Dive Brief:
- During a conference presentation, Blue Apron CEO Brad Dickerson outlined a growth strategy that includes on-demand delivery, more meal kit options and targeting “sticky” customers, according to Project Nosh. The company recently reported a sharp decline in net sales along with a 24% drop in customers using the service.
- The company plans to test on-demand delivery in a yet-to-be named East and West Coast city during the second half of this year, Dickerson said. Blue Apron will offer a GrubHub-style ordering system through its website and use a third-party company for delivery.
- Blue Apron also plans to add more meals to its site that can be prepared quickly, typically in 20 to 25 minutes, and to focus more of its marketing spend on the most promising potential customers rather than cast a wide net.
Dive Insight:
Blue Apron has had to pull back on its marketing spend following a few costly operational blunders — most notably the failure to bring a new automated facility online. As a result, its customer count has steadily declined over the course of this year.
But the company says it has steadied the ship and is now ready to focus on customer growth. The idea is to reach people who might be turned off by traditional meal kits and to do a better job of targeting those customers who would enjoy the company’s offerings, but just haven’t yet been persuaded.
On-demand delivery could resonate with consumers used to ordering restaurant fare to their door. Companies like GrubHub and Uber Eats have lifted restaurant sales in recent years and could do the same for meal kit companies that typically require customers to order several days in advance. According to Dickerson, an on-demand option could unlock a large segment of consumers.
"A big friction point for a lot of customers is the subscription business itself,” Dickerson said during Canaccord Genuity 38th Annual Growth Conference in Boston. "[The feedback from customers] is that 'the subscription business in general is keeping me away from this.'"
But will people want to get speedy delivery of meals that they will then have to spend upwards of a half hour preparing? It will also be tricky to overcome the added costs and complexities that come with this new layer of delivery, and to battle restaurants and grocers for online shoppers.
On the plus side, there’s no shortage of demand for innovative dinner options these days, with two thirds of consumers saying they don’t know what they’re having for dinner on a given night, according to The Food Marketing Institute.
Blue Apron's addition of quick meals and focus on customer targeting are necessary steps. Dickerson said the company, like other meal kit providers, loses on a lot of money on quick churns, in which customers buy discounted meals offered as an enticement, then ditch the service. By offering more options and focusing its resources on the most promising users, Blue Apron aims to boost loyal customers and regular purchases.
Trouble is, most other meal kit companies are taking the same steps. HelloFresh, which overtook Blue Apron as market leader earlier this year, has introduced more recipes with pre-chopped ingredients and has hinted at offering heat-and-eat meals.
Blue Apron is still a strong brand, and the company has high hopes for its Costco pilot, which expanded from 17 to 80 locations during the most recent quarter.
But the economics of the meal kit industry remain incredibly daunting. In July, Chef'd briefly shut down after running out of cash and failing to secure additional funding. It ended up finding a buyer and will now focus on grocery stores. In addition to Chef'd, former meal kit companies Sprig, SpoonRocket and Maple Food have collapsed. With sales growth slowing in the sector, companies large and small will be pressured to improve their margins and grow their customer count — or else.