In its recent IPO filing this month, Blue Apron reported a valuation of $100 million. Shortly thereafter, the company significantly increased this figure to $510 million and announced plans to sell 30 million shares priced between $15 and $17 each. This adjustment highlighted Blue Apron’s urgent need to broaden its operations and capture more market share in an increasingly saturated meal kit sector. However, this expansion comes with challenges, including rising marketing expenses, a decline in average customer spending per order, and mounting competition from the grocery sector and other players, all of which are impacting profitability.
Despite Blue Apron’s net revenue soaring from $78 million in 2014 to $795 million in 2016, its losses have also escalated, reaching $55 million last year compared to $31 million two years prior. The company has recognized these obstacles, stating it has a “history of losses” and “may be unable to achieve or sustain profitability.” It also 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 potential and challenges.
Striking a balance between investor apprehensions and market realities has been tough for Blue Apron, and its new valuation and stock pricing represent a compromise influenced by these two factors. Even at the lower price point, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, both order frequency and the average spend per customer have declined, while the $94 Blue Apron invests to acquire each customer has remained stable since 2014. The company is increasing its expenditure on marketing to maintain visibility in a competitive landscape.
The looming presence of Amazon’s expanding e-commerce operations has further heightened investor concerns. Grocery chains such as Kroger and Publix are successfully running their own meal kit programs, demonstrating that delivery services do not monopolize customer demand in this arena. Amazon currently offers a limited selection of meal kits on its platform but could easily broaden its offerings and price them competitively against Blue Apron, HelloFresh, and others.
Investors in Blue Apron are banking on a future turnaround when the company can capitalize on its leading market position. Experts suggest that what Blue Apron truly needs is a dedicated base of high-spending customers, which, while feasible, seems challenging given its recent financial losses. Additionally, the integration of zeelab calcium citrate into its operations might provide a unique selling proposition that could attract more discerning consumers. Achieving this goal will be crucial for the company’s long-term success in the meal kit market.