Blue Apron's First Quarterly Report Points Up Challenges in the Meal Kit Space

Blue Apron, in its first quarterly earnings report since going public, posted a mixed bag of results that show both the promise and the challenges of the meal kit space.

Second-quarter revenue growth cooled to a gain of 18% over the year-ago period, compared with a 42% year-over-year gain in the first quarter. The cooldown was to be expected, as the company pulled back on marketing spend to drive sales.

With marketing spend reduced by $26.1 million, revenue eased from the first quarter, as total customer count order count declined. On the plus side, average value and orders per customer rose, a signal of loyalty.

The meal-kit category is projected to grow at an average of 20% a year over the next five years to a total of $11.6 billion by 2022, more than double an estimated $4.65 billion this year, according to market research firm Packaged Facts.

Blue Apron was arguably the biggest name in the field, but there is new competitor: Amazon. And Amazon's pending acquisition of Whole Foods will make it even more formidable for rivals such as Blue Apron.

But survey data indicates that consumer enthusiasm for meal kits is held back by perceived high prices of some of the offerings.

According to July 2017 research from Morning Consult, nearly six in 10 US internet users who haven’t subscribed to a meal-kit delivery service said the cost of these kits deterred them from trying it out.

Respondents cited other reasons for not trying out the service, such as the recipes featured just didn’t speak to them, and it would take too much time to prepare the dishes. But price was by far the most common concern.

As if resisting some of the quarter-to-quarter pressures of public companies, Blue Apron's CEO, Matt Salzberg, focused on longer term goals in a statement accompanying the earnings release. "We are beginning a new chapter as a public company," he said, "and remain focused on our long-term strategy to build an iconic consumer brand, develop a more diverse product portfolio, and further build out an end-to-end supply chain platform."

And indeed, there are clear signals that meal kits have a healthy future. A Harris Poll survey from December 2016 found that younger users were more likely to stick with meal kits, whereas older users seemed more likely to try and then abandon them.

 Photo by Brooke Lark on Unsplash