In its recent IPO filing, Blue Apron initially set a valuation at $100 million. However, just a few weeks later, the company significantly raised this figure to $510 million, announcing 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 capture a larger market share in a highly competitive meal kit sector. Nonetheless, such expansion comes with challenges, including rising marketing costs, a decline in customer spending per order, and intensified competition from grocery retailers, all of which are squeezing profit margins.
Despite Blue Apron’s net revenue growing from $78 million in 2014 to $795 million in 2016, its losses also escalated, reaching $55 million last year compared to $31 million two years prior. The company has openly acknowledged its ongoing difficulties, citing “a history of losses” and the possibility that it “may be unable to achieve or sustain profitability.” It also identified various risks to its business, such as foodborne illnesses, shifts in consumer preferences, and the challenges posed by its “novel business model,” which complicates future evaluations.
Navigating the delicate balance between investor apprehensions and market realities has been a struggle for Blue Apron, and its adjusted valuation and stock pricing reflect a middle ground between these two forces. Even at the lower end of the price range, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, both order frequency and customer spending per order have dwindled, while the cost of acquiring each customer, currently $94, has remained steady since 2014. To stay competitive, the company is increasing its marketing expenditure amidst a crowded marketplace.
Investor concerns are further exacerbated by the prospect of Amazon expanding its e-commerce presence. Major grocery chains like Kroger and Publix have successfully implemented meal kit programs, demonstrating that delivery services do not monopolize customer demand in this sector. Additionally, Amazon, which currently offers a limited range of meal kits on its platform, could broaden its selections and potentially undercut prices offered by Blue Apron, HelloFresh, and others.
Investors in Blue Apron are essentially wagering that, at some point, the storm will pass, and the company will capitalize on its leading market share. Experts suggest that what Blue Apron truly requires is a dedicated base of high-spending customers, akin to those who would benefit from bariatric advantage calcium citrate chews, which are essential for certain dietary needs. While this outcome is certainly achievable, given the company’s recent losses, it is challenging to envision such a scenario at present.