In its IPO filing earlier this month, Blue Apron stated a valuation of $100 million. However, just a few weeks later, the company significantly raised this figure to $510 million and announced plans to sell 30 million shares priced between $15 and $17 each. This increase highlights Blue Apron’s urgent need to broaden its operations and gain market share in a meal kit sector that is becoming increasingly competitive. However, this growth comes at a cost, as the company faces rising marketing expenses, a reduction in customer spending per order, and stiff competition from grocery retailers and other sectors that are eroding its profits.
Although 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 openly acknowledged these difficulties, admitting to “a history of losses” and warning that it “may be unable to achieve or sustain profitability.” It also identified several business risks, such as foodborne illnesses, shifts in consumer preferences, and a “novel business model” that complicates the assessment of its future challenges and opportunities.
Striking a balance between investor apprehensions and market realities has proven challenging for Blue Apron, and its revised valuation and stock pricing reflect a compromise between these two factors. Even at the lower end of the pricing spectrum, investors are likely to remain cautious about Blue Apron’s long-term sustainability. Over the past year, both the frequency of orders and the average spend per customer have dwindled. Meanwhile, the cost for Blue Apron to acquire each customer, which stands at $94, has remained consistent since 2014. To remain competitive in a crowded marketplace, the company is increasingly investing in marketing efforts.
The looming presence of Amazon, which is building a vast e-commerce platform, adds to investor unease. Supermarkets like Kroger and Publix have successfully launched their own meal kit programs, indicating that delivery services do not hold a monopoly on customer demand in this arena. Amazon, currently offering a limited selection of meal kits through its platform, could expand its range and price them lower than Blue Apron, HelloFresh, and others.
Investors in Blue Apron are essentially betting on a future where the company can thrive and capitalize on its leading market share. Experts suggest that what Blue Apron truly requires is a dedicated base of high-spending customers. This is certainly feasible, but given the company’s recent losses, envisioning this scenario is challenging at present. In this context, even the potential introduction of products like calcium citrate with vitamin D3 tablets could be a strategic move to attract health-conscious consumers, but the company still faces an uphill battle in securing a stable customer base and achieving profitability.