Spectacular Failures - Blue Apron wilts, then rises to a new challenge (Transcript)
This is a transcript of our episode “Blue Apron wilts, then rises to a new challenge.”
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Lauren Ober [narration]: Leila Green is a trauma surgeon in Houston.
Leila Green: I meet people on the worst day of their life, usually.
Then I’m glad we didn’t meet in real life.
Before Leila could become Dr. Green, she had to do a whole lot of training. And you know what’s really hard to do when you’re working a bonkers number of hours? Eat properly.
Leila Green: I was in general surgery residency at the time and kind of tired of eating like hospital food or fast food and things.
And that’s when she heard about this service — a meal kit delivery — that would send her all the ingredients she’d need to make three full meals, plus instructions on how to make them. No more time-consuming trips to the grocery store and no more desperation Big Macs.
Leila Green: So I thought, well, I'll try it. I got a free box. And so I said, Okay, I can do this. And I lived by myself. So I thought it would just be something fun to do.
What Green is conveniently leaving out of her story is her level of cooking experience pre-meal kit.
Leila Green: I can heat things up.
Lauren: Oh, oh, ma’am.
Leila Green: And that’s...it? I mean, I had to buy so many different things like, once these boxes started coming, you need all these like equipment and things that I didn't have. I had to buy zesters. Like I didn't have a garlic press. What is this? Okay, but I, you know, I'm a surgeon, so I have to have all the right instruments, you know, to put this stuff together.
Getting a meal kit every week did force Green to upgrade her kitchen utensil game. But more importantly, it gave her back time — something that as a trauma surgeon she does not take for granted.
Plus, the meal kits helped Green hone her cooking skills. Forget just pressing “cook” on the microwave. Green is now a master in the fine art of mise en place.
Leila Green: You have to learn how to like chop everything up and set it aside. You really do have to feel like you're cooking things because you really do have to put everything together
Lauren: Right. Now I would think if you were a surgeon, your knife skills wouldn't be too bad.
Leila Green: Oh, no, I mean, I can I can cut, people and carrots, ok? I can you, know...
In the year that Green subscribed to that meal kit delivery service, she made seared steak and pizza from scratch and a whole host of other things she would never normally prepare herself. And she documented her cooking journey on Instagram.
But eventually, Green finished her training and got back to a more regular schedule, which allowed for grocery shopping and meal prep. So she canceled her subscription.
Which was bad news for the meal kit service she was using — Blue Apron. You may be familiar with the company from such podcasts as... all of them:
Clip collage: [Joe Rogan podcast]: To end the stress of cooking now, go to blueapron.com/rogan and get your first two meals free./ [Blue Apron web ad] Inside everyone is an incredible cook. [Dan Savage podcast] When was the last time you made a dinner you were really proud of. [Marc Maron podcast] Thai curried cauliflower steaks with black rice and Thai basil, what?! [Crooked podcast] That’s blueapron.com/crooked. [Malcolm Gladwell podcast] That’s blueapron.com/gladwell [Maron] /maron [Savage] /savage [Blue Apron web ad] visit blueapron.com/cook to get your first two meals free.
When Blue Apron began in 2012, it was supposed to revolutionize how Americans ate. It was going to gently pull us away from our take-out and our T.V. dinners and nudge us back into the kitchen.
And for a while, it worked. Until it didn’t. And Americans returned to the warm embrace of their boxed mac and cheese and takeout pad thai.
Obviously, a home-cooking revolution didn’t materialize.
Or did it? The novel coronavirus has forced many of us to become intimately acquainted with our casserole dishes and our garlic presses and our dutch ovens. We made banana bread by the pallet and sourdough starter by the ton. We learned how to sear steaks and spatchcock chickens and all manner of gruesome carnivorous techniques. In short, boy did we ever cook.
All this cooking at home created a make or break moment for Blue Apron. But it wasn’t supposed to be like that. Just a few years ago, the company was valued at $2 billion. Now it was barely hanging on by its fingernails, its only lifeline a global health crisis that required so many of us to shelter in place for months and avoid trips to the grocery store.
I’m Lauren Ober and from American Public Media, welcome to the new season of Spectacular Failures, the show that always flambeés the hell out of failure.
Legend has it that the idea for Blue Apron began with an Argentinian steak. There were these two guys, Matt Salzberg and Ilia Papas, and they were clever tech entrepreneur types, full of ideas.
