Introduction
In 2016, the global health and wellness food market value stood at $707 billion, by 2021 it is expected to reach $811.82 billion (Shahbandeh, 2019). Demonstrating a clear trend of economic growth has allowed this market segment to develop at a healthy pace in the context of global supply chains of fresh food ingredients, social awareness of healthy eating, and an economic climate beneficial for consumer spending. AMGD is a Singapore-based company focusing on healthy cooked meal delivery in major world cities which has sought to capitalize on the trend but also fill a gap for delivery of already cooked meals which was lacking in the global market.
Formed on the ideology of improving the quality of life for people through diet, AMGD is both an innovative and economically sound business venture. Online food delivery is a rapidly growing segment, set to reach $200 billion global market worth by 2025, and it has sparked significant growth and innovation in the industry (Singh, 2019). AMGD entered this space with a promising appeal to niche consumers and has successfully built a sustainable model. This report will examine the AMGD business idea, present an industry analysis, identify issues, and discuss strategic differentiation and future for the company.
Business Idea
Consumers in developed countries have adopted a health and wellness lifestyle in large numbers in recent years. Diet is a significant lifestyle change that most consumers make since significant research literature indicates that diet directly impacts the long-term health and functioning of an individual, as well as having secondary effects such as contributing to weight loss and better energy. While several diets exist, the majority of legitimate diets support a well-balanced, vitamin-rich regimen. Unfortunately, until recently the healthy foods market was scarce, mostly focused on unique locations or self-purchasing of ingredients.
Delivery and carry out locations with prepared food in many countries had very few healthy options, and those that did had questionable or unhealthy ingredients, increasing demand for meal planning services (Ducrot et al., 2017). While services existed for ingredient and self-cook healthy options, the goal was to enable a healthy fast food experience, an idea on which AMGD was formed.
The company offers two distinct value propositions for the consumer: convenience and choice. The company takes care of many time-consuming elements of finding, purchasing and preparing healthy ingredients into a nutritious meal and then delivering it at convenient times. Second, the consumers have a choice on which meals they select based on individual preferences and dietary goals. By capitalizing on both aspects, AMGD can generate interest and differentiate itself (AMGD, 2020)s.
The business model of AMGD focuses on creating a marketplace website, where a customer visit and can select the meals they desire, meal plans, and suitable times and locations for delivery, and then pay for it. Customers have the liberty of specifying menus of choice based on preference. In meal prep delivery businesses, individual meals are usually not customizable unless by special request and additional payment from a customer. However, all ingredients are openly provided for purposes of allergy as well as health selections. Chef in the kitchens prepares storable and reheatable food the night before or day of delivery, adhering to customer specifications and food safety standards (Fatbit Technologies, n.d.).
Revenue comes via customer orders, meal plan subscriptions, and delivery fees. The objective of this business model is to ensure customer returns and signing up for meal plans since it allows for economies of scale in preparation, resulting in greater net profit from a single order. It is a sustainable and profitable approach in the long term. AMGD is one of the leading healthy food delivery services in both Singapore and Hong Kong where it currently operates. The biggest issue is logistics since AMGD promises delivery anywhere in these tremendously large cities and does not require customers to sign up for meal plans for weeks or months, creating potential pressure on deliveries of individual meals.
Industry and Market Analysis
Market Trends
AMGD capitalized on a major market trend globally that started in the mid-2000’s focusing on healthy diets and eventually meal prep delivery. The health diet craze has been ongoing for many decades to some extent, but as described earlier the medical research and social awareness have transformed the health foods market from more than just a fad to a highly sought out element by consumers. Meanwhile, the food delivery system also underwent a transformation as networks of food deliveries formed in many countries, pioneered by Uber Eats which made food delivery quick and efficient, and revolutionized numerous technologies in the sector.
For many, busy with jobs and families, as well as everyone having a smartphone device, it was a matter of convenience to receive pre-cooked meals at some point during the day and not worry about cooking (Ladd, 2018). Eventually, the market saw the rise of healthy precooked meals led by companies passionate about the topic since it is a common practice when dieting to precook meals based on a weekly meal plan. While such companies and AMGD cook their meals daily for delivery, the concept is inherently the same for consumers to have a predetermined healthy and satisfying meal plan. Meal prep delivery services have evolved to serve niche markets such as diets for diabetics, paleo, gluten-free, and others (Uraha, 2019).
PESTEL Analysis
- Political – potential for taxes on import of certain ingredients or operating small businesses. Tariffs may impact prices of food ingredients. Some political challenges in running an international business. Social political unrest such as 2019 Hong Kong protests may disrupt business operations.
- Economic – economic downfall may lead to decreased demand for food delivery from consumers due to a fall in purchasing power. Increased costs of running a complex business. Increased costs for property rent, equipment, and wages.
- Social – consumer trends around health foods may dwindle.
- Technological – technologies will only improve regarding storage and processing of food, which is beneficial for AMGD that works with healthy ingredients and requires to maintain them as fresh as possible. More efficient ordering and delivery systems, both in terms of software and the availability of technologies such as drones will expedite growth.
- Legal – As a food business, AMGD must abide by local safety and sanitation regulations in its kitchens.
- Environmental – Natural disasters may disrupt city functioning. An epidemic such as the recent coronavirus outbreak has led to the shut down of many food-related businesses.
Porter’s Five Forces
Industry rivalry – Strong
The food industry is one of the most competitive sectors in the economy. AMGD is competing with a variety of establishments in cities such as Singapore which are known for their cuisine. AMGD is competing in both the delivery market as well as the healthy food industry, with at least 10 companies who are in both sectors. This is in addition to regular restaurant takeout’s, large food delivery networks, and traditional street food who have all begun offering healthy options.
