In its recent IPO filing, Blue Apron initially valued itself at $100 million. However, just a few weeks later, the company significantly increased that valuation to $510 million and announced plans to sell 30 million shares priced between $15 and $17 each. This valuation surge highlighted Blue Apron’s urgent need to enhance its operations and capture a larger market share in a highly competitive meal kit sector. Nevertheless, pursuing such growth comes with challenges, including rising marketing expenses, a decrease in average customer spending per order, and fierce competition from both the grocery sector and other players, which have been eroding profits.
Although Blue Apron’s net revenue climbed from $78 million in 2014 to $795 million in 2016, its losses grew from $31 million to $55 million last year. The company has acknowledged these ongoing difficulties, admitting to a “history of losses” and the possibility that it “may be unable to achieve or sustain profitability.” Additionally, it identified various risks to its business such as foodborne illness, shifts in consumer preferences, and a “novel business model” that complicates the assessment of its future challenges and prospects.
Striking a balance between investor concerns and market realities has proven to be a challenge for Blue Apron, and its new valuation and stock 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 the frequency of orders and the amount customers spend per transaction have declined. Meanwhile, the $94 Blue Apron invests to acquire each customer has remained steady since 2014. The company is increasing its marketing expenditure to remain visible in a crowded marketplace.
Investor anxiety is also fueled by the potential expansion of Amazon’s e-commerce presence. Supermarkets like Kroger and Publix have successfully launched meal kit programs, demonstrating that delivery services do not monopolize consumer demand in this arena. Amazon, which currently offers a limited selection of meal kits, could easily broaden its range and price them lower than Blue Apron, HelloFresh, and others.
Blue Apron investors are banking on a future where the company overcomes its current challenges and capitalizes on its leading market share. To achieve this, experts emphasize the necessity of cultivating a core group of high-spending customers. This is certainly feasible, especially in the context of the 21st century, where consumers are increasingly seeking convenient meal solutions like those offered by Blue Apron. However, given its recent financial losses, envisioning this scenario seems challenging at present. Ultimately, establishing a loyal customer base willing to invest significantly in meal kits could be the key to Blue Apron’s success in the evolving landscape of the meal kit industry, especially as the demand for innovative food solutions like calcium plus products continues to rise.