1. Creating a Winning Recipe for a Meal Kits Program
Creating a Winning Recipe for a Meal Kits Program
February 26, 2019
Rob Wilson | February 26, 2019

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3. 3 CONFIDENTIAL | DRAFT
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4. 4 CONFIDENTIAL | DRAFT
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5. 5 CONFIDENTIAL | DRAFT
The feedback from consumer purchasing habits in this report is drawn from
deep recent casework and our 2018 Consumer F&B Consumer Survey
2016
(N=1,560)
2018
(N=1,559)
2020
A robust longitudinal study L.E.K. publishes every two years …
To make sure we stay ahead of key consumers trends to gain competitive advantages …
Meal kits growth and
preferences
Consumer perception
of Amazon / Whole
Foods
Rise of the
“Grocerant” and
perimeter of store
Consumer preferences
for meal delivery
services
Importance of product
claims for specialty
foods
Continued
prevalence of
indulgent foods
Changes in
private label
preferences
E-commerce
grocery delivery
model trends
Transforming facts and information into actionable insights for our clients
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properties of their respective owners. © 2019 L.E.K. Consulting LLC. All rights reserved.

6. 6 CONFIDENTIAL | DRAFT
Consumers are migrating from “Big Food” dominated grocery center aisles…
Consumers are shifting purchasing habits from center aisle grocery to e-
commerce grocery, meal kits, restaurant delivery and prepared foods
…and embracing
options they
perceive as fresher
Growth areas for brick &
mortar retailers
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properties of their respective owners. © 2019 L.E.K. Consulting LLC. All rights reserved.
Prepared foods
/ ‘Groceraunt’
Meal kits
Restaurant
delivery
E-commerce
grocery

7. 7 CONFIDENTIAL | DRAFT
Online Share Online Share
Note: Online share figures meal kits; total market figures include food & beverage sales by e-commerce firms and sales by food & beverage firms
Source: U.S. Census; Euromonitor; L.E.K. Analysis
~2%
(~$15B of ~$800B)
~15-20%
(~$175B of $1T)
Meal Kits
Online Grocery
Brick & Mortar2017 2025

The shift on-line will largely be driven by on-line grocery and meal kits,
with e-commerce penetration expected to increase 10X
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This monumental shift in how
consumers purchase food &
beverage implies there is ~$150B
of growth up for grabs
This monumental shift in how
consumers purchase F&B implies
~$150-$200B of growth up for grabs

8. 8 CONFIDENTIAL | DRAFT
As a result, retailers are moving quickly – the Amazon / Whole Foods deal
has supercharged deal activity for grocery retailers and meal kit providers
Source: U.S. Census; L.E.K research and. analysis
2016
2017
2018
Digital Labs formed
As of February 2019…
NOT EXHAUSTIVE
The Fire-starter
The on-line offering and experience to consumers provided by retailers is improving every day
Meal kits to grocery
Partnership
Partnership
Acquisition
Acquisition
Acquisition
Partnership
PartnershipPartnership
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properties of their respective owners. © 2019 L.E.K. Consulting LLC. All rights reserved.
Partnership Partnership Partnership

