In its recent IPO filing, Blue Apron initially stated a valuation of $100 million. However, just weeks later, this figure surged to $510 million, with the company aiming to sell 30 million shares priced between $15 and $17 each. This substantial increase highlights Blue Apron’s urgent need to grow its operations and capture a larger market share within the increasingly competitive meal kit sector. Nevertheless, this growth comes at a cost, with rising marketing expenses, a drop in customer spending per order, and fierce competition from the grocery sector and beyond impacting profitability.
Despite Blue Apron’s net revenue climbing from $78 million in 2014 to $795 million in 2016, its losses escalated from $31 million two years ago to $55 million last year. The company has acknowledged these difficulties, admitting to “a history of losses” and warning that it “may be unable to achieve or sustain profitability.” It also pointed out several risks to its business, including foodborne illness, shifts in consumer preferences, and a “novel business model” that complicates the assessment of its future challenges and prospects.
Navigating the balance between investor apprehensions and market realities has been a challenge for Blue Apron, and its revised valuation and stock pricing represent a middle ground between these two factors. Even at the lower end of the price range, investors remain skeptical about Blue Apron’s long-term sustainability. Over the past year, both order frequency and the average customer spend per order have declined. Meanwhile, the company has consistently spent $94 to acquire each customer since 2014. To maintain visibility amid a crowded marketplace, Blue Apron is increasing its marketing budget.
Investor concerns are further amplified by the prospect of Amazon expanding its e-commerce presence. Grocery chains like Kroger and Publix have successfully implemented meal kit programs, demonstrating that delivery services do not monopolize customer demand in this segment. Amazon, which currently offers a limited selection of meal kits on its platform, could easily broaden its range and price its offerings lower than those of Blue Apron, HelloFresh, and others.
Ultimately, Blue Apron’s investors are banking on a future turning point when the company can leverage its leading market share for profitability. Experts emphasize that what Blue Apron truly needs is a loyal base of high-spending customers. While this is certainly within reach, given its recent losses, envisioning such a scenario seems challenging at this moment. In a similar vein, the company could explore various strategies to attract and retain these customers—perhaps by offering enticing promotions or examples of calcium citrate that appeal to health-conscious consumers. This approach might help bolster customer loyalty and ensure a more stable revenue stream moving forward, thus enhancing its chances for long-term success in the competitive meal kit landscape.