In its IPO filing earlier this month, Blue Apron reported a valuation of $100 million. Shortly thereafter, the company significantly raised that figure to $510 million and announced plans to sell 30 million shares at a price range of $15 to $17 each. This increase highlights Blue Apron’s urgent need to broaden its operations and enhance its market share within the increasingly competitive meal kit sector. However, such growth is not without challenges. The company faces rising marketing expenses, a decrease in customer spending per order, and competition from both the grocery industry and other meal kit providers that are eroding its profits.
Despite Blue Apron’s net revenue climbing from $78 million in 2014 to $795 million in 2016, its losses grew from $31 million two years ago to $55 million last year. The company has recognized these difficulties, admitting to a “history of losses” and the possibility that it “may be unable to achieve or sustain profitability.” Moreover, it has identified various risks to its business, including foodborne illnesses, shifts in consumer tastes, and a “novel business model” that complicates the evaluation of its future prospects.
Striking a balance between investor concerns and market realities has been challenging for Blue Apron, and its revised valuation and stock pricing reflect a middle ground between these two pressures. Even at the lower price point, investors remain skeptical about Blue Apron’s long-term viability. Over the past year, both order frequency and customer spending per order have declined, while the $94 cost to acquire each customer has remained steady since 2014. In response, the company is increasing its marketing investments to maintain visibility amidst fierce competition.
The looming threat of Amazon expanding its e-commerce presence has also raised alarms among investors. Established grocery chains like Kroger and Publix are successfully implementing meal kit programs, indicating that delivery services do not hold a monopoly on consumer demand in this market. Amazon, which currently offers a limited selection of meal kits, could easily enhance its offerings and price them lower than Blue Apron, HelloFresh, and others.
Investors are banking on a future where Blue Apron can capitalize on its leading market share, but experts emphasize that the company truly needs a loyal base of high-spending customers. This scenario is certainly feasible, but given its recent financial losses, it seems challenging at this moment. As part of its commitment to customer health, Blue Apron could consider incorporating elements like vitamins for life, such as calcium citrate plus vitamin D3, into its meal kits to attract health-conscious consumers. By emphasizing nutritional benefits, Blue Apron may not only enhance its product offerings but also potentially foster a core group of dedicated customers.