Blue Apron Stock Leaves a Bitter Taste for Many Investors

Blue Apron stock is looking the beginning of the end in the face

Blue Apron (NASDAQ:APRN) has a new CEO, but it’s unlikely that personnel changes will make too much difference for Blue Apron stock.

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In a press release announcing her hiring newly appointed Chief Executive Linda Kozlowski is quoted as saying that it was an “exciting time” to join the meal kit seller. For the company’s long-suffering shareholders, things are a little too “exciting.”

Shares of the New York-based company are in a free-fall, falling 90 percent since debuting at $10 during its much-hyped 2017 IPO, even with its recent jump in the wake of Kozlowski coming on board. She is the company’s third CEO since going public, and she faces a daunting challenge in turning the company around.

Bad Breaks and Blue Apron Stock

About everything that could go wrong has gone wrong for Blue Apron. The company’s IPO was a flop, pricing at the lower end of its expected range. Half of APRN’s customer base has dropped the service as competition intensifies as the novelty has worn off. APRN’s efforts to grow its business through partnerships with WW (NYSE:WTW), formerly known as Weight Watchers, haven’t amounted to much as of now.

The bitter taste investors experienced with Blue Apron stock isn’t going away anytime soon. I don’t see any logical buyer in the already-crowded market with 150 providers. The company’s flawed business model makes gaining traction difficult.

First, there is a low barrier to enter the market for meal kits, which are pre-measured ingredients with recipe cards. The only thing that separates one company from the other is the creativity of the chefs they employ. Grocery chains such as Walmart (NYSE:WMT), Kroger (NYSE:KR),  which acquired APRN rival Home Chef last year, and Giant and Stop & Shop parent Ahold Delhaize NV offer meal kits. Amazon.com also offers meal kits through its Whole Foods grocery chain and on its main website.

Flawed Business Model

Then there are the practical considerations.

According to Grocery Dive, consumers can buy meal kits at grocery stores only hours before dinner time while subscription services like Blue Apron lock a customer into a meal plan for a week in advance. As a result, many consumers cancel their Blue Apron subscriptions after their free trials expire.

Blue Apron is aware of this trend and last year announced a partnership with Costco (NASDAQ:COST) that was subsequently put on hold ahead of the December holidays. Though APRN plans to return to COST, it isn’t clear when that will happen.

Meal kits also are expensive.

Blue Apron’s plans run from $59.94 to $71.92 per week. I would expect my food to arrive at my house already cooked for that kind of money delivered by servers with white gloves. No wonder Ladd expects more than half of all meal kit companies to be out of business by 2025. Companies are marketing themselves on the tastiness of their meals, a strategy which has its limits.

Forbes contributor Brittain Ladd put it this way:

“…Telling me repeatedly that `No one has a better tasting meal kit than we do does not erase an inefficient supply chain, high unit costs, high customer acquisition costs, and low customer retention…According to Nielsen, only 9% of consumers have purchased a meal kit. That’s an incredibly low number in an industry with sales in excess of $641 billion in 2017.”

Jonathan Berr doesn’t own shares of any stocks mentioned in this post.


Article printed from InvestorPlace Media, https://investorplace.com/2019/04/blue-apron-stock-leaves-a-bitter-taste/.

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