Salzberg had an MBA from Harvard and cut his teeth in a big New York venture capital firm. Papas was a go-getter software engineer. They met at a network-y happy hour and decided to go into business together.
But what kind of business?
Alex Konrad: Their original idea is not meal kits. It is more of a research crowdfunding idea called Petri Dish.
That’s Alex Konrad. He’s a senior editor at Forbes. He wrote about the founders in 2015.
Petri Dish wasn’t the pair’s only startup idea.
Alex Konrad: I think another one we highlighted in our article was Warby Parker for strollers.
Lauren: I don't even understand. I truly don’t even understand.
Alex Konrad: You know a company that would give you a high end but also affordable stroller experience. Ummm...yeah.
So those two startup ideas — a Kickstarter for science experiments and a Warby Parker for strollers — were nonstarters for the pair. But then over grilled meat, it hit them.
Alex Konrad: Salzberg and Papas are doing dinner. And they're struggling to make Argentinian steaks on a borrowed grill. And they're like, you know, wouldn't it be great if there's a service basically, for amateurs like us?
In fact, there was. But it was in Sweden. In 2007, a woman named Kicki Theander created a company called:
Kicki Theander: Middagsfrid. That translates into Dinner Peace in English.
Lauren: Let me see if I can pronounce this right: Middagsfrid.
Kicki Theander: That's pretty good.
Theander wanted to solve the vexing nightly problem that families around the world face: What are we having for dinner? Because the answer can’t always be ice cream.
Kicki Theander: People started talking about hell hour. You know, like the hour between five and six when you have to run to the grocery store and fight with your spouse about who's cooking tonight, what are we having?
That right there is the spirit of entrepreneurship.
Alex Konrad: I think the question is, then, is this a legitimately huge problem? And is this a problem that a lot of people have as well?
For Salzberg and Papas, the answer to both of those questions was an enthusiastic yes.
Now, at this point, it was 2012 and Theander’s company had been around for five years and was growing steadily. It had a few competitors in Europe, but in the U.S., nothing of the sort existed. Which was great for Salzberg and Papas.
Alex Konrad: And so they think Hey, we can start our own meal kit company for the US market called Part and Parsley.
To be clear, that’s a terrible name. And very quickly they changed it to Blue Apron — named for what French apprentice chefs wear in the kitchen.
At almost the exact same time, a Harvard classmate of Salzberg’s began a rival meal kit company called Plated. But Salzberg and Papas weren’t worried. Because they had brought on a ringer: Matt Wadiak, a chef with a degree from the prestigious Culinary Institute of America. And Wadiak was the guy that was going to make their business stand apart from its rivals.
Alex Konrad: Wadiak would basically go and source the ingredients. Farmers would say, okay, we would love to lock in these large extra orders at a scale that is very attractive to us, you know, many thousands of ingredients. I think you know, when he was in his food world that was a differentiator and great for Blue Apron.
Not only did Wadiak design the menus and source the products, but he also served as the social media face of the company. He was Blue Apron’s culinary secret weapon and did a series of early Youtube videos showcasing his know-how. Here he is trying to convince us that artichokes aren’t vile.
Clip of Blue Apron Matt Wadiak cooking demo: Everybody likes artichokes but they’re crazy. What do you do with them? They’re tough, they’re spiny, they’re all over the place? They’re kind of confusing. A lot of times people just don’t cook them because they just don’t understand how to cook them.
He cuts into some truly revolting artichokes and proceeds to make my worst dining nightmare.
Clip of Blue Apron Matt Wadiak cooking demo: Then get in with a spoon and scoop out that really hairy, chokey interior. And the reason they call this the choke is because if you eat it, you will choke. It’s full of little fibers and it’s like a fish bone that will make you cough.
In the early days, all the founders had to hustle like this. Before they had staff, it was Salzberg, Papas and Wadiak packing up boxes in a small kitchen in Long Island City, New York. Then seemingly out of nowhere, the company landed some sweet venture capital to the tune of $3 million. Things were looking good for the startup.
Within the first few years, the business took off. In 2014, Blue Apron was shipping 600,000 meals a month. By 2016, it was eight million meals, and a billion dollars in revenue. Within just five years of its founding, the company employed 4,500 people and was valued at nearly $2 billion. Blue Apron looked like it was on the express train to Successville.
