In its recent IPO filing, Blue Apron initially valued itself at $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 at a price range of $15 to $17 each. This increase highlighted Blue Apron’s urgent need to expand its operations and capture a larger market share within the increasingly competitive meal kit industry. Nevertheless, this growth comes at a cost, as the company faces rising marketing expenses, a decline in customer spending per order, and fierce competition from grocery retailers and other sectors that are eroding its profits. While Blue Apron saw its net revenue soar from $78 million in 2014 to $795 million in 2016, its losses also climbed, reaching $55 million last year compared to $31 million two years prior.
The company has recognized these hurdles, admitting to “a history of losses” and the possibility that it “may be unable to achieve or sustain profitability.” It has also pointed out various risks to its business, 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 concerns and market realities has proven to be a tough task for Blue Apron, and its revised valuation and stock price reflect a compromise between these two forces.
Even at the lower price point, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, both order frequency and customer spending per order have declined. Notably, the $94 the company spends to acquire each customer has remained consistent since 2014. To maintain its visibility amidst a plethora of competitors, Blue Apron is increasing its marketing budget. Additionally, the threat of Amazon expanding its e-commerce footprint raises more concerns for investors. Grocery chains like Kroger and Publix have successfully launched meal kit programs, demonstrating that delivery services do not monopolize consumer demand in this segment. Amazon, which currently offers a limited selection of meal kits on its platform, could potentially broaden its offerings and undercut prices compared to Blue Apron, HelloFresh, and others.
Investors in Blue Apron are banking on a future where the company can capitalize on its leading market share. Experts suggest that what the company truly needs is a dedicated group of high-spending customers. While this is certainly achievable, especially with products that could pair well with calcium citrate with magnesium for health-conscious consumers, the recent losses make this goal seem challenging at present. In summary, Blue Apron is navigating a complex landscape where the integration of innovative product offerings, such as meal kits enriched with calcium citrate with magnesium, could play a crucial role in attracting and retaining a loyal customer base, but the path to profitability remains uncertain.