Blue Apron Inc.: Success and Challenges
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Case Code: BSTR535 Case Length: 12 Pages Period: 2012-2017 Pub Date: 2018 Teaching Note: Available |
Price: Rs.300 Organization: Blue Apron Inc. Industry: Meal Kit Delivery Service Countries: US Themes: Business Strategy, Entrepreneurship |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Business Model
Driven by the purpose of making home cooked food accessible to everyone, Blue Apron developed an integrated system to deliver superior quality products to its customers (See Exhibit I). The company coordinated directly with farmers and many vineyards for the procurement of the ingredients and the wine. The company prepared food recipes, printed out these recipes, and delivered kits along with measured ingredients to subscribers’ homes. Blue Apron offered two plans: a 2-person and a 4-person subscription, both with 3 meals per week. The 2-person plan was available for US$59.94 per week (US$9.99 per person) while the family plan was for US$139.84 per week (US$8.74 per person). The subscriber received these kits and cooked the meal at home. He/she eliminated the time spent on searching for a recipe and on shopping for the ingredients at grocery stores...
Marketing
To attract new customers, Blue Apron continued to invest heavily in marketing (both offline and online). In 2016, the company spent US$66 million on offline media, an increase of 267% from 2015. A significant increase in offline media advertisement spend helped the company gain brand recognition among potential customers. Its marketing spend increased by 624% from US$8.37million in Q1 2015 to US$60.60 million in Q1 2017 . Between 2014 and 2016, the company spent an average of US$94 on acquiring each customer . However the increased marketing spend resulted in a negative free cash flow for the company...
Success
According to analysts, Blue Apron had experienced very quick growth. From 2014 to 2015, the company’s revenues increased by 338%. Total revenues as of 2016 were US$795.4 million. The company shipped 8 million meals monthly . The company witnessed a 60% increase in its customer base from 649 thousand customers in Q1 2016 to 1036 thousand customers in Q1 2017...
Challenges
According to the US Department of Agriculture, the average weekly food expenditure for a US family of four stood at US$297. The figure pertained to breakfast, lunch, and dinner. It worked out to US$5.31 per meal per person. While Blue Apron charged a 69% premium, the cost per person per meal stood at US$ 8.99. Observers said that this high premium cost appealed to only a small fraction of subscribers...
The Road Ahead
Analysts felt that going forward, Blue Apron should develop enough scale to decrease its purchase and fulfillment costs. The company needed to work on customer retention and improve on the cost of acquisition for new customers in order to turn profitable, they added...
Exhibits
Exhibit I:How Blue Apron Works?
Exhibit II: Blue Apron Marketing Spend
Exhibit III: Blue Apron- Customer Age Profile
Exhibit IV: Blue Apron: Customer Metrics
Exhibit V: Blue Apron- Key Financials
Exhibit VI: US Meal Kit Delivery Market Share (September 2017)
Exhibit VII: Blue Apron vs Competitors
Exhibit VIII: Blue Apron-Stock Price Chart (August 2017- December 2017)
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