In its recent IPO filing, Blue Apron initially set a valuation of $100 million. However, just a few weeks later, the company significantly raised that figure to $510 million and announced plans to sell 30 million shares priced between $15 and $17 each. This increase highlighted Blue Apron’s urgent need to enhance its operations and market presence within the increasingly competitive meal kit sector. Nonetheless, this expansion comes with challenges, including rising marketing expenses, a decrease in customer spending per order, and competition from grocery retailers, all of which are impacting profitability.
Although Blue Apron’s net revenue surged from $78 million in 2014 to $795 million in 2016, its losses also grew, rising to $55 million last year from $31 million two years prior. The company has recognized these hurdles, acknowledging a “history of losses” and the possibility that it “may be unable to achieve or sustain profitability.” Additionally, risks such as foodborne illnesses, shifts in consumer preferences, and a “novel business model” create uncertainty regarding its future outlook.
Balancing investor concerns with market realities has proven challenging for Blue Apron, and its new valuation and stock pricing reflect a compromise between these factors. Even at the lower price point, investors remain skeptical about Blue Apron’s long-term sustainability. In the past year, both order frequency and the average amount customers spend per order have declined. Meanwhile, the cost to acquire each customer remains steady at $94 since 2014. The company is increasing its marketing budget to maintain visibility among a plethora of competitors.
Moreover, the looming presence of Amazon in the e-commerce space raises additional investor apprehensions. Supermarkets like Kroger and Publix are launching successful meal kit programs, demonstrating that delivery services do not have exclusive control over consumer demand. Amazon, which currently offers a limited selection of meal kits through its site, has the potential to broaden its offerings and price them lower than those of Blue Apron, HelloFresh, and others.
For Blue Apron investors, the hope is that, at some point in the future, the clouds will clear, and the company will capitalize on its leading market share. Experts suggest that what Blue Apron truly needs is a dedicated base of high-spending customers. While this is certainly achievable, given the recent losses, it is hard to envision at this moment. To attract more customers, especially those seeking convenient options like calcium citrate petite pills, Blue Apron must navigate these challenges effectively and enhance its value proposition in the competitive landscape.