Sprig: Uber for healthy meals

How an on-demand start-up executes on its promise of healthy, delicious meals delivered in 15 minutes

There’s no denying that a number of start-ups these days can be described as “Uber for X” – the delivery of a product or service on-demand. There’s an Uber for groceries, cleaning, laundry and even massages [1]. It’s not surprising that some are already failing given they are directly copying Uber’s operating model without adapting it to the specific “X” they are delivering. Sprig – known as ‘Uber for healthy meals’ – is an exception.

uberforthatweb_30014

 

What’s Sprig’s business model?

Sprig delivers healthy, gourmet meals directly to a consumer within 15 minutes of placing an order. Customers use the Sprig app to select one of three different meal choices (menu changes daily), and are charged $9-12 per meal plus a small delivery fee.

“We feel like the current food system gives customers an unfair choice, either convenience or quality. Sprig’s mission is to eliminate that choice” – Gagan Biyani, Sprig CEO [2]

At its core, Sprig’s value proposition is to deliver both convenience and quality. This resonates most strongly in urban areas with a high density of young professionals, who are increasingly looking for healthy, quality food without the long wait or investment in the kitchen. While it is too early to label Sprig a definitive success (founded in 2013), its rapid yet disciplined growth, positive reviews, and strong VC backing identify it as effective thus far [3].

Sprig menu

 

How does the operating model supporting this?

In brief, Sprig’s operating model is to cook huge quantities of a few meals, then load them into cars that drive around neighborhoods to ensure they are always close by when a customer places an order. Sounds slightly strange until you dig into the model and understand how it drives the two sides to Sprig’s value proposition – convenience and quality.

With regards to convenience (15 minute delivery), Sprig leverages technology that is core to Uber’s operations. It uses predictive analytics to anticipate key variables such as demand by neighborhood and demand for each specific meal option, and it uses data science to determine opttimal delivery routes and to drive Uber-like dynamic delivery pricing to match supply with demand and avoid long wait times [4]. However, what really allows Sprig to be successful in delivering convenience is the ways in which it has adapted Uber’s operating model for meal delivery:

  • Warming bags in vehicles: Allows drivers to carry large batches of meals and stay close to potential customers in a given neighborhood, versus the slower process of cooking meals to order and dispatching one at a time [2]
  • Innovative sous-vide cooking method (use of water bath): Ensures meals hold up for extended periods of time while drivers circle around neighborhoods [5]
  • Limited menu: Reduces likelihood of driver stock outs for any one of the three meals (and reduces waste)
  • Employees, not contractors: Unlike Uber, Sprig has decided to make all their drivers employees of the company, which allows them to invest in training and development to ensure all drivers deliver meals in the most quick and service-friendly manner [6]

As for the second side of the value proposition – food quality – components of the operating model drive this as well, primarily in the form of chef assets:

  • Limited menu: Improves quality control and yields cost savings from economies of scale, allowing for investment in more expensive, higher quality ingredients
  • Strong executive chef: Sprig hired former executive chef at Google, Nate Keller, and in doing so acquired a preexisting set of relationships with quality ingredient suppliers, experience cooking vast quantities of food, and a solid understanding of menu preferences for Sprig’s core market (young professionals) given Keller served the same market at Google [7]
  • Partnerships with acclaimed chefs: Help project an overall image of inspiring, high quality meals [8]

Nate keller

 

So will Sprig win the on-demand meal market?

It looks promising. While pieces of the operating model are replicable, Sprig has decided to deeply penetrate markets versus pursuing a broad land-grab, which builds a strong barrier to entry and helps the unit economics of what is otherwise a very capital intensive business – arguably its greatest risk.

Although there are competitors with similar business models (Caviar, Postmates, DoorDash) none come close to Sprig’s 15 minute delivery given their reliance on restaurant orders. The biggest threat to delivery time may come from Uber itself, in the form of UberEats (currently in pilot), which like Sprig achieves speedy delivery by carrying around large quantities of a few entrees. While less capital intensive, Uber risks failure by pursuing a new “food” value proposition without adapting the underlying operating model. For example. UberEats sources meals from restaurants (not made to be carried around for long periods of time), resulting in lower quality [9]. If however Uber and other competitors can more effectively align their business and operating models, Sprig may be in trouble.

 

Sources

[1] http://www.wsj.com/articles/theres-an-uber-for-everything-now-1430845789

[2] http://www.chicagotribune.com/bluesky/originals/ct-sprig-meals-launch-chicago-bsi-06092015-story.html

[3] https://medium.com/@greylockvc/greylocks-investment-in-sprig-f5e9bdbee190#.zfmr7f7p7

[4] http://venturebeat.com/2015/02/05/uber-vs-sprig-2-different-flavors-of-dynamic-pricing/

[5] http://www.fastcompany.com/3031636/fast-feed/sprig-taps-celebrity-chefs-for-its-on-demand-dinner-service

[6] http://techcrunch.com/2015/08/06/sprig-to-classify-contractors-as-employees/

[7] http://www.fastcompany.com/3024128/most-creative-people/want-to-eat-like-a-google-employee-sprig-is-at-your-service

[8] http://www.7×7.com/eat-drink/state-bird-coming-sprig-one-night-only

[9] http://www.eater.com/2015/6/16/8788929/uber-ubereats-food-delivery-struggle-business-restaurant

 

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8 thoughts on “Sprig: Uber for healthy meals

  1. This is a very interesting business. At $9-13/meal, the price of a meal from Sprig rivals most fast casual restaurants. I wonder if the price point could be lowered further as the company scales and gains more customers in densely populated areas (increasing utilization of each driver and shortening the distance of each delivery).

