Blue Apron Shares Hit New Low, as Anyone Can Do “Meal Kits,” Even Walmart

Former unicorn gets trampled. 150 startups and the grocery giants are at it. But Americans are not so convinced.

Shares of Blue Apron [APRN] dropped 5% this morning to a new low of $2.59 after Walmart announced that it would expand its presence in the meal-kit market. “One-stop meals,” it calls them. They’re part of its offering on its website of “meal kits, farm crates & specialty food boxes.” It said the meal-kit offering would expand from the 250 stores where it has already rolled out the service to 2,000 stores.

Walmart combines the online ordering process with its vast brick-and-mortar presence and global supply chain. So it has a better chance of making money in this niche than Blue Apron. These meal kits would serve two people and range from $8 to $15 a box. A check on its website for meal kits reveals prices upward of $30 for two to four meals with “free shipping.”

Walmart belatedly has made mega-efforts to not get run over by e-commerce in general and by Amazon in particular. It has been investing in its online grocery business. Sam’s Club announced last week that it partnered with Instacart to offer food delivery in several states. It’s also rejiggering some of its suddenly shuttered Sam’s Clubs stores into distribution centers for the online grocery business.

Supermarket chain Albertsons Companies has piled into the meal kit market in 2017, when it launched same-day delivery and “Drive-up & Go,” and when it acquired meal-kit startup Plated. In November, it announced that it is also partnering with Instacart to offer “nationwide on-demand grocery delivery service” with “deliveries in as little as an hour.”

Kroger announced last December that it was expanding its meal kit service, which it had rolled out earlier in 2017, to 200 stores. These “Prep+Pared Meal Kits are a growing part of Kroger’s Our Brands portfolio,” it said.

Target announced last December that it had acquired Shipt, a same-day grocery delivery service active in over 70 markets in the US. A competitive meal-kit offering will likely follow.

Amazon hasn’t yet announced a full-blown meal-kit service, though it has experimented with it. But it announced in February that it would start grocery deliveries from its Whole Foods stores via its two-hour Prime Now delivery service. And meal kits can’t be far behind.

Among the meal-kit startups, Blue Apron is still the largest in terms of market share, but its share is dropping, hounded by an ever increasing number of competitors, including the German meal-kit company HelloFresh that managed, like Blue Apron, to get an IPO done last year. There’s Home Chef, Sun Basket, Green Chef, Purple Carrot, Gobble, Marley Spoon, MealPal….

In short, 150 meal-kit startups were founded over the past five years, according to a report cited by the Wall Street Journal in January. It’s easy to create the app. It’s hard to deliver fresh ingredients on such short notice on time. And it’s impossible to make money doing this, given the costs of logistics, the costs of customer acquisitions, and the lack of economies of scale. A number of these startups have shut down after they burned through their investors’ money.

Meal-kit customers appear to lack a sense of consistency and loyalty, according to another report cited by the WSJ: “An estimated 70% of customers of Blue Apron Holdings Inc., the largest such provider, stop regularly buying its meals six months after signing up, while more than 80% of HelloFresh S.E users weren’t active.”

The venture capital community has finally gotten the memo. “We are not funding meal kits, and I don’t know a single VC that is actively looking at the space,” Ian Sigalow, co-founder of Greycroft Partners, told the WSJ. His firm was a lead investor in Plated that was taken off their hands by Albertsons. Lucky them.

Nevertheless, in 2017, about $274 million was invested in 18 meal-kit companies. While that’s down from a peak of 25 deals totaling $308 million in 2015, it still way above zero. So as of last year, investors were still buying the hype. This may not be the case anymore this year.

Meal kits had become one of the many hyped investment opportunities that would change the world and the way we live, or whatever, only to flounder once reality set in.

Whether meal kits are going to remain a thing or get folded into online grocery and delivery services, one thing is for sure: There are zero barriers to entry, and if Americans like using this service, all the giants in the grocery business will jump into it. Another thing may also be true: These services may remain a money-suck forever due to the logistics involved and the prices people are willing to pay.

Blue Apron was valued at $2 billion during its last round of funding in June, 2015. It was one of the most hyped unicorns that would change the world. But by the time its IPO was promoted in June 2017, enthusiasm had already waned, and the IPO price was cut from a range of $15-$17 a share to $10 a share. Just months after the IPO, the company started laying off workers and shutting facilities as it was running low on cash.

