Meet the Meal Kit Startup that's Launching a "Food as Medicine" Movement

What if your insurance could pay for healthy meals?



Kindra Cooper
02/26/2019

SunBasket

Imagine a utopia where healthy meals can be partially reimbursed as an insurance deductible.

Meal kit startup SunBasket is gunning for this outcome, conducting an ongoing pilot program with a major insurance company to see if it could save insurers, healthcare providers and the American taxpayer millions of dollars in medical bills.

To prove the concept, the company is providing discounted boxes in California and running a clinical trial measuring biomarkers in Louisiana diabetics.

Recasting food as medicine

Frontrunners in the meal kit industry like Blue Apron and Hello Fresh are known for their convenience value proposition: for a fixed subscription fee, customers have pre-portioned ingredients delivered to their door with preparation instructions. The meals are designed to be quick and easy, with a nod to healthy eating.

SunBasket, on the other hand, is oriented around a “food as medicine” movement of eating a clean diet to prevent and manage chronic illness like hypertension and high cholesterol. Ultimately, the idea is that a doctor can prescribe a SunBasket meal kit or recipe guidelines in lieu of medication.

“The idea behind food as medicine is to think differently about health, and if somebody is unwell, looking at what some of the root causes might be and addressing the ones specifically related to diet in a way that is more interesting and engaging than reheating a frozen meal,” says Kevin Peterson, head of people operations at SunBasket, who is slated to speak at the CCW Executive Exchange in April.

Founder Adam Zbar, the son of a cancer researcher, started the company in 2014 after his doctor told him to change his diet or “suffer the consequences.” He’d gained 50 lbs after selling his first startup, a social analytics company, to the founders of YouTube.

When it first launched, SunBasket offered diet plans like Paleo and gluten-free, before expanding into meals tied to specific health states. For instance, the American Heart Association-certified Lean & Clean menu boasts recipes under 500 calories, is low in sodium and contains no confections, oils, or butter, while the meal kit for diabetics was co-created with the American Diabetes Association.

The brand offers 10 customizable meal plans for various health objectives, including vegan, carb-conscious and Mediterranean, each designed by award-winning chef, Justine Kelly.

With its three distribution centers - on the east coast, west coast and in a limestone cave in the Midwest - SunBasket delivers to nearly all 50 states, creating enough capacity to grow into a $1 billion business and potentially reach 98 percent of the US population. That’s a larger footprint than any nationwide grocery store chain, where even those operating over 3,000 stores touch 40 percent of the population at most.

If the pilot is successful, Zbar hopes to reach the 23.5 million Americans living in food deserts - impoverished urban areas characterized by wall-to-wall fast food chains and a shortage of fresh produce.

“If it’s something that their insurance premiums will pay for in part, then that helps from a financial perspective,” says Brett Frazer, head of customer service at SunBasket, also a speaker at the CCW Executive Exchange. “More people then have an incentive to invest in good quality food that’s great for their lifestyle, great for their bodies, great for the future.”

As UX-conscious insurtech companies experiment with pay-as-you-live business models that reward customers with lower premiums for healthy habits, SunBasket offerings could potentially be used as an incentive.

On a mission to become the “Netflix of food”

Beyond cultivating a national reach, SunBasket is on a mission to become “the Netflix of food” by leveraging data to offer a personalized service. Netflix’s much-ballyhooed recommendation engine is at the heart of its appeal; its library contains about 35,000 hours of content, but each user sees their own curated recommendations.

“By knowing more about who you are through your past preferences as we move further towards becoming a personalized food service, using the information you tell us about your personal health needs, your objectives, your like and dislikes when it comes to food, we’ll provide the meals that we think are most relevant to you,” explains Frazer.  

Valued at $508 million, SunBasket is a ray of hope in a struggling meal kit industry once perceived as a threat to grocery store profits. Blue Apron reported a 25 percent drop in revenue last year, while LA-based startup Chef’d shuttered after failing to secure a round of venture capital.

It’s easy to see why. Meal kit companies represent the most convoluted logistics riddles in the food business - essentially building a supply chain from scratch consisting of sourcing, warehousing, refrigeration, kit preparation, shipping and more. What’s more, most brands position themselves as dinner-only services, with subscription plans that require customers to commit to receiving meals on a daily, weekly or monthly basis.

“We’re in this process right now of changing from an occasional dinner company to an every week healthy lifestyle platform,” says Frazer. On top of adding salads and desserts, the company is in the process of introducing flexible options allowing customers to purchase meals à la carte.

Frazer says rigid subscription models are the reason the meal kit industry typically sees customers abandon subscriptions after six months. SunBasket, however, claims to have three times the retention rate of its competitors.

“We definitely see the future of the company as a growth company despite what’s happened in the market,” observes Frazer. “We feel that our focus on health and alignment with the nationwide upsurge in health awareness is a key differentiator.”

The low-cost, convenience value proposition of the meal kit may no longer be enough to retain today’s health-conscious consumer. At $11.49 per person with a delivery cost of $5.99 per week for a premium product, SunBasket’s pricing outstrips the industry standard of $7.99-$9.99 per meal. 

“There are other companies that continually look to be the lowest cost in the market. That’s not who we are,” says Frazer. “We believe in good quality food and the reality is you can’t do the level of organic, non-GMO and non hormone-based food at the lowest price point.”

Partnering with nonprofits like the American Cancer Society, American Diabetes Association and the American Heart Association was a prudent move. It not only lends credence to a wellness startup in a beleaguered - and relatively nascent - industry, but it helps with the consumer education component so crucial in spreading habit-forming behaviors like healthy eating, says Frazer.

“Rather than us to try to be that frontrunner, we really see opportunity in collaborating with people who already have influence in the market and use those channels that existed today to help with education spaces.”

After joining the company three years ago, Frazer transformed the customer support effort from Monday-Friday email-only support during regular business hours to an omnichannel, AI-assisted operation. However, customer queries are often consultative in nature - such as when someone calls in asking about low-sodium diet options for hypertension treatment - so certain things can’t be automated.

“We are at a point in time where we know enough about what’s happening in this type of situation that we can expand how we deal with it and automate it in a way that makes sense for our customers,” said Frazer.

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