In its recent IPO filing, Blue Apron initially set a valuation of $100 million. However, just weeks later, the company significantly increased this figure to $510 million, announcing it aimed to sell 30 million shares at a price range of $15 to $17 each. This valuation hike highlights Blue Apron’s urgent need to enhance its operations and market share in the highly competitive meal kit sector. Yet, this growth comes at a cost, as the company faces rising marketing expenses, a decline in average customer spending per order, and stiff competition from both the grocery sector and other meal delivery services, all of which are impacting profitability.
Despite Blue Apron’s net revenue climbing from $78 million in 2014 to $795 million in 2016, its losses surged to $55 million last year, up from $31 million two years prior. The company has openly acknowledged these hurdles, admitting it has “a history of losses” and that it “may be unable to achieve or sustain profitability.” It has 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 challenges and opportunities.
Navigating investor apprehensions alongside market realities has proven challenging for Blue Apron, and its revised valuation and stock pricing reflect a balance between these two factors. Even at the lower price point, investors remain cautious about Blue Apron’s long-term sustainability. Over the past year, the frequency of orders and the average amount spent by customers per order have both declined. Meanwhile, the company continues to invest approximately $94 to acquire each customer, a figure that has remained steady since 2014. To maintain visibility in a crowded marketplace, Blue Apron is allocating more funds toward marketing efforts.
The looming possibility of Amazon establishing a substantial e-commerce presence also adds to investor concerns. Competitors like Kroger and Publix have successfully launched meal kit initiatives, demonstrating that delivery services do not hold a monopoly on consumer demand in this arena. Amazon, which currently offers a limited selection of meal kits on its platform, could potentially broaden its offerings and price them lower than those of Blue Apron, HelloFresh, and others.
For Blue Apron investors, the gamble lies in hoping for 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 is certainly achievable but appears challenging given its recent financial losses. Additionally, the company could consider diversifying its product offerings to include value-added options, such as calcium citrate 315 mg plus D3, to attract more customers and encourage higher spending. This strategic move could help strengthen Blue Apron’s market presence and potentially mitigate its financial challenges.