Alex Konrad: Blue Apron seemed to be sort of the buzziest, the biggest market share, the leader in this emerging category.
Which included HelloFresh, Sunbasket and about a million companies with the word “chef” in the name.
Alex Konrad: Then, I actually tried the products. And it seemed, at least to me personally, just as someone testing the products, that Blue Apron overall kind of had the experience that resonated the most with me, and I thought it might resonate the most with Americans.
Now, the thing about Americans is— we love products that claim to make our lives easier, more convenient, less of a hassle. And that’s exactly what Blue Apron was doing. It was saying, “Hey, working mom! We know you have a lot on your plate LOL. We want to help you cook nutritious and delicious meals for your family WITHOUT the hassle of going to the grocery story or reading a cookbook.”
But it was also saying, “Hey, millennial! We know you’re a work hard, play hard, eat sloppy takeout at 9pm kind of person. But we also know that you’d love to cook if only it wasn’t such a time-consuming pain in the ass. So we’re gonna make it super convenient for you!”
This American obsession with convenience around food, and in particular the magical home-cooked meal minus the effort — goes back at least to the late 19th century, says culinary historian Laura Shapiro. That was when a particular brand of utopian fiction began to emerge.
Laura Shapiro: The plot was sort of the same. Somebody is taking a walk, they get bonked on the head. When they wake up, it's 500 years in the future. And they're surrounded by all these strange looking creatures and it's a whole different world and somebody takes them to dinner. They take them home to dinner, and it's a miracle dinner.
The food just appeared with the press of a button or the wave of an arm. And it was scrumptious and filling and most importantly back then, digestible.
Laura Shapiro: ...miracle food, it was utopian food. And that has been a dream, I think that is attached itself to the American dinner table for decades and decades.
Not long after the emergence of this utopian fiction, dining actually did start to look like a miracle. You could buy vegetables in a can and chicken in a can and later full meals like spaghetti and meatballs in a can.
Then in the 1950s came the frozen turkey dinner. Just whack it in the oven and presto, a rubbery simulacrum of the real thing. But it was quick! And clean-up was a breeze!
Clip of Swanson ad: Mother Murphy, lucky me. My wife uses Swanson TV turkey dinners. And make your husband lucky too. Get Swanson’s TV turkey dinners, Swanson TV fried chicken dinners, Swanson TV beef dinners from your grocer’s big freezer.
When frozen fish sticks hit the scene around the same time, oooh buddy, it was utopian fiction come to life.
Clip of fish sticks ad: Master Chad Morley ate fish sticks with his fingers. Now I’m 32 and I use a fork...sometimes. Mrs. Paul’s fish sticks: you never stop loving them.
Laura Shapiro: It was an immediate success. These you know, deep-fried frozen fish sticks that tasted not at all of fish, which meant that people adored them.
Obviously fish sticks took off and the industry used that as an excuse to stickify everything — chicken, eggplant, lima beans. Whatever you could deep fry and freeze, the packaged food industry tried it.
The post-war years also brought an explosion of fast food and takeout meals. And now in the 21st-century future, we can order just about any food we want — from some vegan drumsticks to a prix fixe haute cuisine meal — just by pressing an app.
Laura Shapiro: All of these iterations of the miracle dinner. It's like they aim at three longings that women have always had when they think about making dinner: They want it to be effortless. They want it to be delicious. And they want it to have the moral value of home cooking.
The home cooking aspect of this is perhaps the most resonant.
Laura Shapiro: The thing that home cooking delivers that none of these other things do is that it satisfies, I think, what we all feel as the moral imperative to cook, there's something that just doesn't click in when the thing comes in from outside.
And this is a great thing for a company like Blue Apron because...
Laura Shapiro: ...Blue Apron, inches a little closer to that. It gets you that much closer to feeling as though you have cooked this.
Notice Shapiro said “feeling” as though you cooked something. Because for her, what Blue Apron is doing, despite all of its fresh ingredients and “chef-inspired” recipes, is helping you assemble.
Laura Shapiro: They kind of fool you into thinking you're cooking whereas real cooking, hands-on cooking, knowledgeable cooking, has to do with cooking day after day. Doesn't mean you're making fabulous, elaborate meals day after day, even if it's the simplest possible thing. That's cooking.
