In its IPO filing earlier this month, Blue Apron indicated a valuation of $100 million. A few weeks later, the company significantly raised this figure to $510 million and announced plans to sell 30 million shares at a price ranging from $15 to $17 each. This increase highlights Blue Apron’s urgent need to enhance its operations and expand its market share in an increasingly competitive meal kit sector. However, this growth comes at a cost, as the company faces rising marketing expenses, a decline in customer spending per order, and stiff competition from the grocery industry, all of which are impacting profits.
While Blue Apron’s net revenue surged from $78 million in 2014 to $795 million in 2016, its losses escalated to $55 million last year, up from $31 million two years prior. The company has recognized these hurdles, admitting to “a history of losses” and stating that it “may be unable to achieve or sustain profitability.” It also highlighted various risks to its business, including foodborne illnesses, shifts in consumer tastes, and a “novel business model” that complicates the evaluation of its future challenges and prospects.
Navigating investor concerns alongside market realities has proven challenging for Blue Apron, and its new valuation and stock pricing reflect a compromise between these two factors. Even at the lower pricing, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, both order frequency and average customer spending per order have declined. Meanwhile, the cost to acquire each customer, currently $94, has remained steady since 2014. To maintain visibility amid intense competition, the company is allocating more resources to marketing.
The looming presence of Amazon in the e-commerce arena also raises alarms among investors. Retailers like Kroger and Publix have successfully launched meal kit programs, demonstrating that delivery services do not monopolize customer demand in this market. Amazon, which currently offers a limited range of meal kits on its platform, could expand its selection and potentially undercut prices set by Blue Apron, HelloFresh, and others.
Investors in Blue Apron are banking on a future turnaround when the company can leverage its leading market share. Experts suggest that the company must focus on cultivating a core group of high-spending customers, a goal that, while achievable, seems challenging in light of its recent losses. As Blue Apron navigates these turbulent waters, the need for innovative strategies—perhaps even exploring offerings like calcium soft chews to cater to health-conscious consumers—could be vital in attracting and retaining customers in a crowded marketplace.