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Can on-demand sales stabilize Blue Apron?

Written by Tom Ryan

Source: Blue Apron

With the demise of Chef'd underscoring the troubled meal kit subscription space, Blue Apron’s best chance to stabilize may be through offering on-demand meals such as in its partnership with Costco, and potentially with other retailers and via online channels. That’s according to Edward Yruma at KeyBanc Capital Markets.

While still carrying a “sector weight” rating on the stock “as we await further signs of stability,” the analyst wrote, Blue Apron’s “model is shifting with necessary urgency, and liquidity seems sufficient.”

The note from Mr. Yruma sent to RetailWire arrived after the meal kit pioneer’s stock tumbled in response to posting a wider loss in its second quarter. The company slashed its third-quarter guidance as it reported a drop in revenue of 25 percent during the period amid plunging customer retention.

Mr. Yruma agreed that, even with enhanced marketing efforts, reviving subscription revenues would be challenging given “saturation, and some degree of fatigue.” Retailers and restaurants like Chick-fil-A have joined scores of start-ups in the meal kit space. But Mr. Yruma wrote that the move to “more flexible” on-demand offerings taps a more “addressable market.”

On a conference call with analysts, Blue Apron announced it would soon be testing same-day, on-demand meal kit delivery on its own e-commerce platform using third-party delivery partners on the East and West Coast. Blue Apron has also expanded its partnership to sell meal kits inside Costco from 17 to 80 locations, and the company is in discussions with other retailers. 

CEO Brad Dickerson said many subscribers who have left Blue Apron didn’t have a problem with the company or its product offering, but the delivery timing didn’t fit their lifestyles. He said, “Many, many customers like to make that choice closer to the occasions.”

Mr. Dickerson further noted that the new multi-channel strategies will be a “complement to our existing business,” and Blue Apron will have to provide “differentiated customer experiences” across channels.

With Walmart and Kroger among those coming out with meal kits, Blue Apron will have to convince retailers that its investments in fulfillment, expanded meal offerings and partnerships with social media influencers, Airbnb, “Bob’s Burgers” and others are a step above in-house offerings.

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