Sure, getting a dime bag of za’atar, a thimbleful of pepitas and a literal tablespoon of sesame oil in your meal kit does have a somewhat infantilizing effect. But in Blue Apron’s early years, plenty of people were happy to have everything portioned out for them.
But convincing potential customers that they wanted and needed a service like that… that cost the company some big cash. In the form of free meals, tons of specials and endless advertising. Anyone who listened to podcasts in 2015-2018 is bound to have heard at least one disinterested podcast host give a lackluster Blue Apron ad read.
Chorus of podcast hosts: Blue apron dot com.
In biz speak all of this is known as the CAC, or customer acquisition cost.
Dan McCarthy: What it's supposed to be is the total amount of money that the company spent on marketing to acquire customers, divided by the number of customers that they actually acquired.
That’s Dan McCarthy. He’s a marketing professor at Emory University’s business school and he’s studied Blue Apron for years. McCarthy says that in the early days, Blue Apron was spending about $60, $70 per customer.
But then, as people came and went, Blue Apron had to spend more and more money to get new customers on board. The customer acquisition cost just kept creeping up and up and up until it nearly doubled.
Dan McCarthy: And you can imagine if you're spending 120 just to bring somebody in, when you talk about the amount of profit that you need after that to break even on that customer, that's a tougher proposition.
The more money Blue Apron spent, the harder it was to recoup the investment. Which brings us to the second problem: Preventing customers from bolting once the company has spent all that money to bring them in.
How many customers stick around is measured by a really important metric called “churn rate.” The churn rate tells you the rate at which customers come into and spin out of the business.
If you’re spending a lot of cash to land new customers and they don’t stick around long enough to make any money off of them, you have high customer acquisition costs AND a high churn rate. That’s where Blue Apron found itself. And even the most basic cooking dodo could tell you that’s a gourmet recipe for losing a lot of money.
Our pal Dr. Green used Blue Apron for about a year, which is way longer than most of its customers stuck around.
Dan McCarthy: Yes, about half the people were churning out in a month. By six months, about 70% of their customers were churning out. They just weren't weren't able to keep those customers for as long as they should.
Despite Blue Apron’s early success and growth, one nut the company’s never been able to crack is how to stop that outflow. How do you get people to subscribe and stay subscribed, at least long enough to make a profit off of them? It’s a puzzle.
But despite its high churn rate, Blue Apron was still the market leader. It had gotten a slight jumpstart on rival HelloFresh and it was starting to look real sexy to big investors.
Dan McCarthy: They were the 800-pound gorillas. And even though the space itself wasn't that that large at the time, it was still something like $5 billion. And, growing really quickly.
On its face, business seemed booming. But the whole meal kit market was on the cusp of a shake-up.
In 2017, grocery chains Albertsons and Kroger each picked off competing meal kit companies. Then another Blue Apron rival, Chef’d abruptly shut down and laid off all its employees, only to be bought a week later. And so, Blue Apron was at a crossroads, says Alex Konrad.
Alex Konrad: For startups, the most common exits are, you know, you fail, you go public or you get bought. Those are really the only traditional outcomes and so for the companies that didn't want to fail, they were gonna have to go public someday or sell. Like that, that's just the reality.
So Blue Apron had three choices — pack it in, sell or go public.
We’re going to take a quick break. When we come back, join me in my outdated condo kitchen as I whip up some delicious Blue Apron meals. And we explain how the really terrible coronavirus was also a little bit good for Blue Apron. Plus, we gaze into our meal kit crystal ball to see what the future might hold. SPOILER: the future is delicious.
No story about Blue Apron could be called complete without sampling the product. So I ordered up a box. And paid for it, mind you.
Lauren: OK, so I just got my Blue Apron box at my doorstep. And when I picked it up, I could not believe how heavy it was.
When the box arrived, it felt like Christmas. Except better because the food wasn’t mediocre and arranged in a shrink-wrapped basket.
Lauren: So, let's crack into this box.
Inside there were two bunches of kale, some loose onions and about a million tiny baggies of “Knick Knacks,” including two tablespoons of creme fraiche, a quarter of a cup of panko breadcrumbs and one teaspoon of something called furikake, which according to the Blue Apron recipe was supposed to “lend even more savory flavor” to my dish. Yum.
Lauren: [laughing], there's the tiniest, the tiniest, tiniest portion of brown rice. I mean, this must be maybe half a cup, in a bag maybe three times the size.