9. 9 CONFIDENTIAL | DRAFT
The rise of e-commerce has accelerated the Omni-channel creation in grocery;
The battle for the last mile is becoming crowded and is evolving at a brisk pace
Curbside pickup
Locking in store visits
 Amazon is installing
lockers in select Whole
Foods, saving on
operational costs and
attracting Prime members
to stores
Amazon crashes in
 Amazon’s acquisition of Whole Foods
threatens to deprive Instacart of an
important supplier in favor of
AmazonFresh
Instacart fights back with partnerships
 In response, Instacart has announced
a campaign to find new partners
eager to check Amazon’s influence
- Allies include Aldi, Costco, H-E-
B, and Albertsons
Ride sharing for groceries
 Walmart & Kroger are testing grocery
delivery services with Uber in various
markets including Dallas, Denver,
Washington D.C., and Phoenix
Kroger / Ocado
 The recent deal with Ocado signals a
major bet by Kroger on in-home
grocery delivery
Pickup is picking up pace The dash to deliver
Source: Business Insider; TechCrunch; Digital360; Progressive Grocer; Company websites; L.E.K. Analysis
Grocer/Storage
In-StorePickup
OnlineOrder+Delivery
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10. 10 CONFIDENTIAL | DRAFT
Technology is further heating up the race for the last mile as retailers are testing
self driving vehicles to deliver meal kits and groceries directly to consumers
Source: Supermarket News, L.E.K. research and analysis
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 Several large retailers such as Amazon, Walmart,
Kroger, and Stop & Shop are exploring using driverless
vehicles to deliver groceries and other products directly
to consumers
 The Amazon Scout, an autonomous electric vehicle that
brings packages to consumers’ doors, is currently
undergoing field testing
“… We are happy to welcome Amazon Scout to our growing suite
of innovative delivery solutions for customers and look forward to
taking the learnings from this first neighborhood so Amazon Scout
can, over time, provide even more sustainability and convenience
to customer deliveries…”
Sean Scott, Vice President of Amazon Scout, January
2019
 Walmart and Kroger are engaged in pilot programs using
self-driving vehicles to fulfill online grocery orders
 Stop & Shop is developing a program whereby driverless
vehicles bring a selection of groceries to consumers
when summoned by an app; consumers can choose
among an assortment of goods contained in the vehicle
“… This is one way in which we’re leveraging new technology to
make shopping easier for customers by essentially bringing the
store to them…”
Mark McGowan, Stop & Shop President, January 2018
Amazon Scout
Stop & Shop Robomart

11. 11 CONFIDENTIAL | DRAFT
0
500
1,000
1,500
2,000
2,500
3,000
~750M
~700M
Estimated U.S. meal kit delivery market (2018)
Millions of dollars (RSP)
~200M
~200M*
~800M
~300M
~$3B
Meal kits are ~20% of the F&B e-commerce market today (~$3B) and are
experiencing explosive growth
Note: * Albertsons bought Plated for $200 million with potential for additional pay outs based on growth
Source: Packaged Facts, Technomic, Washington Post, Eater, TechCrunch, company websites, CNBC, Second Measure, PR Newswire, L.E.K. interviews and analysis
 In the span of a few short years, more than 150
companies have jumped into the meal-kit
industry with low barriers to entry
 The industry is experiencing explosive growth,
as Meal kits meet consumer needs for portion
sizes, convenience of home delivery, and ideas
for interesting / on-trend recipes
 Despite the explosive growth, meal kit
companies struggle to turn a profit
 As a result, there is likely to be a shake-out in
the industry – starting with the shift from on-line
to brick and mortar stores
Others (150+)
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12. 12 CONFIDENTIAL | DRAFT
Note: Q23: With which meal kit companies are you familiar?; Q27: On a scale of 0 to 10 how likely are you to recommend the following meal kit providers
to a friend or colleague, where ‘0’ means “not at all likely to recommend” and ‘10’ means “very likely to recommend”?
*Casual defined as purchased occasionally; **Committed defined as purchased frequently or always
Source: L.E.K. consumer survey
Nearly 80% of consumers are aware of meal kit providers…
0
20
40
60
80
100
30
10
50
70
90
19
80
U.S. meal kit awareness
Percent of respondents (N=1,559)
16
59
25
45
34
26
18 17 17 16 14
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13. 13 CONFIDENTIAL | DRAFT
… but only ~20% U.S. consumers have tried meal kits or are regular
customers, with higher penetration among younger generations
Note: Q22: Have you purchased from a meal kit company?; Q24: With what frequency do you purchase meal kits?
Source: L.E.K. consumer survey
24%
17%
4%
14%
12%
6%
4%
7%
64%
77%
92%
79%
0
20
40
60
80
100
Regular customer
Overall
U.S. meal kit purchasing, by generation
Percent of respondents* (N=1,559)
Millennial Gen X Boomer +
Never tried
Tried but
unlikely to
continue
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14. 14 CONFIDENTIAL | DRAFT
Hello Fresh has become the #1 meal kit player and is getting closer to generating
a profit; Blue Apron revenue declined last year and profitability challenges remain
Notes: * HelloFresh revenues include global sales, Blue Apron sales are largely concentrated within the U.S.; ** HelloFresh 2018 expected revenue and EBITDA based on Q3 2018 earnings
Source: Company Annual Reports, CapIQ, L.E.K. analysis
0
1,500
500
1,000
Annual Blue Apron and HelloFresh Revenue & Profitability* (2015-18E)
Millions of dollars
668
17 18E**2015 16
341 349
795
683
881
1,035
1,449
CAGR%
(2015-18)
25.1
66.3
Hello Fresh surpassed
Blue Apron in 2017
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EBITDA $M ($42.6) ($43.6) ($137.9) ($61.0)
% of
sales
(12.6%) (5.5%) (15.7%) (9.1%)
EBITDA $M ($98.6) ($94.5) ($80.2) ($67.2)**
% of
sales
(28.0%) (13.8%) (7.7%) (4.6%)
(12.1)
12.0

