"It's Easier to Just Heat It Up in the Microwave"... Once a Multi-Billion Market, Now Buried in Debt [Why&Next]

Meal Kit Giants Bow Their Heads
Meal Kit Sales Decline After COVID-19 Boom
Fresh Easy, Industry Leader, Faces Swelling Deficits
MyChef Begins 'Holding On' Phase, Relies on Capital Injection

Leading companies in the domestic meal kit market, which has entered a period of stagnated growth, are struggling. Companies that rapidly scaled up during the COVID-19 boom are now facing dual pressures of declining consumption and rising costs.

According to the Financial Supervisory Service’s electronic disclosure system on April 15, Fresh Easy, the leading company in Korea’s meal kit market, recorded standalone sales of 100.8 billion won last year, down 12.3% from 114.9 billion won in the previous year. Operating losses decreased to 23.7 billion won, but the company has yet to escape the red. Since its establishment in 2016, Fresh Easy has never posted a profit. Net loss for the year also exceeded 20 billion won.

Fresh Easy, Entrenched Loss Structure... Relying on Borrowing

The company’s financial structure continues to worsen. Liabilities have surpassed 80 billion won, while equity has dropped to the 20 billion won range. Due to continued net losses since its founding, Fresh Easy’s accumulated deficit has reached 654.3 billion won. With deficits overwhelming its equity, the company is now evaluated to be in a state close to capital impairment. Short-term funding pressures have also grown. Short-term borrowings increased from 23.3 billion won to 42.2 billion won. Current liabilities (60.1 billion won) exceed current assets (25.0 billion won) by more than 35.0 billion won, further heightening short-term repayment pressure. In effect, the company owes more than the assets it currently holds.

Fresh Easy has focused on B2C (business-to-consumer) meal kit sales and supplied products through OEM (original equipment manufacturing) and ODM (original design manufacturing) models. As non-face-to-face consumption increased during the COVID-19 outbreak, it was seen as a key beneficiary. Sales grew from 1.5 billion won in 2017 to 214.8 billion won in 2022. During this process, Fresh Easy also pursued an aggressive M&A strategy, acquiring related companies such as Line Logistics System, Doctor Kitchen, Heodak, and Tasty Nine, thereby expanding its production and logistics base. However, this expansion led directly to higher costs. The strategy of lowering prices to secure market share also contributed to deteriorating profitability.

In fact, Fresh Easy’s cost-of-sales ratio exceeded 81% last year. This is high compared to the 50-60% range typically seen at general food companies. With the addition of selling and administrative expenses, the loss structure became entrenched.

'Holding On' MyChef, Dependent on Capital Injections

The situation is similarly challenging for MyChef, the second-largest company in the sector. Sales increased by 22.7 billion won, from 45.4 billion won to 68.1 billion won. Operating losses shrank from 10 billion won to 4.4 billion won, and net losses also decreased by about half.

However, when examining its finances, analysts note that MyChef is closer to 'holding on' than 'recovering.' While equity remains around the 20 billion won range, this is not due to internal profits but rather the injection of external funds. In fact, the company raised about 15 billion won in 2024 and about 5 billion won last year through paid-in capital increases. Accumulated deficits have also grown to around 74 billion won, and the loss structure continues.

The company’s debt structure has also changed. While short-term borrowings decreased from 22.4 billion won to 4.4 billion won, long-term borrowings increased from 5 billion won to 18 billion won. Although short-term debt pressure has been eased, total liabilities remain at around 41 billion won. The fundamental financial burden persists.

MyChef has secured relatively stable demand by increasing its B2B (business-to-business) sales ratio. Since being acquired by Korean Air C&D Service in 2022, the company has reinforced its business structure by leveraging its affiliate network.

Changing Consumer Trends, Preference for Ready-to-Eat Foods

The simultaneous difficulties faced by both companies are rooted in the limitations of the meal kit industry. Due to the nature of fresh foods, cost ratios are high and the burden of refrigerated and frozen logistics costs is significant. In addition, the short shelf life increases the risk of inventory disposal. As the number of product types increases, so do production and inventory management costs.

Shifting consumer trends are also a burden. According to the Ministry of Food and Drug Safety, the domestic ready-to-eat meal market (based on sales) grew from 3.6525 trillion won in 2020 to 6.3424 trillion won in 2024. The industry expects the market to surpass 7 trillion won this year. The global market is also on an upward trend, with the global ready-to-eat meal market projected to grow at an annual average rate of 4.4% to reach 228.1 billion dollars (337.6336 trillion won) by 2030.

In contrast, the presence of meal kits is weakening. According to Euromonitor, the meal kit market grew rapidly from 34.5 billion won in 2018 to 382.1 billion won in 2023, but as dining-out demand recovered after the endemic phase, the market has remained in the 300 billion won range for the past five years.

Consumers are also gravitating toward ready-to-eat foods. According to a survey by global market research firm Mintel of 1,000 internet users aged 18 and older, 57% reported consuming frozen ready-to-eat foods at least once a week (including 2-3 times per month). In contrast, only 43% consumed refrigerated meal kits.

Industry observers believe that as consumers increasingly value both price and convenience, the position of meal kits is narrowing. Demand is shifting from meal kits, which require cooking, to ready-to-eat foods and frozen ready meals, which can be easily prepared using a microwave.

Price hikes are also difficult. Consumers are highly sensitive to price, and competition is intensifying as large food companies and distribution platforms enter the market.

An industry official said, "While meal kits have strengths in terms of convenience, structurally the business offers inherently low margins. Even increasing scale does not easily improve profitability."

This content was produced with the assistance of AI translation services.