For a while, it looked as though Blue Apron was destined to become a culinary juggernaut in the American kitchen.
Founded in 2012, the company
carved out a clever business model by mailing perfectly portioned, pre-packaged ingredients and recipe cards to home cooks in need of handholding. It’s not yet profitable, but growth is impressive. Last year, the company had $795.4 million in 2016 by delivering about 8 million meals per month to customers.
Recently, though, there have been challenges. Shares that the company had hoped to sell between $15 and $17 apiece in June were priced at just $10, hurt in part by Amazon’s
announced acquisition of Whole Foods
earlier that month. They now trade for less than $6, pummeled in part by Amazon’s plans to launch its own meal kits.
The twin revelations about Amazon are no doubt unnerving to Blue Apron’s executive leadership team and investors. And yet, they should also see them as encouraging signs. That Amazon sees so much potential in the industry is proof positive that the meal kit represents a new American staple, and not just—pardon the expression—a flash in our collective pots and pans.
True, Amazon is a formidable rival. And yes, the meal kit business is increasingly crowded. (Current contenders include: Plated, HelloFresh, Purple Carrot, and Sun Basket.) But Blue Apron has an opportunity to differentiate itself. To do so, it must focus on the needs, wants, and values of its target audience: mainly millenials.
First, Blue Apron should make taste innovations a priority through partnerships with organic farms and ethnic food suppliers. Second, Blue Apron must work on its environmental record by investing in a greener supply chain and more eco-friendly packaging for its ingredients. Finally, Blue Apron must communicate its strategy to customers in an inspirational and compelling way.
The basic proposition of meal kits is that they mimic home cooking with the added benefit of convenience. Customers feel good about preparing a meal-kit dinner: it’s wholesome, filling, and practically homemade. And apart from a bit of chopping and stirring, it’s easy. As the landscape grows more competitive, though, customers will demand more.
Of course, people might tire of Blue Apron or realize that (horrors) they can cook a reasonable meal without its help.
In the food business, the key differentiator is always taste. Rather than give price discounts, Blue Apron needs to set itself apart by offering the most appetizing and delicious meal kits on the market. It needs to enlarge its network of chefs and recipe creators and encourage them to make bold flavors a top priority. It also should partner with ethnic food suppliers to diversify its offerings and provide more interesting recipes from around the world such as China, India, Thailand, France, and the Middle East. These moves should help the company expand its customer base while also satisfying existing customers who crave greater variety in their food.
Taste is king, but for health-conscious millenials, nutrition is the second important consideration. Bearing that in mind, Blue Apron should form alliances with smaller, organic farms. These partnerships would yield fresh, healthy food and also provide support to local communities (social sustainability is another principle close to millenials’ hearts).
A second opportunity for Blue Apron to distinguish itself is packaging. Meal kits are lauded for eliminating food waste, but they are often criticized for generating massive amounts of paper and plastic waste. Every ingredient—from a single radish to a tablespoon of turmeric—arrives in its own plastic bag. This is both economically wasteful and environmentally fraught.
Blue Apron should focus on solving this problem. It needs to invest in greener, recyclable packaging. It needs to implement programs urging customers to reduce and reuse its boxes. It also needs to fine-tune its supply chain and determine the most energy efficient ways to transport food from farms and manufacturing plants to distribution centers and homes across the country.
Finally, Blue Apron must devise a vision—or in marketing terms, a “promotional strategy”—for how it will communicate its plans. Company leadership needs to talk openly about Blue Apron’s mission to dazzle its customers’ taste buds and expand their pallets with new flavors and exotic cuisine. It needs to put healthful eating on front and center of its business agenda. The company also needs to be transparent about its current environmental impact and candid in seeking solutions to improve. And then, of course, the company must deliver on its goals and promises.
It’s a long to-do list, but Blue Apron is up to the task. Let’s not forget that Amazon wasn’t profitable for its first six years in business. But customers—and Wall Street—remained faithful because Jeff Bezos, the company’s CEO, had an exciting vision.
Blue Apron can survive the threat of Amazon. It just needs to follow a recipe for success by resisting the temptation to play the discounting game and investing with a laser focus on delivering on millennial tastes and values.
Sharmila C. Chatterjee is a senior lecturer in marketing and the academic head for the enterprise management track at the MIT Sloan School of Management.