distinctive branding and marketing positioning was cooked up in-house, thanks to a sharp focus on customer feedback, solid knowledge of their customer purchase behaviors, and strategic investments in all stages of their brand funnel.