Blue Apron is in talks with unnamed retailers to sell its meal kits in stores by the end of this year, according to The Wall Street Journal, signaling that its subscriptions aren't sufficient by themselves.
Brad Dickerson, the meal kit company's CEO, told the newspaper that the move should bolster both the firm's meal kit subscriptions and its meals available in-store and online. He said customer access would be "much broader in this avenue than the avenue we’ve been operating in in the past."
Blue Apron's subscription base has dropped from more than 1 million in 2017 to about 750,000 as of February, the WSJ reported, due to growing competition, distribution challenges, and retailers such as Kroger, Amazon and Walmart selling their own meal kits.
While it makes sense for Blue Apron to enter the retail channel as another marketplace for its meal kits, it's questionable whether being in stores will be enough to solve the company's ongoing problems.
Nearly every major food retailer has expanded its presence in meal kits during the past few months, a trend that could further complicate Blue Apron's ability to make significant inroads in supermarkets across the country. It's uncertain just how many retailers Blue Apron could partner with that would meaningfully boost the company financially and offset the ongoing troubles it faces in the home delivery business it helped to pioneer.
Albertsons, which also owns Safeway and Shaws, bought Plated last fall. Amazon is offering its own online meal kits, and Sun Basket is solidifying its presence with healthy offerings and recyclable and compostable packaging. Publix and Kroger also have waded into selling meal kits, and Weight Watchers recently announced it is launching a healthier meal kit line that will be available in stores.
And, in what could be the heftiest competition to date, Walmart just debuted three types of branded meal kits in 250 of its stores. The retail giant hopes to nab higher-income consumers who are 20% more prone to purchase from the deli department, according to Nielsen statistics reported by Bloomberg.
Ever since going public last summer, Blue Apron has had troubles with subscription losses, high operating costs and costly facilities, including a fulfillment center in New Jersey that went live too early. And while it is still the largest meal kit company in the country, others — particularly the German-owned HelloFresh — are snapping at its heels.
Sales of in-store meal kits still remain strong — growing 26.5% last year, to $154.6 million, according to Nielsen — but in the future they are likely to remain one part of the supermarket food business that also will include home delivery and click-and-collect initiatives, along with the traditional retail locations.
Marketing costs remain high and loyalty is very low for meal kit companies. In Blue Apron's case, 70% of its customers migrate elsewhere after subscribing for six months. Investors have become less willing to back them, although the WSJ has reported that the sector was projected to hit $6 billion by 2021.
Blue Apron's CEO isn't sharing many details of the company's in-store plan so far, but the entry will have to be significant and cost-effective to make a dent in the highly competitive meal-kit market — which is only getting more crowded as time goes on.