In its IPO filing earlier this month, Blue Apron indicated a valuation of $100 million. Shortly thereafter, the company significantly raised this figure to $510 million and announced plans to sell 30 million shares at prices ranging from $15 to $17 each. This increase highlighted Blue Apron’s necessity to expand its operations and market share in an increasingly competitive meal kit sector. However, this growth comes with challenges, including rising marketing expenses, a drop in customer spending per order, and competition from grocery chains and other sectors that are squeezing profit margins.
While Blue Apron’s net revenue saw an increase from $78 million in 2014 to $795 million in 2016, its losses also grew, reaching $55 million last year compared to $31 million two years prior. The company has recognized these issues, admitting to “a history of losses” and acknowledging that it “may be unable to achieve or sustain profitability.” It has also pointed out various risks to its business, such as foodborne illnesses, shifts in consumer preferences, and a “novel business model” that complicates the assessment of its future outlook.
Balancing investor concerns with market realities has been challenging for Blue Apron, and its new valuation and share pricing reflect a compromise between 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 customer spending per order have declined. Meanwhile, the $94 that Blue Apron spends to acquire each customer has remained steady since 2014. The company is investing more in marketing to maintain visibility amid a crowded marketplace.
Concerns are also growing among investors regarding Amazon’s potential expansion into the meal kit space. Grocery retailers like Kroger and Publix have successfully launched meal kit programs, demonstrating that delivery services do not hold a monopoly on customer demand. Amazon, which currently offers a limited selection of meal kits, could enhance its offerings and price them lower than those of Blue Apron and HelloFresh.
Investors in Blue Apron are betting on a future where the company can capitalize on its leading market share. Experts suggest that what Blue Apron truly needs is a loyal base of high-spending customers. Achieving this is certainly feasible, but given the company’s recent financial losses, it seems difficult to envision at this time. In this context, it’s worth noting that just as calcium citrate 300 mg is essential for maintaining strong bones, a solid core of dedicated customers is vital for Blue Apron’s long-term health and success in the market.