What's your business model?

16340

How does Munchery make money?

Meals range from $8 to $12, but you need to be a member ($85 per year) to order from the service

Innovation series by Ronny Kerr
December 9, 2016 | Comments
Short URL: http://vator.tv/n/4883

Munchery makes money by selling meals.

Customers go to the website or mobile app, select their meals, and then order them for delivery. Unlike other services that deliver hot meals from established restaurants, Munchery delivers its meals chilled ("for maximum freshness and flexibility"), meaning the customer needs to heat it up in the microwave or oven.

The menu varies from day to day and region to region. To test it out, I checked out the meals available in San Francisco on Thursday, December 8, 2016. As advertised, the main dishes ranged in price from $8 to $12. Here were a few of the dozen-plus options available:

  • $7.95: Plantain Tacos
  • $9.95: Herbed Yogurt Roasted Chicken Leg
  • $10.50: Chicken Parmesan
  • $11.95: Togarashi Bavette Steak

In addition to single meals, Munchery offers "cooking kits" that include dinner for two. Here's a sampling:

  • $19.95: Warm Winter Greens with Burrata
  • $20.95: Herbed Beef Ravioli
  • $22.50: Green Curry Salmon

After those main dishes, Munchery offers a few additional items for order, including side dishes, kids' meals, desserts, and beverages. Here's another sampling:

  • $6.95: Whipped Sweet Potatoes (Sides)
  • $5.25: Kids' DIY Beef Tacos (Kids)
  • $5.95: Lemon Cheesecake (Desserts)
  • $19.25: Vignale di Cecilia Prosecco (Drinks)
  • $3.95: Coconut Water (Drinks)

Finally, Munchery lets you filter through the menu using a wide variety of dietary restrictions, making it easy to see only the meals that fit your specific diet:

  • Vegetarian
  • No Gluten Added
  • No Dairy Added
  • No Nuts Added
  • Vegan
  • No Egg Added
  • No-Antibiotic Poultry

I marked the "No Gluten Added" option since my girlfriend is allergic, and Munchery's site automatically narrowed down the main dishes to six options and the coooking kits to just one. Left with that one kit (a meal for two people), I decided to select it: the green curry salmon. I also added one side order of garlic roasted brussel sprouts and some black and white cookies for dessert.

Once you confirm the order, Munchery asks you to select a delivery time, offering one-hour windows from 4 to 9 PM. After inputting your address and payment info, you're given the final breakdown. Here was mine:

  • Green Curry Salmon: $22.50
  • Garlic Roasted Brussel Sprouts: $6.95
  • Black and White Cookies: $6.95
  • Subtotal: $36.40
  • Delivery Fees: $2.95
  • Taxes: $0.00
  • Driver Tip: $3.00
  • Total: $42.35

By default, the "driver tip" is set at at $0 (Munchery insists it's "completely optional"), but the customer can select $1, $3, $5, or enter a custom amount. The "delivery fee" can fluctuate: mine happened to be $3 (the low end), but Munchery says it can sometimes charge as much as $5 for same-day deliveries.

In a shift from its earlier days, Munchery now requires customers to be members to order meals from the service. The membership comes in two different plans—either $8.95 per month or $85 per year—though it's available as a free 30-day trial. (The yearly plan is the better deal, as the monthly option would end up totaling to $107.40 per year.)

Given the required membership, it's clear that this is where Munchery makes most of its money.

Munchery used to hire independent, third-party chefs to cook its meals, and it would distribute the majority of customer payments to these chefs. Drivers making deliveries would take a small cut, and then Munchery would take its own small cut, once called the "marketplace fee."

Today, Munchery only has in-house chefs prepping meals. So the company is keeping the entire customer payment (in addition to subscription fees), and uses this aggregate to both cover costs and—presumably—to start making a profit.

I reached out to the company but it wouldn't comment on financials. It also wouldn't disclose how many members currently subscribe to the service.

It's worth noting that Munchery has a separate corporate service—Munchery@Work—specifically tailored to deliver meals to offices. The service delivers lunch and dinner meals to companies like Hotel Tonight, Okta, PocketGems, Luxe, and Fenwick & West LLP. A spokesperson for the company told me that standard membership fees apply to Munchery&Work.

As a private company, Munchery isn't obligated to report its financials, so we don't have a view into their revenues. Though high losses have definitely been an issue, the company says it's moving in the right direction.

In Bloomberg last month, Munchery board member Jeff Housenbold said the company had reduced costs by between 30 and 50 percent reduction since May 2016. For the month of October, he estimated the company's losses were less than $3 million.

Munchery has raised over $120 million in venture capital from Menlo Ventures, Sherpa Capital, and others.


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