I decided that it would be sad to cook these dishes by myself, so I invited my girlfriend over to experience the magic of Blue Apron with me.
Lauren: You have a choice between meals tonight.
Hanna: I'm so ready. Mostly because I'm so hungry.
Lauren: Oh, well.
We had the choice of three dishes. But one of them had cilantro sauce, so no thank you. Another was like a spicy Indian situation and I was feeling kind of basic. So I chose the pesto and kale pasta with goat cheese.
Lauren: It says this quick-cooking pasta gets a one-two punch of irresistible flavor from a dollop of creamy goat cheese for delicious tang and our herbaceous basil pesto stirred into the warm pasta and garlicky kale just before serving. By the way, that was a run-on sentence.
Lauren: A touch of crushed red pepper…
Technically, we picked the easiest dish. So what!
Things were going well until I dropped a garlic clove down the InSinkErator.
Lauren: Oh, Hanna no. Get your hand out of the garbage disposal.
After that near catastrophe, we boiled the fresh cavatelli, sauteed the kale with garlic and red pepper flakes, added the pesto and the dollop of goat cheese and voila!
Hanna: Can I get you a bowl of pasta?
Lauren: Why yes, you could!
And I’m here to report, we made a damn fine meal! The kale was tender, crisp and very well seasoned, the cavatelli was perfectly al dente (well done, Hanna) and the cheese added some good saltiness. I would say we were perfectly satisfied diners. But wait, there’s more!
Lauren: Cleanup is practically nothing, because everything came out of a packet. So really, we're only left with
Hanna: Actually that's really nice.
Lauren: ...a couple of dishes.
Hanna: I don't want to underestimate that. I think that's really nice.
But not everyone who’s used Blue Apron has appreciated that. The company has gotten flak for its abundant packaging — though much of it is now recyclable — and customers have complained that the recipes were too complicated.
I made four Blue Apron meals for this story and for a middling cook with a reasonable amount of cookware, I thought the dishes were pretty simple to assemble. Also pretty tasty. I would make every single one of those dishes again. But I’d do the shopping myself, which I guess sort of defeats the purpose.
When I opened my first Blue Apron box, it was a novelty. A cornucopia in cardboard. But, then I forgot to cancel my subscription and I got a second box by accident. That one wasn’t as exciting. By then, I understood the gimmick and the excitement of discovery kind of fizzled. In this way I’m not too different from a lot of people who try Blue Apron, says Prof. Dan McCarthy.
Dan McCarthy: Discovery doesn't tend to last that long. There's a bunch of people ,they look at Blue Apron as this: it's like, I want kind of this surprise and delight every month. And the problem is that they may want that initially, but after you've been surprised and delighted a few times you say, you know I'm pretty good. I don't need any more of this surprise and delight.
But Blue Apron execs were like, uh yeah you do. You need it AND you want it. And they believed in their product’s ability not just to continually delight, but to actually provide a valuable service to people. And all that meant that in 2017, the company had to work out its options: pack it in, sell or go public. And the higher-ups decided on going public.
Now, before offering up public stock in the company for the first time, Blue Apron wanted to show strong customer growth. So they started to amp up spending to bring in new users. Remember, CAC, the customer acquisition cost? In the year before the IPO, Blue Apron increased its marketing cash by almost 200%.
But none of this marketing resulted in a huge new customer haul. And that, says Forbes’ Alex Konrad, made investors a little less in love with the company.
Alex Konrad: It was hard to make a really attractive, you know, future-facing story for like how Blue Apron really becomes that huge.
Blue Apron’s books weren’t the only thing that made investors turn up their noses around the IPO. A couple weeks before the Blue Apron team was set to ring the bell at the New York Stock Exchange, Amazon made a little announcement: it was buying Whole Foods in a $13.7 billion deal. For Blue Apron, it was like getting upstaged at your own wedding by an impossibly rich and infinitely more beautiful guest of a guest.
Alex Konrad: When Amazon's acquisition of Whole Foods was announced that that was just devastating. Even just psychologically it felt like, you know, here come the giants, and if Amazon can sell things online really well, and Whole Foods has pretty good ingredients, what is Blue Apron really selling here?
And then of course Amazon trademarked its own meal kit offering.
