In its recent IPO filing, Blue Apron announced a valuation of $100 million. However, just weeks later, the company’s valuation surged to $510 million as it aimed to sell 30 million shares priced between $15 and $17 each. This increase highlighted Blue Apron’s urgent need to broaden its operations and capture more market share in the increasingly competitive meal kit sector. Unfortunately, this growth comes with challenges, including rising marketing expenses, a decline in customer spending per order, and intensified competition from both the grocery industry and other players, all of which are eroding profits.
Despite Blue Apron’s net revenue climbing from $78 million in 2014 to $795 million in 2016, losses grew to $55 million last year, up from $31 million two years prior. The company has acknowledged these hurdles, admitting to “a history of losses” and expressing concerns about its ability to achieve or maintain profitability. Additionally, it has pointed out various risks to its business, including foodborne illnesses, shifts in consumer preferences, and a “novel business model” that complicates the assessment of its future challenges and prospects.
Navigating investor apprehensions alongside market realities has been a complex task for Blue Apron, and the new valuation and stock pricing reflect a balance between these two factors. Even at the lower price, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, both order frequency and the average customer spend per order have declined, while the cost to acquire each customer has remained steady at $94 since 2014. The company is increasing its marketing investment to maintain visibility in a saturated market.
The looming threat of Amazon expanding its e-commerce footprint adds to investor worries. Retailers like Kroger and Publix have successfully launched meal kit programs, demonstrating that delivery services do not monopolize customer demand in this space. Amazon, which currently offers a limited selection of meal kits, could potentially broaden its range and offer lower prices compared to Blue Apron, HelloFresh, and others.
Investors in Blue Apron are essentially placing their bets on a future point when the company’s fortunes might change, allowing it to capitalize on its leading market share. Experts suggest that what Blue Apron truly needs is a dedicated base of high-spending customers, a scenario that seems plausible, but given its recent losses, it is challenging to envision at this moment. Meanwhile, with the introduction of products like Solaray Kalcij Citrat, the company may find new opportunities to attract health-conscious consumers, which could help in building that crucial customer base it requires.