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Blue Apron Fires Recruiting Staff and Implements Hiring Freeze

August 22, 2017, 8:03 PM UTC

Blue Apron Holdings Inc. has lost its human resources chief, implemented a temporary hiring freeze of salaried employees and fired part of its recruiting team just as it ramps up a new fulfillment center that’s supposed to help the troubled, newly public company expand.

HR chief Kate Muzzatti’s resignation was announced internally on Aug. 10, according to two people familiar with the situation, the same day Blue Apron decided to halt the hiring of salaried employees. The fired recruiters included staff who helped find operations and technical employees, said three people, who asked to remain anonymous to discuss an internal matter.

The meal-kit company confirmed Muzzatti’s resignation and said she’s joining MM. LaFleur, a women’s apparel startup. The recruiting team firings totaled 14 people. They were tied to the temporary hiring freeze, which doesn’t affect hourly positions as well as certain roles at headquarters, the company said. Blue Apron, which sells boxes packed with fresh ingredients and recipe cards to make dinner at home, employs more than 5,000 people.

Since going public in June and raising less money than expected, Blue Apron has lurched from one setback to another. Last month, co-founder Matt Wadiak quit as chief operating officer; he was overseeing the teams in charge of producing boxes, procuring ingredients and creating recipes. Though Blue Apron beat analysts’ revenue estimates in its first earnings report as a public company, it lost customers during the quarter after slashing the marketing budget. The shares have fallen almost 50 percent since the IPO.

Blue Apron has ambitious plans to upgrade its fulfillment operations and offer a much wider selection of products and options; to that end, it’s been moving a lot of the work to a new warehouse in Linden, New Jersey, all the while winding down an older facility in Jersey City.

But Blue Apron has had trouble keeping enough workers on the production lines, especially at the Jersey City facility, one of the people said. At the worst, more than 100 new people had to be hired in a week to replace those who quit, and an average of 20 to 30 weekly departures was common, the person said. Even though Blue Apron pays above minimum wage, the work is stressful, involving standing for hours in a refrigerated warehouse with little natural light, doing repetitive tasks perfectly. Because the process is complex, new workers take some time to get up to speed.

The new fulfillment center, when running at full capacity, is supposed to handle more than half the company’s production volume. Yet during the second quarter, only 3 percent came from Linden, due to unexpected challenges, Chief Financial Officer Brad Dickerson said on the earnings call. CEO Matt Salzberg also said Linden had been slow to ramp up because training on new machinery was taking longer than expected. Linden began operating in May, a few months later than originally planned, one of the people said.

The company said the Jersey City turnover was related to the transition to the Linden facility and that the delayed opening was nothing out of the ordinary and typical of any large construction project.

The delays and other setbacks mean it will take longer than expected to offer new menu options. Meanwhile, Blue Apron plans to keep cutting marketing to free up cash for the new center. As a result, the company won’t reach $1 billion in sales this year — a milestone many investors and analysts expected.