Dan McCarthy: Everyone was very concerned that basically this was going to be the next you know, I won't call Blue Apron an ant you know, but I would say everyone agrees Amazon's way bigger, so. They're just gonna bold their way right in and stamp this industry out. And, and so that was a big lurking concern.
Blue Apron’s IPO in the summer of 2017 raised $300 million — about a third of what the company anticipated. Stock went for about $10 a share rather than the expected $15 to $17.
Alex Konrad: It was a turbulent IPO, to say the least.
Still, Blue Apron co-founder and CEO Matt Salzberg seemed pretty upbeat about the whole situation on CNBC.
Clip of Matt Salzberg on CNBC: I’m honestly not here to talk about the pricing of Blue Apron stock. That’s really up to the investors to decide. Blue Apron is here because we’re excited about the big opportunity that we’re going after. We’re tackling a huge market and we’re focused on the long term quite frankly. And the stock price today, whether it’s up, down, left, or right is really just the beginning of this new chapter in our company’s life that we’re really excited about.
One thing Salzberg mentioned in that clip was how his company was tackling a huge market. Now if you’re defining the market as all the people who eat food in America, then yeah, that’s a huge market.
But according to the good folks at market research company Packaged Facts, that market has a ceiling. And not like a cathedral ceiling.
Cara Rasch: Initially, the market was definitely expanding exponentially and I think that's where a lot of the interest initially came from. If you're seeing these companies that are having 100% growth like that's really significant.
That’s Cara Rasch. She’s a food and beverage analyst with Packaged Facts.
Cara Rasch: One of the whole things that I think went wrong with the industry is people thought there was a very big addressable market for meal kits. But as it turns out, there really isn't.
It’s hard to gauge, but Rasch estimates that only about one percent of the U.S. population uses home delivery meal kits. And she says the market kind of peaked two or three years ago. Since Blue Apron started, more than 150 meal kit services have come on the scene. But only about 15 to 20 are national operations, with HelloFresh now the clear market leader.
Remember when we said Amazon trademarked its meal kit back in 2017? Rasch says the company never did much with it. And that’s a pretty good indicator that meal kit delivery is not a growing global concern.
Cara Rasch: I think that Amazon saw that much of the market for meal kits had already been addressed by the competitors that were already there. So they didn't try really to break into that because they didn't see much potential for growth anymore.
It seems like Amazon was right to hold off. In 2017, Blue Apron hemorrhaged 250,000 customers. And its stock price had tanked to just $2.99 a share by the end of the year.
And there were more problems. Within a month of the IPO, co-founder Matt Wadiak stepped down as COO. Matt Salzberg, then the CEO, resigned his post shortly thereafter. Blue Apron’s expensive brand spanking new fulfillment center in New Jersey had a bunch of tech bugs that needed to be worked out. And workers from its California operation filed a class-action lawsuit over alleged missing wages.
Things were looking pretty grim for the once-hyped company.
Clip from Trading Nation, CNBC: Welcome to Trading Nation. I’m Eric Chemi. Let’s take a look at one of last year’s high profile IPOs that’s getting absolutely smoked. We’re talking of course about Blue Apron, the stock sinking as much as four percent on Friday and now…
By the end of 2018, Blue Apron stock dipped below a dollar a share and the slide didn’t seem to be letting up.
The following summer, the company tried a move meant to keep it from being booted from the stock exchange. It’s called a reverse stock split and basically it means that the company bundled its shares. So you get a fewer total number of shares, but each share is worth more. Like trading in four quarters for a dollar.
The move raised the company’s stock price, but customers still weren’t flocking to Blue Apron’s boxes. Now at this point, I would have thrown in the towel. But not CEO Linda Findley Kozlowski. The company wouldn’t make Kozlowski available for a chat. But here she is last year on CNBC’s “Squawk on the Street” talking about how jazzed she is about Blue Apron’s prospects:
Clip of Linda Findley Kozlowski on CNBC: ...and our recipes, our ingredients, our culinary authority, our brand recognition is by far still number one. So we feel confident that when we’re talking to investors, they appreciate and understand that there’s something here. It’s really just about getting execution right and making sure that we’re actually capitalizing on that.
Cool, cool, cool. But also Blue Apron was thinking about getting down with some “strategic alternatives,” says Marketwatch’s Tonya Garcia.
Tonya Garcia: “Strategic alternatives” which, you know, means a lot and nothing at the same time, right.
