Blue Apron—you’ve seen their boxes and their advertisements but what do you really know about the company behind this popular meal delivery service?
Having initially started out in 2012 as a traditional meal kit, Blue Apron has expanded to include an online marketplace with kitchen essentials, cookware, wine, and even pre-made meals.
How did they go from a small and relatively unknown meal kit to one of the most popular meal delivery services in the U.S.? The story of their rise to fame is not without a few bumps, bruises, and a whole lot of drama along the way.
Let’s dive into the untold history of Blue Apron…
How Blue Apron Got Started
Let’s face it, many of us eat quick, grab-and-go junk food on a daily basis. In fact, it’s estimated that 36.6% of American adults consumed fast food on any given day.
When we know it's not the best for us, health-wise, why do we still eat it?
For some it may be to save time, for others it may be to indulge in a tasty (and relatively cheap) meal. That convenience comes at a cost, though. While this is mainly seen through the growing size of our waists, it’s also caused a reduced appreciation for the art of cooking delicious meals at home (which has a variety of benefits).
While the overwhelming majority of people want to cook meals at home, only around 36% of people actually do (according to a survey by reportlinker.com).
This is the issue co-founders Matt Salzberg, Ilia Papas, and Matthew Wadiak created Blue Apron to solve. They wanted to help people experience a new and interesting way of cooking delicious meals at home that cuts out the tediousness of planning, meal prepping, and expensive grocery store runs.
So, in the summer of 2012, the three soon-to-be entrepreneurs all left their stable and secure jobs to build Blue Apron.
You may be asking yourself, “Are they all food experts or maybe classically trained chefs?” Well, the answer may surprise you...
Salzburg worked as an associate at Silicon Valley investment firm, Bessemer Venture Partners, and Papa’s spent many years as a software engineer. While they both enjoyed cooking and eating delicious meals, neither of them had any background in the food industry. Though, this didn’t hinder their startup plans. To make up for their own lack of knowledge, they brought in Wadiak as their third co-founder, a trained chef and wholesaler of truffles and avocados.
Having three co-founders is a bit unique for a startup but it was no accident. According to Salzberg, it was all part of the plan. In an article from 2015, he told Business Insider:
“A lot of people who found companies go out and do it with their closest friend who does exactly what they do and has the exact same background that they have. We were very deliberate in assembling a team that we thought was complementary and would work well together... It allowed us to divide and conquer a lot more easily in the early stages and have access to different networks and access to different information."
With fresh-faced founders at the helm, Blue Apron was ready to hit the ground running. The only problem—money.
Blue Apron didn't hit the ground running with millions from big-name investors. Rather, they got their start as a true small business with seed investments from the founder's families and friends. During their early days, they were scrappy and bootstrapped their way through the initial startup slog.
It was only Salzberg, Papa, and Wadiak working together in a commercial kitchen they rented in Manhattan. They were, quite literally, doing everything themselves—creating the recipes, boxing the ingredients, and shipping them out.
Their hard work that first year paid off. By February 2013, they had established a growing early customer base and saw that they could become a successful business.
Of course this success is predicated on the fact that they need to grow further and faster. This meant another round of fundraising but this time it needed to be big... Really big.
Blue Apron started making their rounds, trying to woo investors, and it worked. By the end of 2014, they had closed 3 rounds of investments, giving them nearly $60 million to run wild with.
Blue Apron’s new investments pushed their valuation to an astounding $450 million. That's nearly half a billion dollars—not bad for a company that’s only been around for a few years. Though, the hard work was just getting started.
With millions to spend, Blue Apron set to work expanding their customer base and growing their company. They leased warehouses across the U.S. so meals could be delivered coast to coast, poured their funds into marketing, and secured relationships with farmers and ranchers throughout the U.S.
With such a massive valuation, the stakes were high for the founders. They needed to grow, and they needed to grow fast to satisfy hungry investors.
The only problem is they were starting to run into some massive financial issues, including high costs, high churn rate, low margins, and not nearly enough revenue to keep up with everything. On top of that, opening and running warehouses across the U.S. meant hiring thousands of employees as well as ensuring decent wages.
The numbers for 2014 show this predicament a bit more clearly with operating expenses at $108.6 million and only $77.8 million in net revenue. In terms of startup financials, this net loss was technically manageable. More investments should lead to more growth, which should eventually lead to profitability… right?
By June 2015 they closed another round of investments. This time coming in with $135 million from Fidelity, a behemoth in the banking industry, which pushed Blue Apron’s valuation to $2 billion.
This valuation was quite an accomplishment for the young company and they were granted “unicorn” status, a term given to young companies that have been given 10-figure valuations by investors.
While the money was flowing into Blue Apron, the view from the outside looked better than what was actually happening on the inside.
Keeping Their Head Above Water
Over the next few years, Blue Apron faced challenge after challenge. This made many skeptical of their survival, including investors. Word had gotten out that meal kits weren’t easy to make profitable, and many were wary of investing any further into the once-booming business.