15. 15 CONFIDENTIAL | DRAFT
High customer churn remains a key issue, making profitability
improvements challenging
Source: 1010 Data Market Insights, CBInsights; HelloFresh Financials; Wall Street Journal; L.E.K. interviews and analysis
0
20
40
60
80
100
Netflix
12 246
Months since first order
0
HelloFresh
Customer retention rates
(March 2015 – March 2017)
Percent of customers still ordering
18
Blue Apron
 Customer “churn” is high with low consumer
retention rates
− With low barriers to entry, consumers are
constantly hit with new promotion offers and
have low loyalty
 Most meal kit providers have low / negative
profit margins
− Customer acquisition and retention costs,
packaging, labor and delivery costs are
disadvantaged vs. grocery
− Lack of “stales” are an advantage as driven
by the inherent “pull nature” of the business
(grocers experience significant costs here)
 Funding in 2017 was down significantly from
2015, and is expected to stagnate in 2018 as
investors continue to question the viability of
meal-kits
− In 2015 there were an estimated ~30
transactions and $450M in funding vs. ~18
transactions and ~$275M in funding in 2017
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16. 16 CONFIDENTIAL | DRAFT
Pricing is a key profitability improvement lever; unfortunately ~60% of
customers who exited meal kits cited price as the primary reason
Note: Q25: What are the primary reasons you do not plan to continue purchasing from meal kit companies? Please select up to 3 responses.
Source: L.E.K. consumer survey
60
23 22
18 17 16
14
12 11
7
5
0
10
20
30
40
50
60
70
Recipesare
toodifficult
Restrictivediet
Excessive
packagingwaste
Primary reason consumers do not plan to continue purchasing meal kits
Percent of respondents who do not plan to continue purchase and selected the criteria as most important (N=111)
Excessivefoodwaste
Toomuchprepwork
Thepricenot
worthpreptime
Tooexpensive
Donotlikerecipes
Boredofmenuoptions
Canmakemeals
onmyown
Customerservice
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Sun Basket
Organic 5-minute salad
5 minutes preparation time
Purple Carrot
“Purple Carrot Extra”
5 minutes preparation time
Home Chef (Kroger)
“Home Chef Express”
15 minutes preparation time
Hard to lower
prices when
losing money…
So meal kit providers
are actively reducing
prep time

17. 17 CONFIDENTIAL | DRAFT
The shakeout we predicted for the meal kit industry in 2016 is beginning to
play out, as the path to profitability remains challenging
Chef’d announced a sudden
closure in July of 2018 citing
financing and profitability issues*
Munchery closed in January 2019 after
burning through $125M in funding due
to low customer retention
Sprig closed in 2017 after its inability
to reduce waste burnt through $57M
in funding
Spoonrocket closed in 2016 after
consuming $14M in funding
Bento closed in 2017 due to low
gross margins and financing issues
Blue Apron IPO at $10 / share
is now <$1 / share in Dec 2018
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Note: * In late 2018, Chef’d was acquired by True Food Innovations, who re-opened and transitioned Chef’d from an e-business model to a retail model
Source: Bloomberg, Eater, GroceryDive, New York Times, San Francsico Chronicle, Supermarket News, TechCrunch, The Hustle, L.E.K. research

