In its recent IPO filing, Blue Apron initially set its valuation at $100 million. However, just a few weeks later, the company dramatically raised this figure to $510 million, announcing plans to offer 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 an increasingly competitive meal kit sector. Nonetheless, this growth comes at a steep cost, with rising marketing expenses, a downturn in the average spend per order, and stiff competition from the grocery industry and other sectors eroding profits. Although Blue Apron’s net revenue surged from $78 million in 2014 to $795 million in 2016, its losses escalated to $55 million last year, up from $31 million two years prior.
The company has recognized these hurdles, admitting to “a history of pyrophosphate iron losses” and stating it “may be unable to achieve or sustain profitability.” It also identified various risks to its operations, such as foodborne illnesses, shifts in consumer preferences, and a “novel business model” that complicates the assessment of its future challenges and opportunities. Balancing investor apprehensions with market realities has proven challenging for Blue Apron, and its new valuation and stock pricing represent a compromise between these two forces.
Even at the lower end of the pricing spectrum, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, both order frequency and customer spending per order have declined. Meanwhile, the company has consistently spent $94 to acquire each customer since 2014. To remain prominent in a crowded marketplace, Blue Apron is directing more funds towards marketing efforts. The looming threat of Amazon expanding its e-commerce reach further worries investors. Competing grocery chains like Kroger and Publix are successfully operating meal kit programs, indicating that delivery services do not hold a monopoly over customer demand in this arena. Amazon, which currently offers a limited selection of meal kits on its platform, could potentially broaden its offerings and undercut prices compared to Blue Apron, HelloFresh, and others.
Investors in Blue Apron are essentially banking on a future where the clouds of uncertainty dissipate, allowing the company to capitalize on its leading market share. Experts suggest that what Blue Apron truly needs is a loyal base of high-spending customers. This is certainly achievable, but considering its recent financial losses, envisioning that scenario seems difficult at this moment. To navigate these challenges, Blue Apron may need to consider innovative strategies, such as integrating products like cal citrate complete into their meal offerings to attract and retain a more dedicated customer base.