Blue Apron Holdings Inc. (APRN), a market pioneer in the meal kit delivery space, is making a big change to its business in an acknowledgement that as new players push into the market, it can no longer compete and retain customers with its current delivery-only model.
The New York City-based company, which delivers pre-portioned ingredients and recipe boxes to customers' doorsteps, will now start offering its grab-and-go meal kits in brick-and-mortar grocery stores, reported The Wall Street on March 15. The in-store offering is set to combat Blue Apron's slumping subscription business and reverse customer losses amid heightened industry competition and a series of distribution problems. (See also: Why Amazon's Stock Will Rise 15% Even Amid Grocery Price Wars.)
The announcement comes as retail giant Walmart Inc. (WMT), grocery leader Kroger Co. (KR), HelloFresh SE (HFG) and, of course, tech titan Amazon.com Inc. (AMZN) have doubled down on their own ready-to-go meal kits to get in on the high-flying segment. While consumers turn away from the center aisles, a demand for convenience and fresher, healthier food options has driven sales of meal kits at grocery stores up 27% to nearly $155 million in 2017, according to Nielsen.
APRN Down to a Fraction of Its IPO Price
Blue Apron hit the public market in July with an initial public offering (IPO) price of $10 per share. Trading down 1.4% on Friday afternoon at $2.16 per share, APRN reflects a 46.4% decline year-to-date (YTD), versus the S&P 500's 3% gain over the same period. The stock is now worth just over one fifth of its IPO price last summer.
Last month, the six-year-old startup reported 750,000 subscribers, down from a high of more than 1 million last year. As independent surveys suggest that consumers are shying away from Blue Apron's service due to its relatively high cost and the commitment that comes with a monthly paid subscription, Chief Executive Officer Brad Dickerson indicates that à-la-carte meals sold in stores and online should offer avenues for much broader access to consumers, reports the WSJ. Dickerson took over for former CEO and co-founder Matt Salzberg last fall and has since doubled down on improving production facilities in New Jersey and elsewhere.
While Blue Apron has not yet announced how much it plans to charge for its kits, set to hit stores by the end of this year, its subscription meals currently start at about $9 per head. Its new offering could appeal to smaller, high-end grocers that are not planning to launch their own branded meal kits. (See also: Food Wars: How Walmart Plans to Beat Amazon.)