18. 18 CONFIDENTIAL | DRAFT
With packaging, last mile delivery costs, and profitability challenges – meal kit
brands and meal kit solutions / fresh prepared foods are moving to brick & mortar
Fresh prepared foods
(On the perimeter)
Meal Kits in Store
(Refrigerated)
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The blurring lines of retail & foodservice: What’s next?
QSR Meal Kits
(Chick-Fil-A Example)

19. 19 CONFIDENTIAL | DRAFT
Many leading grocery retailers have invested in meal kit partnerships or built
private label meal kit offerings with established on-line providers
 In 2017, Walmart launched a meal kits and specialty foods site featuring products from
meal kit partners like Takeout Kit and partnered with Gobble in 2018; As of March
2018, Walmart also offers private label kits designed by their internal innovation center
 Albertson’s acquired Plated in September 2017 and plans to expand its in-store meal
kit offering from 40 to hundreds of stores by the end of 2018 through Instacart, online
ordering and home delivery, and in-store pickup through Albertson's Drive Up & Go
 Kroger acquired Home Chef in May 2018 and began selling their meal kits in store and
online in October; Kroger also sells its own private label Prep+Pared meal kits
 Ahold Delhaize partnered with HelloFresh to begin selling its meal kits at ~600 Stop &
Shop and Giant Food stores in mid-2018
 Whole Foods attempted to compete with meal kits by displaying meal ingredients
together and including a recipe; it has since expanded its meal kit program to include a
partnership with Salted in limited markets
 Chef’d has partnered with dozen retailers in 27 states as of December 2018, such as
Costco, Harris Teeter, and Hy-vee for retail meal kits after their online model went out of
business in mid 2018
 Amazon offers its own meal kits available via Amazon Fresh and in select Pacific
Northwest Amazon Go stores (4) and also sells Tyson Tastemakers and Martha
Stewart’s Martha & Marley Spoon meal kits
Source: Company websites, CNBC, Fast Company, Fortune, Supermarket News, Today, Chicago Tribune, L.E.K. research and analysis
Fresh Prepared FoodsMeal kits in-store
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20. 20 CONFIDENTIAL | DRAFT
Albertson’s + Plated and Ahold + HelloFresh are among successful retailer
meal kit partnerships (1 of 2)
Fresh Prepared FoodsMeal kits in-store
 Albertson’s acquired Plated in September 2017 and
plans to expand its in-store meal kit offering from 40
to hundreds of stores by the end of 2018 through
Instacart, online ordering and home delivery, and in-
store pickup through Albertson's Drive Up & Go
 Through partnership with Albertson’s, Plated aims to
become the first omni-channel meal kit offering with
national scale
Source: Company websites, Progressive Grocer, Retailer Leader, Today’s Dietitian, L.E.K. research and analysis
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21. 21 CONFIDENTIAL | DRAFT
Albertson’s + Plated and Ahold + HelloFresh are among successful retailer
meal kit partnerships (2 of 2)
Fresh Prepared FoodsMeal kits in-store
Source: Company websites, Progressive Grocer, Retailer Leader, Today’s Dietitian, L.E.K. research and analysis
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properties of their respective owners. © 2019 L.E.K. Consulting LLC. All rights reserved.
 Ahold Delhaize partnered with HelloFresh to begin
selling its meal kits at ~600 Stop & Shop and Giant
Food stores in mid-2018
 HelloFresh’s retail channel expansion aims to drive
customer acquisition in new segments
“… It’s for customers that don’t have the ability to preplan as
much …”
HelloFresh CEO Dominik Richter
 HelloFresh’s retail offerings are priced between $15-
$20 with preparation times under 30 minutes