At the price this morning of $2.59 a share, Blue Apron’s market capitalization has dropped to $500 million, down 75% from the “valuation” during the last round of funding. There are still hopes that another big retailer will buy it, but those hopes are fading every time a big retailer, such as Walmart today, goes another route.

Despite protestations to the contrary, the brick-and-mortar retail meltdown continues with a mechanistic air of inevitability. Read…  The Brick & Mortar Retail Meltdown, February Update

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  59 comments for “Blue Apron Shares Hit New Low, as Anyone Can Do “Meal Kits,” Even Walmart

  1. Rob says:

    If Corndogs did a meal kit, I would subscribe

  2. mvojy says:

    Meals on Wheels is a nonprofit that serves 2.4 million senior annually with $30.32 million of operating expenses. I don’t think Blue Apron can do the same.

    • Corbin Dallas says:

      You’re missing something though – MoW just cares about helping people modestly, not Disrupting Food or whatever garbage they trot out.

      • fajensen says:

        Disruption -/
        Involuntary bowel movement (see: Singularity, Exponential Thinking).

    • Wolf Richter says:

      When I was in high school, I volunteered a little with Meals on Wheels. I guess the idea was to get kids and the elderly together. This has been around for a while ;-]

      But it’s a charity. It gets donations and is largely operated by volunteers. And it isn’t trying to feed investors but people.

      • Justin Steele says:

        Yes. Volunteers. It’s how to avoid, what I suspect is one of the larger costs for Meal Kit companies, the expense of delivery and getting the product in the front door.

  3. Hirsute says:

    The existence of Blue Apron and others like it is just proof of the Fed financial repression. All of this money creation is not finding it’s way to individuals. Banks have access to free money. Large corporations have access to cheap money. Individuals have to pay at least 400 basis points above index for borrowing and that is for those with good credit scores. Yes, the 1% that control corporations and trade directorships among themselves then have to find a place for all of these excess profits. You can only do so many share buybacks, so we get other malinvestments like Blue Apron.

  4. Tim McLean says:

    APRN is just another example of a unicorn that had no clear path to profitability. The founders of APRN likely cashed out enough of their shares that they will be fine. The investment bankers should be ashamed of themselves for selling APRN to the public. There are many unicorns that may never see the public markets, as the Fed starts tightening.

    I grew up in the 80’s where I was taught to use a discounted cash flow model to value a company. In order to come up with a positive value, there had to be positive CF. Look at TSLA. The WS analysts who are still bullish on this stock at a value of $60 billion are clueless.

    • Hirsute says:

      The “public” should be ashamed of themselves for buying. It’s probably just an agent of the public, though, like a pension fund. Anyway, caveat emptor.

    • Javert Chip says:

      People are free to buy whatever they want. Some willingly make the most ridiculous investing decisions (Bitcoin, Uber, Blue Apron, Netflix, Snapchat…on and on and on).

      When things go bad, they’re suddenly victims, claiming to have been manipulated (or otherwise abused) by capitalism or the Federal Reserve or Russian agents or tricked into taking student loans – anything except taking responsibility for their own decisions.

      If you learned most of what you know about investing from the internet, you simply are not playing with a full set of tools. There just aren’t any participation medals for investing.

  5. Robert says:

    There was a delivered AND completely prepared Gourmet Meal offering during the melt-up and mania. I scoffed at it as I did most of the insane offerings at the time. And I also paid zero attention to Amazon. So I am wrong a lot.

    Now I scoff at meal kits, I do not know why we would use them. I could be wrong again, as Millennials, many of them, share living quarters and don´t drive or own cars. Perhaps they will grow to love meal kits. Can´t say.

    I am a Dinosaur with no online presence, I should say ¨We¨ because my mate has no online presence and does not use any social media either.

    But neither one of us would have predicted ten or twenty years ago that we would be buying ALMOST EVERYTHING (no food or gas) online. As we do now.

    The future is hard to predict, as Yogi Berra might once have said.

    I will qualify my ¨we buy ALMOST EVERYTHING online¨ statement by saying that we know price, quality and value, and have had only two or three online buying disappointments since we made this change. Small ones, easily absorbed, or easily returned.

    I still don´t think we will ever buy a meal kit for any reason whatsoever.

  6. Laughing Eagle says:

    These companies that need a transportation delivery system other than Fedex, UPS, or USPS, must pay to maintain a fleet of delivery vehicles which must be too expensive to deliver low margin food products. Or they unload those costs to someone else who drives their own vehicle, not realizing how inadequately they are being paid, not realizing all their indirect costs and also the increased risk of an accident or some life changing injury.
    I also wonder if an insurance company charges higher rates if you use your car for business or does only go by the yearly mileage driven?

