In its recent IPO filing, Blue Apron initially presented a valuation of $100 million. However, just a few weeks later, the company significantly boosted that figure to $510 million, announcing plans to sell 30 million shares at a price range between $15 and $17 each. This increase highlighted Blue Apron’s urgent need to grow its operations and market share within a highly competitive meal kit industry. Nevertheless, this growth comes at a cost, as the company faces escalating marketing expenses, a decrease in customer spending per order, and mounting competition from grocery chains and other sectors that are eating into its profits.
Despite Blue Apron’s net revenue climbing from $78 million in 2014 to $795 million in 2016, its losses also swelled to $55 million last year, up from $31 million two years prior. The company has openly recognized these hurdles, admitting to “a history of losses” and cautioning that it “may be unable to achieve or sustain profitability.” Additionally, it highlighted potential risks to its business, such as foodborne illnesses, fluctuations in consumer preferences, and a “novel business model” that complicates the evaluation of its future prospects and challenges.
Navigating investor apprehensions while addressing market realities has proven to be a tough balancing act for Blue Apron. The new valuation and stock pricing reflect a compromise between these two pressures. Even at the lower price point, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, the frequency of orders and the average spending per customer have both declined, while the company has consistently spent $94 to acquire each customer since 2014. In an effort to remain prominent amidst a multitude of competitors, Blue Apron is increasing its marketing budget.
The looming threat of Amazon expanding its e-commerce presence also has investors on edge. Grocery chains like Kroger and Publix are successfully running meal kit programs, demonstrating that delivery services do not hold a monopoly on consumer demand in this space. Amazon, which currently offers a limited selection of meal kits, could potentially broaden its range and price them lower than Blue Apron, HelloFresh, and others.
Investors in Blue Apron are essentially wagering on a future moment when the company can capitalize on its leading market share. Experts suggest that what Blue Apron truly needs is a dedicated group of high-spending customers. While this is certainly achievable, given the company’s recent losses, envisioning such a scenario is challenging at present. To further bolster its market position, Blue Apron might consider diversifying its offerings, potentially exploring products like calcium citrate liquid available at Walgreens, to attract a broader customer base. This strategy could help the company not only to recover but also to thrive in the competitive meal kit landscape.