Blue Apron has had a strong year, as homebound consumers turn to meal kits to enjoy fresh cooking without the risks and inconveniences of grocery shopping. In the fourth quarter, net revenue rose 22 percent year over year to $115.5 million, per a company announcement on Thursday (Feb. 18), and net losses totaled $11.9 million, a $10 million improvement from Q4 2019.
While stay-at-home orders have created a valuable opportunity for meal kit services, which were struggling to scrape by in 2019, the question remains as to whether these subscription services will be able to parlay this short-term boost into long-term growth, especially when so many competitors have come to the fore in the last year. “We do significant brand research twice per year and continue to be the No. 1 recognized brand in the space,” CEO Linda Findley Kozlowski said on a call with analysts. “And so our big priority at this point is building off of that, and looking at those purchase intent drivers that match with the differentiators for Blue Apron.”
These differentiators, according to the company’s research, primarily pertain to the quality and sourcing of the foods. They include “discovery aspects of new ingredients and new [cooking] techniques,” as well as the company’s high-quality ingredients, its animal welfare standards and its recipes that “continue to get simpler.” Kozlowski cited “our culinary authority combined with our product innovation” as key differentiators for the brand going forward.
Part and parcel with the question of differentiation is the question of retention. Even once consumers have chosen Blue Apron as their mid-lockdown meal kit provider, why will they continue ordering kits once in-door dining is a viable option? Kozlowski addressed this question in vague terms: “We don’t currently discuss any of our customer churn numbers. What I will say is that we have specific programs in place for 2021 to make sure that we are both growing and retaining our customer base.”
These specific programs might center on recipe development and improvement. Kozlowski stated that the company intends to introduce new products this year and to implement “product enhancements.” She also alluded to “marketing programs to make sure that we can more efficiently attract and retain customers going forward.”
Chief Financial Officer Randy Greben added that the past quarter’s increase in orders per customer — up 15 percent year over year, with average revenue per customer up $327 from $269 — suggests the effectiveness of the company’s retention initiatives. “Those are indicative of the company’s ability and focus on decreasing churn and driving more benefits for existing customers.”
Blue Apron believes its market is growing, even as the vaccine rollout suggests a forthcoming change in consumer behavior. “What we’re seeing is that market is …expanding,” said Kozlowski. “…What we’re seeing is an acceleration in online grocery spend, which we still see as a leading indicator, and we are in the process of looking at how we can identify those expansion opportunities.” She added that the company’s new initiatives will “expand into other meal occasions.”
Still, as more and more meal delivery services continue to enter the marketplace with tens (or hundreds) of millions in funding at their disposal looking to capitalize on consumers’ changing habits, the game is changing. It may take more than culinary innovation and name recognition to win the market share necessary to support this difficult-to-sustain business model.
In the short term, Blue Apron expects that consumers will continue to cook at home more often than pre-pandemic. As Kozlowski noted, “both third-party and our internal research found that those habits are expected to continue into 2021 … we have the right operating strategies in place to drive and meet consistent increased demand.”
With an eye toward long-term growth, the company is implementing operational changes to increase efficiency. These initiatives focus on optimizing line speed, labor use and equipment, using the infrastructure that Blue Apron has already established. “We wanted to make sure that we’re not just thinking about the immediate term, but are thinking about long-term efficiencies that we can build into our operations, in order to build ahead of capacity going forward or ahead of demand going forward,” Kozlowski said.
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