Can Blue Apron Develop a Recipe for Profitability?
Innovation, supply-chain disruption, strategy and hot competition: Are there just too many meal-kit cooks in the industry’s kitchen? Blue Apron provides a case in point on all of the above.
The Big Idea
Blue Apron once seemed to poised to revolutionize meal kits, the farm-to-table supply chain and maybe even American culinary know-how. But as bigger, more sophisticated competition arrived, Blue Apron’s revenues began to wilt. What does the meal-kit pioneer need to do to freshen its fortunes and finally turn a profit?
The Scenario
In 2012, entrepreneurs Matt Salzberg and Ilia Papas partnered to create meal-kit delivery service Blue Apron. Named for the blue aprons worn in culinary schools, the company created novel recipes each week and delivered boxes of precisely measured ingredients with step-by-step directions to customers. The service appealed to home cooks looking for a convenient way to learn techniques and experiment with new flavors.
Behind the scenes, Blue Apron built a vast network of relationships with local farmers. Investors applauded the company’s ability to buy direct from growers, and in 2017 an IPO valued the company at roughly $2 billion.
But soon after its public offering, flaws surfaced. Customers found the meals took longer-than-promised to cook, while others simply moved on after the novelty wore off. Blue Apron’s supply chain — labor-intensive, slow and unreliable — emerged as an Achilles’ heel. The costs to source, pick and package ingredients for an ever-changing roster of meals were not covered within the product’s pricing structure, and customers did not appear willing to spend more. Although Blue Apron worked hard to try to attract new customers, attrition was high, and profitability remained stubbornly out of reach.
Additionally, large competitors moved in, drawn by the potential of the meal-kit industry —estimated to reach $10 billion in the U.S. by 2024. Kroger and Amazon acquired Home Chef and Whole Foods, respectively, and began offering their own versions of the service. Instacart inked a deal with Sunbasket that allowed customers to review recipes and, with a single click, buy all the ingredients and get them delivered the same day. Delivery services DoorDash and Grubhub brought restaurant dishes to the doorstep, no need to cook at all. With pressure on all sides, what move could Blue Apron make?
About UVA Darden School of Business
The University of Virginia Darden School of Business prepares responsible global leaders through unparalleled transformational learning experiences.
Darden's graduate degree programs and Executive Education & Lifelong Learning programs offered by the Darden School Foundation set the stage for a lifetime of career advancement and impact.
Doug Thomas
Academic Director of the Sands Institute for Lifelong, Learning Henry E. McWane Professor of Business Administration
Thomas focuses on supply chain management and quantitative modeling, and his research explores coordinating production and inventory planning across the enterprise and connecting decision models to logistics performance measurement.