To make a profit, Blue Apron would need a flush of new and loyal customers. However, statistics show that about 72% of Blue Apron users cancel their subscriptions within six months.
Though, customers signing up and then leaving—called “churn” in business—was really just the tip of the iceberg of problems that were starting to mount. Competition was ramping up. In addition to HelloFresh becoming a household name due to their massive ad campaigns, other brands such as Plated, Sunbasket, and Home Chef all entered the scene too.
The heat was on for Blue Apron and, as they clamored for new customers, expenses continued to rise. By 2016, they made an impressive increase in revenue—$795.4 million—but were still faced with a net loss of $54.9 million due to expenses and marketing costs.
In an effort to scale up, Blue Apron was opening packaging facilities across the nation. One of which, in Richmond, CA, was embroiled in drama. From reports of OSHA violations to employee arrests, it seemed like Blue Apron was nearing its end. However, the worst was yet to come.
The excitement over meal kits had started to run its course by 2017, and many in the arena decided to shut their doors or sell to big-name food supply companies, such as Plated to Albertsons and Home Chef to Kroger.
While Blue Apron tried to court new investors in another push for growth, all were unwilling to burn more money. With private money off the table, Blue Apron switched focus to the public sector by filing an IPO.
On June 28th, 2017 Blue Apron it was going to be a publicly traded company on the New York Stock Exchange by announcing its IPO of 30 million shares at $10 per share.
The following months came with drastic changes felt throughout the company, including cuts in marketing expenses, layoffs, and even changes in the executive leadership team. Within just a few months both co-founders, Matthew Wadiak and Matt Salzberg, stepped down from their positions of CEO and COO.
Although Blue Apron cut expenses and continued layoffs to forge a path towards profitability, they were still struggling with the expenses of running massive fulfillment centers.
In 2017 they opened another warehouse in New Jersey as a way to meet more customer demands, but it didn’t do much to help improve their overall revenue.
By December 2018, their stock price was at an all-time low—even at one point dipping close to $1 per share. By May of 2019, they were on the fringe of being de-listed from the NYSE because of such radically poor performance.
This eventually led Blue Apron to perform a 1-for-15 reverse stock split. In layman’s terms, this is financial wizardry that reduced the number of their shares from 100 million to 6.7 million in an effort to prevent Blue Apron from being delisted from the NYSE. It also gave their stock price an inflated boost to help them look more appealing to current stockholders and potential investors
Despite the pressures of the stock market, 2018 was a surprisingly successful year for Blue Apron in terms of accomplishments and partnerships. They made significant connections by partnering with brands like Airbnb, Chrissy Teigen, New York Botanical Garden, Bob’s Burgers, Jet, and Weight Watchers.
Though the odds seemed stacked against them and the narrative around meal kits had shifted, Blue Apron wasn’t letting any of that slow them down.
Getting Back On Their Feet
There's speculation that Blue Apron will never be able to pull itself out of financial disarray. Some journalists have already deemed the company as a “disaster”.
Though, through all the bumps and bruises along the way, Blue Apron gritted it out. One of their key goals for 2019 was to finally turn a profit. This plan included even more layoffs and the closing of one of their warehouses. However, what they couldn’t plan for was the looming pandemic.
While the pandemic shook the economics of the U.S. and closed many businesses, for others it provided an unexpected surge of more business. Such is the case with many meal kits, as people were staying home and didn’t want to risk weekly grocery store runs.
In 2020, Blue Apron experienced a massive 25% increase year over year in the average revenue per customer. They also gained 20,000 new customers with a 17% increase in orders per customer. With more and more customers giving Blue Apron a try, they were finally able to make a profit of $1.1 million.
While this was good news for Blue Apron at the time, they knew these numbers were outliers and couldn’t be depended on, especially when the world was starting to open its doors again. As things started to become more stable with the pandemic, their numbers, once again, started to drop.
Despite the fluctuation in numbers, Blue Apron stayed committed to its focus of gaining and keeping new customers. They continued to pour funding into marketing, partnerships, and exciting additions to their menu and marketplace.
Blue Apron Today
Against all odds and despite harsh critics, Blue Apron is still here and still working its way towards sustained profitability.
Their intense perseverance does not go without reward. As of February 14th, 2022 they announced in a press release, “An additional $5.0 million private placement investment by RJB Partners LLC, a longtime investor in the company.”
It appears they’re not being swept to the side after all, as investors still see potential in this now mature meal kit. According to a statement from CEO Linda Findley,
“These funds are in addition to the equity capital raise that we completed in November 2021. We expect these funds to add to what we are already building to accelerate the next phase of our growth strategy.”
Today their growth strategy focuses on product innovation and marketing to attract new customers and retain current ones.
While their stock price isn’t anywhere near where it originally debut at, it doesn’t look like Blue Apron is conceding defeat any time soon.
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