If you like to cook but not to shop or plan your own meals, and if you weren’t too hungry, and if you didn’t like cooking for too many friends, then Blue Apron—the startup delivering precisely measured, prepackaged amounts of just enough salmon, green beans, butter and lemon for one meal, no leftovers—was for you.
Exactly who it was that was both upwardly mobile to pay for this service while also having a barren kitchen, nobody really knew—but by the divine math of Silicon Valley gamblers, your existence made this an idea worth several billion dollars and potent enough to “disrupt” the grocery business. People actually believed this. Or they did until Jeff Bezos and Amazon went shopping and bought out Whole Foods. Or until HelloFresh launched. Or until Blue Apron spent millions on packaging and shipping, as well as marketing, literally gifting away boxes of neatly assorted ingredients to millennials who never ordered another box. All this conspired to, one-by-one, wreck Blue Apron’s IPO, crater stock prices to all-time list lows, kick founders out of company leadership and now, at last, the seemingly undeniable, ultimate doom of the company.
After losing another $23.7 million in the last three months of 2019, Blue Apron is laying off 240 workers and shutting down the shop at its Arlington, Texas warehouse location. Blue Apron will keep, for now, its California and New York assembly-and-distribution shops, while leaders ponder peddling what’s left at a paltry $50 million price tag. Meanwhile, customers continue to desert Blue Apron, down to 351,000 in the last quarter of 2019, from 557,000 the year before.
Selling off Blue Apron that low would mean a loss in the neighborhood of $143 million for Blue Apron’s capital investors, including Fidelity and Goldman Sachs. That hurts, but as usual, retail investors took the worst hit. Stock-market playing rubes, who bought in when Blue Apron went public at $11 a share, have lost more than 80% on their investment—and that represents a recovery. Shares were trading for $3.60 at the close on Wednesday, up from 2018 when Blue Apron was worth less than a dollar.
There’s no other analysis than this: Blue Apron was one of the biggest-ever Silicon Valley catastrophes, a mix of hubris, unrealistic expectations, a misunderstanding of how people exist in the world—and, Amazon. But how could it have gone so wrong? Why was Blue Apron valued at more than $3 billion at one point, as were the pre-IPO whispers?
Blue Apron was valued at $2B on the private market in 2015 and is now worth $57M. A 97% decline.
Public markets have figured using technology with a traditional retail doesn’t make you a tech company. VCs continue to think having an app = tech valuation📉 https://t.co/19no4V8Cn2
— Dare Obasanjo (@Carnage4Life) February 19, 2020
Three years into existence, back in 2015, the company was “killing it of late,” as TechCrunch put it. Blue Apron was selling a reported three million meals a month, at roughly $10 a per meal. This was cash flow and user growth that emboldened Blue Apron to claim it would someday “reach 99% of potential home cooks.”
And it would do this “custom fulfillment software tools and investing in automation” at its fulfillment centers—an enormous infrastructure, a veritable coast-to-coast ecosphere of logistics that, realistically, would have required blanketing the country in Blue Apron prep kitchens. Meanwhile, the company pitched investors on its “hard-to-replicate value chain” and “powerful and emotional brand connection.” As usual, none of this actually existed.
People didn’t really care about Blue Apron, whose business model had enormous baked-in costs. To get even close to fulfilling the billion-dollar promise—to cover the country in boxes of apportioned ingredients—Blue Apron would have to start making money, and that never happened. One problem is that established grocery stores got wise and started delivering—and delivering full sticks of butter, not just amuse-bouches.
Blue Apron lost even its novelty factor. Instead of having the uncooked-meal-delivery game to itself, Blue Apron signaled a potential opportunityfor a horde of far more established competitors, all of whom had lower costs and more diversified revenue streams. This is partially why Blue Apron lost lots of money, even when it was still a unicorn: $54.9 million in 2016 and then another $52 million in 2017. And that second year, the loss was more than 20% over company revenue, as Blue Apron blew millions on marketing.
As for capturing 99% of “potential home cooks”? Home cooks like to shop for ingredients and maybe buy more than exactly what they and maybe one other person might need—that’s how you save money cooking at home, after all—and those who did want meal-quantity deliveries just didn’t want to bother cooking.
As Marketwatch reported, Blue Apron hopes to get swallowed up by another company, possibly food giants Kraft Heinz, Walmart or even Starbucks. All of those companies have presences in almost every city. They could, in theory, produce ready-to-cook meals at scale and duplicate costs like storage and sourcing items.
It’s easy in 2020, with grocery deliveries de-rigeuer, to see why Blue Apron failed. It was probably also easy to see something was wrong at any other time since the company started carefully distributing pats of butter throughout the country.