22. 22 CONFIDENTIAL | DRAFT
Walmart has developed a wide variety of meal kits both in house and
through acquisition to appeal to a broad range of consumers
Fresh Prepared FoodsMeal kits in-store
Source: Company websites, Chain Store Age, Forbes, Fortune , L.E.K. research and analysis
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Tiered levels of kits
 Through its Culinary and Innovation Center, Walmart has
started offering a variety of self-branded meal kits,
ranging in preparation time and required culinary skill:
- Pre-portioned Meal Kits, serving as more traditional,
standalone pre-packaged kits
- Rotisserie Chicken Meals, which provide ingredients meant to
be paired with a Walmart rotisserie chicken in order to create a
more comprehensive meal
- One Step Meals, which simply require heating
“… Customers are busier than ever and we know getting a delicious dinner
on the table can be a chore. We’re here to help …”
Tyler Lehr, Senior Vice President and General Merchandise
Manager, Deli Services, Walmart U.S.
 Additionally, Walmart partnered with meal kit company
Gobble in 2018 to sell products through Walmart’s e-
commerce site as well as brick-and-mortar stores
- Walmart aimed to offer Gobble meal kits in 2,000 stores
nationwide by January 2019
- Fortune estimates Gobble’s annual revenue to be ~$50M
“… Our state-of-the-art supply chain infrastructure is agile and built for scale
to capture opportunities such as this new partnership with Walmart. We are
ready for more Gobble families who need this level of convenience in their
daily lives …”
Steve Robinson, VP of Supply Chain and Operations, Gobble
Thai Style Coconut Curry Chicken prepared
using a Walmart Rotisserie Chicken Meal
Gobble Meal Kit

23. 23 CONFIDENTIAL | DRAFT
Grocers such as Kroger have begun to provide additional options outside
of traditional, pre-prepared, standalone meal kits
Fresh Prepared FoodsMeal kits in-store
Source: Company websites, Chain Store Age, Forbes, FoodDive, Supermarket News, L.E.K. research and analysis
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Self-service meal kit freezer case
Kroger
 Kroger launched a prepared foods buffet-style create-you-own meal kit station allowing
customers to fully customize the contents of their frozen meal kit
 Self-service freezer cases contain a wide variety of frozen, easy to prepare entrees and sides,
all with an estimated preparation time of 10-12 minutes
 Priced at $7.99 per pound, the frozen selection typically includes 12-18 items, which are flash-
frozen combinations of meat or seafood with sauces and seasonings; once home, consumers
place items in a skillet to cook quickly
 These do-it-yourself service stations present an additional style of meal kit offering beyond
Kroger's sales of HomeFresh, a meal kit maker the grocer acquired in 2018
“… If you’re eating, we want to serve you, and unless it’s a dinner at a white tablecloth restaurant,
that’s a meal we should be able to provide you …”
Rodney McMullen, CEO, Kroger
Customization meets convenience
 Kroger first acquired Chicago-based meal kit company, Home Chef, in May 2018 for
$200M before testing customer appetite for retail store meal kits in Q4 2018
- Home Chef became available in 200 Kroger stores across the Midwest in
October 2018
 Home Chef meal kits cost between $17-$20 with preparation times ranging from 15 to
60 minutes
 After a successful test run, Kroger announced plans to make Home Chef meal kits
available nationwide beginning in early 2019

24. 24 CONFIDENTIAL | DRAFT
Source: Company websites, CNBC, Fast Company, Fortune, Supermarket News, Today, Chicago Tribune, L.E.K. research and analysis
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Amazon Go is revolutionizing the C-store model with cashier-less brick &
mortar outlets focused on fresh, prepared foods
Meal kit boxes to
take home
Heat & eat meals Station with
microwave to heat up

