Blue Apron trims losses, announces Costco pilot
- Blue Apron reported net revenue decreased 20% from the first quarter a year earlier to $196.7 million, driven primarily by a decrease in customers and orders following a pull back in spending during the second half of 2017. It spent spent $39.3 million, or 20% of its revenue, on marketing, a decline from $60.6 million, or 25%, a year ago. Blue Apron said it reaccelerated marketing efforts in the first quarter of 2018 with a focus on building efficient and sustainable growth.
- Blue Apron said it had 786,000 active customers compared to 746,000 in the fourth quarter of 2017 and 1.04 million in the first quarter of last year. Average revenue per customer was $250 in the first quarter of 2018 compared to $248 in the fourth quarter and $236 in the first three months of 2017. The company's net loss narrowed to $31.7 million for the period ended March 31 from $52.2 million a year earlier.
- The meal kit provider said it has launched a pilot program with Costco to carry its product, part of an effort to expand the brand's reach across more households.
Blue Apron's time in the public spotlight has been anything but uplifting. While the company benefits from being in the fast-growing meal kit space, it has faced mounting struggles both internally and from competitors who are eager to tap into the same growth that attracted Blue Apron.
Its most recent quarter exemplified the challenges facing the meal kit pioneer. The space is notoriously expensive. At Blue Apron faces expensive upfront marketing costs to acquire new users, but keeping them around for the long-term has proven difficult. During the last year, the company cut back on marketing, but at the same time roughly a quarter fewer people use the service. This creates a dilemma for the company — does it spend to attract users while increasing its losses or cut back and find fewer people using the product?
While the company said Thursday it recently increased its marketing efforts, it's doing so "with a focus on building efficient and sustainable growth." It's uncertain how long that will take to show up on the company's financials and if it will ever be enough to turn Blue Apron into a sustainable and profitable company.
In the mean time, the company is looking for efforts to expand the brand's reach, a key step toward adding more customers. In its earnings report, the company announced a pilot program with Costco, but it's uncertain whether the bulk retailer and its 740 or so stores will be enough to meaningfully help Blue Apron. If the company wants to benefit from having its meal kits in stores, it's going to need to add a lot more retailers. But what big player is left to carry them?
Plated was purchased by Albertsons, the owner of Safeway, Shaw's and Jewel Osco, last fall, and Publix and Kroger are among the retailers who have started selling meal kits in some of their stores. Amazon also is in the space, and Walmart just debuted three types of branded meal kits in 250 of its stores.
Other meal kit companies are aggressively expanding their presence, too, showing the barrier to entry is low. HelloFresh's North American president Tobias Hartmann told Food Dive in an interview in February that the company will likely overtake Blue Apron as the U.S. meal kit market leader by the second quarter.
And Blue Apron has faced its own self-inflicted problems. It has struggled with subscription losses, executive turnover, high operating costs and costly facilities, including a fulfillment center in New Jersey that went live too early. These obstacles are reflected in its stock price that is down about 80% since its IPO last June.
Even if Blue Apron diversifies with more easy, quick-prep and health-focused meals while increasing its retail presences, it's unlikely to separate itself from its other competitors. For now, its best bet is to find a way to lower manufacturing and marketing costs, while looking for ways to entice customers to stick around.
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