Meal kit company Blue Apron said on its Q4 earnings call today that it was “evaluating a broad range of strategic options” to revive its struggling business — including a sale of the company or its assets.
To say the least, the company’s Q4 earnings were not good: sales have dropped more than 30 percent over the last quarter and the company posted a loss of $1.66 per share, both of which were bigger dips than expected.
Sales aren’t the only way forward for Blue Apron. The Wall Street Journal reports that the company is also considering raising more money, as well as a merger with other meal kit companies.
But for my money, Blue Apron’s best option would be to sell, sell, sell. Blue Apron has been hustling hard to claw itself out of its downward spiral with little to no success. The company halted its partnership with Walmart-owned Jet.com in August. Deals with Beyond Meat and Weight Watchers to make specialized kits haven’t pulled up dragging sales, either. And just last week the company rolled out its new Meal Prep Kits aimed at aspirational, Instagram-savvy millennials.
However, none of those initiatives could solve the two of the big reasons that consumers didn’t stick with Blue Apron meal kits: time and convenience. Even with the simple recipes and pre-prepped ingredients, meal kits still take time to make — and they’re not always markedly cheaper than just ordering food delivery, which is more convenient than having to cook at all (plus no dishes). Some customers also chafe at being locked into subscription models.
These challenges aren’t unique to Blue Apron. Competitors like Hello Fresh, Purple Carrot and Marley Spoon are also trying to figure out how to attract customers and, most importantly, keep them loyal to their brands. But that’s just it — there are so, so many players in the meal kit game, likely due to its relatively low barrier to entry — and they’re all competing for the 93 million Americans who, according to NPD, have stated that they would like to try meal kits. Other players include deep-pocketed retailers like Kroger (which sells Home Chef meal kits) and Albertsons, which are rolling out their own in-store meal kits, and even CPG companies like Tyson.
In short, the competition is just too fierce, the margins are too thin, and the market’s not getting any bigger. Blue Apron has been struggling ever since its dismal IPO in 2017, and at this point it seems like no amount of corporate brainstorming or brand partnerships will save it.
In this author’s opinion, it’s time to sell.
So who would step up and buy Blue Apron? My colleague Chris laid out a comprehensive list of potential buyers in December of 2018, and I think it still holds true. The biggest contenders? Retailers who don’t already have their own meal kit service (hi, Walmart!), CPG companies, other meal kit companies, and even dark horses like Uber. Or maybe private equity groups would just acquire Blue Apron and sell it for parts.
Despite its troubles, Blue Apron has significant assets to offer. According to its latest quarterly report, the meal kit company reported $454.9 million in net revenue in 2019 with thousands of orders per month. It also has a nationwide logistics network and supply chain, which is one of the trickiest parts of meal kits. Not to mention years of customer data related to what food people are buying, and where they’re buying it.
All of that could make Blue Apron an attractive purchase, especially at a low price point. Maybe by the next earning call we’ll have a better idea on whether Blue Apron will continue to try and turn the tides, or if it’s going to cut and run.