25. 25 CONFIDENTIAL | DRAFT
Large CPG firms are developing meal kit offerings to meet consumer
needs related to convenience and customization in the frozen aisle
Fresh Prepared FoodsMeal kits in-store
 Tyson Tastemakers is a series of meal kits sold online
and delivered to consumers through AmazonFresh
- Menus change seasonally and feature a variety of
globally inspired dishes, rather than the basics
“… The company plans to scale Tyson Tastemakers in a
sustainable and profitable way … The platform will move beyond
e-commerce with a regional launch into select brick-and-mortar
stores with click-and-collect business models. Eventually, Tyson
Tastemakers will be available nationwide with a full retail and e-
commerce presence …”
Mario Valdovino, Corporate Executive Chef, Tyson
Foods, March 2017
Tyson Tastemakers Stouffer’s
 Stouffer’s markets their Complete Family Meal Kits
Ready as taking less time (<25 vs. 30 minutes) and
able to last in the freezer for 12 months instead of 1-2
weeks
“… A lot of the meal kits require a lot of prep work beyond what
consumers may consider ‘quick’. So while consumers are
looking for quick prep, they often are getting something that is a
lot more work than they bargained for. And that is a pain point
we look to meet with our Complete Family Meal its…”
Erica Starrfield, Marketing Manager, Stouffer’s
Source: Company websites, Smartbrief, L.E.K. research and analysis
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26. 26 CONFIDENTIAL | DRAFT
In addition to meal kits, grocers are turning to fresh prepared foods (FPF) to
drive traffic (‘groceranuts’): The $34B FPF grocery market is growing at 7-8% p.a.
28
20
4
16
8
12
24
0
32
36
40
44
48
52
19F
Total U.S. fresh prepared foods market* – grocery channel
(2011-21F)
Billions of dollars (RSP)
~$26B
~$45B
~$27B
~$25B
~$29B
~$31B
~$34B
~$38B
~$41B
~$48B
~$51B
2011 1512 13 14 21F16 17 18F 20F
Yoy
growth
~7% ~7% ~8% ~10% ~10% ~11% ~9% ~8% ~7% ~6%
Note: * Fresh prepared food has 5 major categories – center of plate, sides, fresh prepared produce, in-store bakery and other (chilled sauces, salad / soup bar, and other condiments)
Source: L.E.K. analysis
Forecast
CAGR
2011-17 2017-22F
~7% ~8%
Fresh Prepared FoodsMeal kits in-store
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27. 27 CONFIDENTIAL | DRAFT
Most retailers, however, are underpenetrated with fresh prepared foods
(today), signaling strong runway for growth
Directional
~20%
~4%
0
5
10
15
20
Fresh prepared category size by retailer
(2016)
Fresh prepared dollar sales as percent of total grocery sales
Market average
Source: L.E.K. analysis
 “Best-in-class” fresh prepared foods retailers
like Whole Foods and Costco lead the way with
strong penetration rates (e.g. ~20% for WF)
 The overall U.S. market averages just ~4%.
 Conventional retailers have been pushing to
catch up to higher penetration rates
− More progressive retailers like Trader Joe’s
and H-E-B have fresh prepared penetration
rates around 2X the national average
− There is a long tail of grocers who have not
yet capitalized on this growth opportunity
Fresh Prepared FoodsMeal kits in-store
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28. 28 CONFIDENTIAL | DRAFT
The supply chain to support fresh prepared foods is evolving
Source: L.E.K. analysis
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properties of their respective owners. © 2019 L.E.K. Consulting LLC. All rights reserved.
• Typically shipped frozen or
refrigerated
• Served by companies with
national distribution
National
Less common
Regional Commissary Patchwork
Most Common
Local / In-store
More Common
Hybrid (Components shipped National with local prep)
Emerging
• In-store value added foods (e.g.
cooked in store, premium to go
offerings)
• Typically fresh / extremely
perishable products
• Seasonal / rotating flavors
• Made regionally / locally
• Shipping radiuses create a
patchwork of locally based
commissaries
• Varied tastes and preferences
by region
Decreasing shelf life

29. 29 CONFIDENTIAL | DRAFT
Thank You!
Rob has 15+ years of experience in strategy & operations consulting and is an advisor to clients on a
range of strategic issues. Rob focuses in the consumer & retail sector with a focus on the food &
beverage industry. Recent project work includes:
– Growth Strategy
– Commercial Due Diligence and Sell Side Support
– Price Pack Architecture
– Private Label Branding & Sourcing Strategy
– Consumer Segmentation and DTC Strategy
– Organizational Transformation
Rob is an instructor at Merger Week at the Kellogg Graduate School's executive education center,
the premier executive program focused on acquisition best practices
Mr. Wilson was named 2015 Rising Star of the Profession for Excellence in Strategy Consulting by
Consulting Magazine
Rob received his Master of Business Administration with Honors from the University of Chicago
Booth School of Business, and he holds a Bachelor of Science in Industrial and Operations
Engineering, Cum Laude from the University of Michigan in Ann Arbor
Rob Wilson
Managing Director - Chicago
Leader in the Food & Beverage Practice
r.wilson@lek.com
312.923.6461
L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are
properties of their respective owners. © 2019 L.E.K. Consulting LLC. All rights reserved.