Meal-Kit Startup Blue Apron Is Going Public

Jun 01, 2017

Blue Apron, an unprofitable but fast-growing meal-kit-­delivery startup, officially filed plans to launch an initial public offering on Thursday.

The decision to aim to list shares on the New York Stock Exchange—under the ticker symbol APRN—will put Blue Apron on the path to become the first meal-kit provider to debut on the public markets. Founded in 2012 as a way to deliver meals to homes in a direct-to-consumer model that circumvents both grocery stores and restaurants, Blue Apron has, to date, delivered 159 million meals across the U.S., representing about 25 million paid orders through the end of March.

That growth has led to a sharp surge in revenue, jumping from just $77.8 million in 2014 to $795.4 million last year. According to the company's filing with the Securities and Exchange Commission, Blue Apron is also unprofitable. It posted a net loss of $54.9 million last year, swelling from $30.8 million two years earlier.

Wall Street had anticipated that a top-selling meal-kit delivery service would file to go public this year and Blue Apron was long seen as the most likely candidate to pull the trigger first. Late last year, Bloomberg reported that Blue Apron had put plans to file for an IPO on hold because of concerns about how much it costs the company to acquire customers. With dozens of meal kit startups fighting for customers (the industry still has low penetration rates in the U.S.), discounts and hefty marketing expenses are often needed for companies like Blue Apron to convince consumers to try their kits.

Blue Apron—which ships meals that cost $9.99 per person for a two-person household—on Thursday disclosed some of those customer metrics. The startup says it had 1.04 million customers as of the end of the March quarter, serving an average of 4.1 orders per customer with average order value of $57.23. While the customer count has increased, the other two metrics declined from year-ago levels. Blue Apron also disclosed that it spends $94 to acquire a customer.

Blue Apron has said that it wants to satisfy American diners' desires both for fresh and healthier foods and for convenience by aiming to cut out the grocery store and yet generally serving meals that are less expensive that dining out. Meal kits are shipped to consumers with easy-to-follow directions and a mix of prepackaged proteins, raw produce and precise portions of oils, spices and other cooking ingredients.

While the business model is still in its relative infancy, a number of meal-kit alternatives have surfaced, including HelloFresh and Home Chef. Large rivals are also jumping into the trend: Campbell Soup (cpb) invested $10 million in Chef'd, Unilever's (ul) venture capital and private equity arm put money into Sun Basket, and Kroger (kr) is testing the concept too.

Analysts say more disruption is to come. "We expect grocers to target a number of other leading meal-kit services as acquisitions, not unlike the acquisition of several apparel-oriented subscription services like Trunk Club and Gilt in the past several years," wrote Morningstar analyst R.J. Hottovy in a broad report on the meal-kit space earlier this year. "We believe Wal-Mart, Kroger, and Amazon would be the most likely acquirers."

But a rising tide could lift more than one boat. In Blue Apron's filing with the SEC, the company said that online sales only present 1.2% of the overall $781.5 billion U.S. grocery market. The subcategory is expected to grow by 8.5% on a compound annual growth rate between 2017 and 2020, while the broader industry will only increase 1.3% over the same period. That e-commerce trend—if Blue Apron is able to wean new users off discounting and keep current customers loyal—could bode well for the New York-based food seller.

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