Consumer bargaining power – Strong
Consumers are ultimately the core of the business’s profitability, and for food delivery enterprises such as AMGD, the consumer base is everything. Consumer satisfaction, reorder rates, and ratings have tremendous impact. The business is relying fully on consumers and it is up to AMGD to upkeep the high quality of service and product to maintain positive satisfaction.
Supplier bargaining power – Moderate
AMGD depends on high-quality, fresh, and healthy ingredients for its meals. The business model depends on the availability of said ingredients for the chefs and kitchens. AMGD likely maintains strong supplier ties and has alternatives for products in international hubs such as Singapore or Hong Kong.
Threats of Substitutes – Strong
AMGD is offering traditional bowls filled with meals, that are popular in Asian cultures. While the ingredients and mixtures of culinary concepts may be different, there is nothing inherently unique that AMGD is doing, nor can it protect its recipes/offerings with any sort of intellectual property. Therefore, the threat is strong since virtually anyone can emulate AMGD’s business approach or menu.
Threats of new entry – Moderate
High levels of competition and large capital expenditures in this industry make serious threats of new entry rare. While small businesses may emerge in the competition, it is difficult to enter a trend such as health foods when it’s ongoing without some existing brand recognition or significant capitalization for marketing and upkeep, particularly for delivery oriented ventures that require building supply chains and customer bases (Bloomberg, 2019).
Potential Issues
Economics issues can be a challenge for the company. In this business, revenue depends on network effects with pressure to realize economies of scale. The company profits at high volumes with low margins, and the intricacy of AMGD using fresh ingredients and selling small meal deliveries creates greater pressure on the financial side. Furthermore, such services usually thrive in periods of economic growth when customer spending is high, but in recessions, food expenditures for delivery and more trend-based aspects are usually one of the first savings that customers eliminate, leaving businesses with volume-based models struggling due to failing customer retention (Dantara, 2015).
One of the most prominent issues for this business model remains logistics, with managing supply chains and delivery. Forecasting is key in such businesses, with menus planned almost a year ahead, and there is a reliance on specific farmers or producers to deliver specific ingredients to the standards that AMGD requires. AMGD is a relatively small business operating in international shipping hubs. Harvesting and food security issues are very unlikely to affect the business unless it is for a specific ingredient or major environmental disruptions. In this case, there are usually backup suppliers on-call.
The distribution channels of delivery have to be efficient due to high inventory turnover and wide distribution of delivery locations. Often delivery businesses struggle with fulfillment centers not being centrally located or there are not enough to satisfy demand of a growing customer base. The process of procurement, transportation, managing, handling, and preparation of high-quality ingredients requires significant integrity status among supply chain networks which is difficult to maintain (Fancello, Paddeu, and Fadda, 2017)
Strategic Differentiation
An analysis of competitors to AMGD in Singapore, the most popular brands were FIT THREE and Nutrition Kitchen SG. Both focused on healthy meal delivery, but one brand only delivers to local gyms while the other forces a 5-day meal plan purchase. Essentially, only AMGD allows for delivery of a single meal at the time that the customer desires, similarly to any other food delivery service.
Furthermore, AMGD’s meal offerings represent more of a regular takeout meal, with traditional bowls, simply using healthy recipes and ingredients. The other companies mostly focus on straightforward healthy meals which are very distinct from traditional take-out. Therefore, AMGD strategically differentiates itself by being a business that is more accessible to everyone, even for one healthy meal a day and not is a ‘standout among the crowd’ by choosing to eat healthily.
While AMGD does have rewards programs and meal plans, it is not forced and more authentic to traditional delivery than most healthy food services around the world. It can also be argued that the business model that AMGD has created with kitchens with recipes that are curated by chefs based on dietician feedback and evidence-based data offers it a competitive advantage. Other businesses in the sector rely on pre-conceptualized meals that are fundamentally bland and basic. AMGD prides itself on achieving individuality while offering great tastes and presentation to healthy meals, avoiding the clichés of the healthy eating trend.
Conclusion
AMGD is an innovative company focusing on delivering healthy meal options to its customer base. It offers variety, consumer choice, and convenience as its value propositions. It can differentiate from competitors by being more relaxed and consumer-friendly, open to all, and supporting an ideology that even one healthy meal a day is enough rather than pushing a meal plan unto its consumers. The business model is sustainable but has to compete in the cutthroat industry. The biggest issues remain economics which relies on consistent high-volume customer spending as well as logistics issues of delivering in megapolis city. Overall, AMGD is a positive business with significant potential as it expands, building on efficiency and economies of scale to increase its healthy food choice offerings to consumers.
References
AMGD. (2020) About us. Web.
Bloomberg. (2019). ‘How technology is fuelling intense competition in Asia’s food delivery industry’. The National. Web.
Dantara, S. (2015) The economics of food delivery. Web.
Ducrot, P. et al. (2017) ‘Meal planning is associated with food variety, diet quality and body weight status in a large sample of French adults’, International Journal of Behavioral Nutrition and Physical Activity, 14(2), pp.1–12. Web.
Fancello, G., Paddeu, D. and Fadda, P. (2017) ‘Investigating last food mile deliveries: A case study approach to identify needs of food delivery demand’, Research in Transportation Economics, 65, pp.56–66. Web.
Fatbit Technologies. (n.d.) Things to consider when starting a meal prep business. Web.
Ladd, B. (2019). ‘Meal kits are DOA: The next big trends in food are being driven by Amazon, ICON Meals and Mercatus’. Forbes. Web.
Shahbandeh, M. (2019) Global health and wellness food market value 2016-2021. Web.
Singh, S. (2019). ‘The soon to be $200b online food delivery is rapidly changing the global food industry’. Forbes. Web.
Uraha. (2019). ‘A future service model of the food industry “Personalised meal box”’, Medium. Web.