In its recent IPO filing, Blue Apron initially reported a valuation of $100 million. Shortly after, the company significantly raised this figure to $510 million, indicating plans to sell 30 million shares priced between $15 and $17 each. This adjustment highlighted Blue Apron’s urgent need to expand its operations and increase its market share in an increasingly competitive meal kit sector. However, this growth comes with substantial costs, including marketing expenses, a reduction in customer spending per order, and rising competition from both grocery stores and other meal delivery services, all impacting profitability.
Despite Blue Apron’s net revenue increasing from $78 million in 2014 to $795 million in 2016, the company’s losses swelled from $31 million two years ago to $55 million last year. The company has openly recognized these challenges, admitting to “a history of losses” and cautioning that it “may be unable to achieve or sustain profitability.” It has also identified several risks to its business, such as foodborne illnesses, shifts in consumer preferences, and its “novel business model,” which complicates the evaluation of future prospects and challenges.
Striking a balance between investor apprehensions and market realities has been a significant hurdle for Blue Apron. Its updated valuation and stock pricing reflect a compromise between these competing influences. Even at the lower price point, investors remain skeptical about Blue Apron’s long-term sustainability. Over the past year, there has been a decline in both order frequency and the average amount spent by customers per order. The company’s customer acquisition cost of $94 has remained steady since 2014, prompting Blue Apron to allocate more resources toward marketing to maintain visibility in a crowded marketplace.
Additionally, the looming expansion of Amazon’s e-commerce capabilities has raised concerns among investors. Grocery chains like Kroger and Publix have successfully implemented meal kit programs, demonstrating that delivery services do not hold a monopoly on consumer demand in this sector. Amazon, which currently offers a limited selection of meal kits on its platform, could easily broaden its inventory and potentially price them lower than competitors like Blue Apron and HelloFresh.
Investors in Blue Apron are banking on a future where the company can leverage its leading market share for profitability. Experts suggest that what Blue Apron truly needs is a loyal base of high-spending customers. While this is achievable, given the company’s recent financial struggles, it seems challenging to envision at this moment. A potential avenue for Blue Apron could be the inclusion of health-focused products, such as calcium citrate vitamin D3 with zinc tablets, which might appeal to health-conscious consumers and enhance customer retention. Incorporating such offerings could help the company attract a core demographic willing to spend more, ultimately aiding in its recovery and growth.