Halal Industry

The rise of online food delivery in the U.S.: Where are the halal food companies?

| 06 March, 2016 | General
 Haroon Latif, Director of Stratgic Insights, DinarStandard
The rise of online food delivery in the U.S.: Where are the halal food companies?

The online food delivery market in the United States  is estimated at $9.3 billion in 2015. Despite 35 percent of Muslim consumers demanding more online delivery of halal food in the  U.S., this has met with a limited response. There are hence substantial opportunities for new entrants in the market for halal food delivery in the  U.S.

YOUR PAIN POINTS ADDRESSEDASK YOURSELF

Scenario:

You are looking to launch a halal food delivery service in the United States. How attractive is the opportunity?


How attractive is a halal food delivery service in the United States?



What are the size and growth dynamics of food delivery in the United States, and who are notable key players?

What is the potential opportunity for the Muslim market, and who are the current notable players?
What are the key challenges and considerations in addressing this opportunity?

MUSLIM MARKET OPPORTUNITY LARGELY UNADDRESSED

In 2014, $9 billion of  America’s takeout spend was ordered online, with Grubhub and Seamless combined accounting for 19 percent of the online market and with the remainder split between “various small services” that were, according to Business Insider, open to disruption by a “major international service.”  

The dynamics for food delivery are favorable, with high population growth among Muslims in the United States and an increasing preference among millennials for convenience and food delivery. Despite this, online delivery of food is a very small portion of the overall halal food market in the U.S.

According to Hasan Ozcan, Marketing Director of Pittsburgh, Pennsylvania-based halal food company NEMA, “Online delivery of ready-made products and uncooked meat is probably less than 1 percent of the total halal food market in the U.S.”

U.S. MUSLIM and HALAL CONSUMER MARKET
  1. Muslim consumers in the U.S. are projected to have spent $12.6 bln on F&B in 2014 and this expenditure is projected to grow by 2.1 percent compound annual growth rate (CAGR) till 2020, according to the State of the Global Islamic Economy 2015/16 report.
  2. According to a 2014 survey conducted by DinarStandard and the AMCC, 93 percent of respondents indicated they purchase halal food products to consume at home.
  3. One of the key opportunities identified in the Digital Islamic Economy Report was digitally enabled delivery of halal food. In the 2014 survey, 35 percent of respondents indicated that they would like to see greater availability of food online.

 

HALAL MEAT AND PREPARED HALAL FOODS DELIVERY: KEY PLAYERS

There are few offerings that currently deliver halal meat and prepared halal food products across the United States.

NEMA is a Pennsylvania-based halal food products company that distributes throughout the U.S. and is affiliated with myhalalmeat.com, an Illinois-based delivery service that ships throughout the country.

Saffron Road, one of the fastest-growing halal food brands in the U.S., offers a limited selection of prepared foods for order online. The brand has earned over $40 million in retail sales across 50 frozen entrée food products within five years, according to the company’s CEO Adnan Durrani.

Midamar Halal ships to the United States and Canada but was embroiled in a scandal that involved the founder being indicted on fraud, undermining not only the company’s reputation but the broader industry as well.

MEAL KITS DELIVERY: A HIGH-GROWTH MARKET

The meal kit delivery market is a small subset of the $9 billion online food delivery industry. It caters to the growing demand for home-cooked, healthy meals, offering kits that include raw ingredients and easy-to-cook recipes.

Technomic, a food industry consulting firm, estimated the global meal kit delivery market to be over $1 billion in 2015 and upwards of $3 billion by 2025, with the United States accounting for 40 percent of the global market.

Key players in the meal kit delivery market include Blue Apron, Hello Fresh, and Plated, all of which have been able to raise substantial capital from investors.

Blue Apron is a meal subscription service that delivers ingredients from family-run farms and businesses and offers individual as well as family meal plans. Established in 2012, the company is currently focused on the United States and has received $193 million from investors in four rounds of funding.

NEMA’s Hasan Ozcan sees the potential for success for a halal version of Blue Apron, “Online delivery is a key part of growth,” he said. “We really think there is a substantial opportunity for a halal-focused Blue Apron.”  

Hello Fresh is a meal subscription service that offers meals for up to four people and also sources ingredients from local farmers and butchers. It currently delivers across the United States, parts of Europe—including the United Kingdom, the Netherlands, Austria, Germany, and Belgium—and Australia. It began operating in 2011 and has raised over $278.5 million, according to TechCrunch reports.

Plated offers a larger number of meal choices, and its ingredients include sustainable seafood and meats raised with no antibiotics. Plated raised $56.4 million in equity funding, according to data from CrunchBase.

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READY-MADE HALAL FOOD DELIVERY POTENTIAL

There is significant unmet potential in the market for readymade halal food. There are a few potential key players that could address this market opportunity, based on success stories in both the halal and meat kit delivery markets in the United States.

Saffron Road can begin offering a meal kit delivery service, leveraging its brand name and operational expertise and expanding its existing delivery infrastructure.

U.S.-based cooking blog My Halal Kitchen can leverage its extensive understanding of U.S. Muslim meal preferences to partner with a meal kit delivery service. My Halal Kitchen has over 1.2 million likes on Facebook and had a book published in 2016. It shares recipes online and its offering could potentially be combined with the delivery of pre-prepared meals.

Blue Apron, Hello Fresh, and Plated could feasibly address the halal market as well, sourcing halal suppliers and leveraging their existing brands and delivery infrastructure.

Furthermore, there is an opportunity to address the broader organic food market, which was estimated by TechSri Research to surpass $45 billion in 2015. Saffron Road has already made inroads into the market through its prepared foods product line.

KEY CONSIDERATIONS

The halal food delivery opportunity, especially in meal kits, is bound to attract new market entrants. However, there are several challenges facing potential entrants that need to be considered carefully.

Businesses may need substantial investment

While the opportunity is attractive, establishing a delivery infrastructure requires significant upfront investment. As highlighted earlier, the amounts raised in funding by the most prominent meal kit players in the U.S.—upwards of $50 million—serve as an illustration of the amount of capital required to reach a lucrative scale.

As a result, a number of regional players could emerge that focus exclusively on areas where there is a sizeable Muslim population. To some extent, such regional players do exist, such as Honest Chops, a New York–based butcher that delivers across the city.

However, this opportunity would suit companies that already have a delivery infrastructure in place. Furthermore, a step-by-step regional roll-out would make sense to build the business and gain traction.

Getting a reliable halal supplier is a challenge

Following the scandal with Midamar Halal, the confidence in halal-certified suppliers has been somewhat shaken, and using a questionable supplier can damage confidence with the consumer. Adding to this is the broad range of standards.

Hasan Ozcan of NEMA commented, “The problem in this market is that there are so many different standards, it’s hard to determine what each consumer wants, because it can be so different.”

Marketing yourself can be difficult

A common challenge for businesses is how to market to the Muslim consumer given the plethora of websites targeting them. To address this challenge, advertising platforms such as Muslim Ad Network and, more recently, Halal Ad have emerged. These services help businesses advertise across popular websites that are commonly accessed by Muslims.

RECOMMENDED ROADMAP
Understand consumer tastes: Understand what American Muslim- consumers want. For a meal kit, it’s more than just meat; make sure the recipes and ingredients are tested with consumers before release. A clue about American Muslim consumer tastes can be gained from popular recipes on My Halal Kitchen.
Determine your regional focus: Are you delivering to a local area or seeking to expand into the national market? Is this something you will do on your own or can you get a partner lined up?
Use effective marketing: Consider Muslim Ad Network or Halal Ad to reach a critical mass of Muslim consumers.

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