It’s like saying I’m totally happy being single, but I’d be into dating if the right person came along.
Tonya Garcia: It's kind of like one of those things that companies will say when they're just like, Well, we'd be open to, you know, getting bought or a partnership if you're interested, you know, kind of a thing.
In early 2020, Blue Apron put the word out that it was interested in possibly getting scooped up. Maybe by a big grocery chain. Or someone else with deep pockets who wanted to own a meal kit delivery business.
At the same time, Garcia says, the company acted like it was in turnaround mode. It decided to streamline operations, including shutting down its fulfillment center in Texas. It also did away with trying to shovel everyone who had ever eaten food into the top of its customer funnel.
Tonya Garcia: They've decided to focus on what they call their core customers. And these are people who aren't going to do like a lot of people and use a coupon and, you know, get Blue Apron for a month and then cancel their subscription.
So at the same time, Blue Apron was looking to sell, it was also doubling down on its mission. These were last-gasp efforts. It wanted to save itself.
And then came the most unlikely lifeline anyone could think of: a global pandemic. A highly contagious virus that required those of us without essential jobs to practically never leave our houses. Online grocery delivery shot through the roof. And suddenly everyone remembered about this company they heard about on a podcast ad three years ago.
Tonya Garcia: The pandemic has been actually a bit of a good thing for them because it has raised demand.
Blue Apron sees a lot of potential in what the company is offering, especially given that more Americans seem to be interested in cooking at home. Thanks, corona.
Tonya Garcia: If you're Blue Apron, then you're probably thinking, you know, well, if we do a good job, some of this will stick.
In the first quarter of 2020, when coronavirus brought America to a standstill, Blue Apron customer orders were up a bit, though they didn’t spike like the markets hoped. The company still lost $20 million. But that was a little better than the previous quarter.
On its first-quarter earnings call of 2020, the company’s CEO and CFO shook their pom-poms like they were on an episode of “Cheer.” But like the version that features slightly wooden corporate executives.
[Clip of Blue Apron 2020 Q1 earnings call:] So I think a combination of those things puts us in a good position going forward. And we can’t specifically guide what can happen in the second half of the year because of all the uncertainties. You know we do believe there will continue to be some positive effects as we move out of Q2.
The pandemic seems like it’s given Blue Apron a nice little boost. In the second quarter the company brought in 20,000 more subscribers, but that’s still way below where they were in 2019. It’s anyone’s guess whether Blue Apron specifically and meal kit delivery more generally are here to stay. The business Kicki Theander founded in Sweden 13 years ago is still delivering weekly meal fixins to busy Swedes. And despite its own turbulence, market leader HelloFresh is still cranking out boxes. And there’s no shortage of small meal kit companies looking to fill paleo or vegan or regional cuisine niches.
No one knows what the true impact of a global pandemic will be on how we eat and where and when. Not yet anyway. Grocery delivery seems like it's here to stay. Maybe high-end restaurant takeout will also stick around in some form. It’s hard to tell whether all those people who took up home cooking out of necessity will continue to bake crusty sourdough and whip up elaborate curries when we can all safely frequent our favorite local spots.
Blue Apron is banking on a sea change in how Americans eat. The company that was shopping for a buyer just a month before the pandemic hit is now trying to turn a cataclysmic global event into a business-saving opportunity. One big blue box of food at a time.
Spectacular Failures is a production of American Public Media. It’s written and hosted by me, world’s most finicky eater Lauren Ober. Vegan baking wizard Whitney Jones is the show’s producer. Our editor is chef de cuisine Phyllis Fletcher. Barbecue aficionado David Zha is our assistant producer. Our theme music is by the delightful David Schulman. Other original music this season comes from Jenn Champion and Michael Cormier. Kristina Lopez is our Audience Engagement Editor and Lauren Dee is our executive producer. Concept developed by Tracy Mumford. The general manager of APM Studios is Lily Kim. If you want to see photos and videos of my own Blue Apron cooking, and why wouldn’t you, check out our website. Super special thanks to the greatest trauma surgeon in metro Houston for chatting with us about her mmm, asparagus pee.
Leila Green: So I got some asparagus. And then I hadn't really eaten it that much. I went to the bathroom and I said something is not right. And I'm a whole doctor. I'm a full-on doctor. I had to like Web MD myself. I said something has died inside of me.