How Blue Apron Got It Right

Courtesy of Blue Apron

Matt Salzberg launched Blue Apron in 2014 thinking he’d take a novel idea, fuel it with venture capital and some Harvard Business School expertise, and run a nice, healthy startup. He didn’t quite anticipate his meal kit delivery business would blow through its six-year revenue projection in two years.

But Blue Apron, which is based in New York City and sends weekly recipes and ingredients for people to cook at home, has benefited from a trifecta of marketplace trends: People are increasingly interested in eating “clean,” in more sophisticated home cooking techniques, and in on-demand everything. Blue Apron meals range from the exotic—za’atar-spiced steaks with rutabaga-barberry tabbouleh and labneh cheese—to the basic—BBQ sloppy joes with green bean and tomato salad.

The company’s “meal kit” idea wasn’t unique. In 2012, HelloFresh was thriving in Europe, and since then local competitors like Homechef, Greenchef, Hungry Root, Sun Basket, Plated, Din, Chef’d have launched with similar subscription-style services. But in recent years, Blue Apron has emerged from the pack. The company now ships 8 million boxed meals every month. At $10 each, that translates to roughly $960 million in annual sales. It has 4,000 employees, three fulfillment centers, and a dedicated team of argi-ecologists. It is reportedly considering an IPO.

Blue Apron’s breakneck growth was a problem in the beginning because its suppliers weren’t always able to consistently deliver orders of fresh food at the scale the startup required (after all, $960 million buys a lot of rutabaga). That’s where Salzberg’s supply chain and logistics know-how came in handy. Blue Apron’s agri-ecologists now work closely with hundreds of farms across the country, often as their exclusive buyer. The company helps farmers invest in soil health and analyze climate and temperature data. The company even designs its menus around ideal crop rotations.

“We are making authentic environmental change in our activities,” says Salzberg, who appears on Fortune‘s 2016 40 Under 40 list. “We’re not buying food from restaurant distributors and just marking up some unknown food.”

That’s helped Blue Apron, which will not comment on whether it is profitable, keep its food costs down, too. “We’re focused on supply chain disruption and not being a surfacelevel marketing company,” Salzberg says.

Another way Blue Apron has thrived is by keeping its offerings simple and appealing to the widest possible audience. Aside from a vegetarian option, the company doesn’t cater to dietary needs like gluten-free, peanut allergies, paleo or kosher. To keep growing, it has moved into other categories like wine and cooking supplies. The company claims that in the year since launching its wine business, it has become one of the largest wine clubs in the country.

To continue to grow, Blue Apron will need to continue to become more flexible, especially as increasingly specialized meal delivery services continue to flood the market. (In June, Martha Stewart launched her own service, for example.)

There’s always the chance that Blue Apron’s business model is a fad, or that the market saturation from so many competitors could give people fatigue of the entire category. After all, it happened to Groupon. But Salzberg says Blue Apron’s customers only become more loyal over time, not less. “Our data suggests that people don’t tire of it. The longer they’re with us, the less likely they are to churn.”

Increased flexibility is key to Blue Apron’s future. “The best product is one we can perfectly anticipate your needs and serve you without a lot of work on your part, but also get it right based on what you want to cook,” Salzberg says.

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