    As for the Uber threat, I agree with you that UberEats may not be as competitive in terms of quality given that the food may not be specifically made to be carried around for long periods of time. However, I wonder if Uber’s model of playing the intermediary and sourcing food from restaurants instead of creating it gives it more flexibility in terms of changing consumer preferences. It may be easier for UberEats to switch between restaurants based on popularity vs. Sprig that is vertically integrated and would need to re-train chefs on a certain cuisine and purchase specific equipment – it may be pretty difficult to switch from prepping pasta to making sushi overnight.

    1. I agree, there’s an inherent trade-off between guys like Sprig who control their food (maintain strong quality control, food is prepped to be carried for long periods of time, healthier, etc.) vs. those who deliver restaurant food (greater flexibility to changing consumer tastes, more variety, consumers already “know” the dishes). In light of these differences, it will be interesting to see how much these two services end up being substitutes vs. complements.

  2. Love this! The biggest risk I see which others have hit on is flexibility. More and more, we are seeing that individuals want customization, are developing more allergies/food intolerances, and want to substitute ingredients on menus. How can Sprig serve these customers that for example ask restaurants to leave out onions and garlic in their orders or to steam instead of sautee their vegetables? Are customers able to ask chefs questions about ingredients/preparation style real time? Have they considered subscription based pricing for these types of customers that may be planning further in advance? Another thought is that customers like to see where their food is coming from. When customers turn restaurants into personal chefs, they do so after going to the restaurant perhaps once and discovering their preferred meal. If there is some way to combine offline with online to get people over the hump, the company may speed up customer acquisition (Rent the Runway did this when they opened up their retail store in NYC).

    1. Thanks for the comment! The flexibility point is a good one – it looks like they are consciously trading this off in favor of convenience / 15 min delivery. They do however make sure that across the 3 options there is always a vegan and gluten-free option, and in line with the “quality” image they spell out in great detail the ingredients and even where they are sourced from (I don’t have a picture of this above, but in the app you can click on the menu item and it will reveal this info).

      The offline / online combination is also interesting – they haven’t done anything yet, but the partnerships with acclaimed chefs helps people get over the hump a bit – e.g. in SF, when news spread that Sprig was offering meals prepared by the chef of State Bird Provisions (a highly sought over restaurant), the brand got a huge bump in awareness and first-time trials

  3. For Sprig, I want to know how they think about profitability. On the income statement, Sprig can see the overall profitability of the firm, but it is also important to know the profitability of each meal. Does Sprig have an understanding of the full cost of the meal which includes the cost of ingredients, preparation, and delivery? To create a sustainable business model, it will be important for Sprig to determine the cost per meal of delivery and preparation, and then they will need to determine how to reduce the costs. For example, it seems like promising a 15-minute delivery time would be expensive. In my mind, short delivery time would require a lot of cars and/or a lot of trips to deliver the food. It may be more effective to batch together large volumes of meals, but this batching would increase delivery times for food.

    1. Thanks for the comment Obi! The point on profitability per meal is an important one – I’ve noticed that after several weeks Sprig does sometimes recycle a previous menu item, and I’d assume this is based on profitability / popularity (I’d hope the two are correlated). So hopefully they are constantly trimming the number of different meal options to keep only the most profitable. In terms of reducing delivery costs, I think the way they are doing it now is by deeply penetrating markets rather than trying for a broad expansion – that way you can have a lot of batching of large volumes of meals, and ensure maximum hourly utilization of its drivers. The worst scenario would be to have a driver circling around with a bunch of meals in their warming bags, and having only one or two people to deliver to in their assigned territory.

  4. Arkesh – Thanks for the post! I found it super interesting and appreciate the fact that you just expanded my options for eating healthy while on an HBS student’s budget and schedule.

    I think you did a good job highlighting the critical decision the Company made to deeply penetrate selected markets as opposed to engaging in a widespread land-grab and it is easy to understand why the Company feels that this is a necessary strategy. However, it makes me question whether this may lead to unintended social consequences. The communities which, I assume, are most likely to use this service are those that are well-versed on the benefits of healthy eating habits and which are most likely to keep up to date with technology. This means the Company will most likely be solely focused on penetrating the wealthiest communities. I hope the Company doesn’t discourage its drivers from expanding into underserved and underprivileged neighborhoods; bringing affordable and healthy options to these communities could really have a social benefit! Thanks again for your post – I thought it was excellent.

    1. Thanks for the comment Steven! It’s an important point you raise, and one that I think applies to a lot of these “Uber for X” models. The danger is they end up catering to only a small sector of the population – tech savvy yuppies. It makes sense that Sprig, and other similar models start with areas like SF, NYC, Chicago but once they prove out the business model I hope they are able to expand to less affluent areas where healthy, convenient meals are, as you said, arguably most needed!

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