    • Robert says:

      Good points well-made !

      Which got me thinking, the most difficult future events are often the ones that ALL OF US fail to anticipate.

      Gasoline or Diesel fuel at approximately $5.00 per gallon ? Who is anticipating, or planning for that ?

      How about $7.00 ? Or $9.00 ?

      He, don´t say it cannot happen, I woke up one morning in the early 70-s and found to my great pain that the 30 cent per gallon gasoline that so precisely defined my life was gone forever.

      Three-dollar gasoline may meet the same fate, due to unforeseen circumstances, just like happened in the 70-s.

      Don´t say it can happen, but DO TRY to imagine what happens to J.I.T. online ordering of so many things that many of us have come to enjoy.

      I really do like how little I drive now — to get what I need or want.

      Life can change in an instant !

      • Javert Chip says:

        Given US inflation from 1970 to 2018, $0.30 gas in 1970 equals $1.91 gas in 2018.

        Always a good idea to think about uncertainty & the future.

      • Frederick says:

        Robert I must be an older dinosaur than you I remember paying 23 cents a gallon for regular leaded gasoline

        • Robert says:

          You bet ! Good for you, may you collect all of the Social Security that you have coming .

          I remember seeing gas for a quarter when on sale (briefly), and heating oil for a dime — the tiny ad in the local newspaper said these two lines, exactly:
          ¨HEATING OIL 12c,
          10c Cash¨ .
          I remember it so well because I puzzled over it for long while, and then finally asked my mother what it meant.

  7. TheDona says:

    Meal kits of whatever brand are here to stay. Psychologically, perhaps, this will make Trump’s proposition of Food in a box instead of EBT cards more acceptable. And they will probably be delivered by Amazon who eventually takes over the US Postal service.

    • govinda says:

      Called the same thing with Scamazon and USPS merging at some point many months ago. Add in a box of soylent green with your junk mail and you got a winnah!

      • Javert Chip says:

        Bezos would rather chew his own arm off than “merge” with USPS

        • Kent says:

          Agreed, postal workers have decent middle-class incomes, pensions and healthcare. Definitely not the America Bezos has in mind.

  8. Paul says:

    It seems to me Wolf, that the general gist of your articles is that the Fed created this mess of cash which created thousands of investments that can only exist in a free cash system. When that system ends, as you mentioned in your many money death spirals of FED unwind articles, the shit is going to hit the fan.

    Very enjoyable and insightful reading. You are a mile ahead of me in FED speak.

    I would only add that I don’t think the unwind is predictable. My forte is the oil markets. In oil, a small number of nymex futures prices a huge worldwide supply of oil. Paul Tudor Jones started out in the commodity pits. We see markets differently.

    IMO, some markets, like Junk bonds, could resemble an oil hub with inadequate supply. I remember the OTC market in the late 80’s. There were thousands of companies that could not be traded.

    IMO, this downturn cannot be predicted and I’m seriuosly skeptical that our short long geniuses can navigate it. I think Dalio is going to get wiped out. I think the call on muni’s made back in 2009 will ring true. What idiot is going to lend California money. I think half of the transports will trade under $5. Who wants a shipping company that has mnus 10 billion in equity and a defined benefit plan?
    It’s going to be a real goat rodeo.

    On a side note, an old classmate of mine was head of the litigation unit for a major US bank told me once that the geniuses at the bank could get them through any crisis. A year later they were begging for a bailout.

    • fajensen says:

      It seems like your classmate was right:)

    • MooMoo says:

      “In oil, a small number of nymex futures prices a huge worldwide supply of oil.”

      Incorrect. That market is a reflection of what is happening in the cash markets and physical markets…. not the other way around. In Europe the 15-Day Brent market and DTD-Paper CFD’s have far for impact than the measly futures world.

      The NYMEX world is a pimple on the ass of an elephant compared to the cash markets.

  9. Wuzzy says:

    Somehow this reminds me of TV dinners.

    • Prairies says:

      It is TV dinners, only “fresh”. TV dinners still exist because they don’t pay near as much in freight or warehousing. This free money, hi-tech generation is in for a wake up call when they find out debts need to be paid in the real world. –side note– freight companies are making a killing right now.

      Or am I the one in fantasy land… All logical concepts I learned growing up are being ignored in today’s society and it has me torn on what sanity really is.

    • Duke De Guise says:

      TV dinners with Hyper-Bourgeois affectations.

    • Paulo says:

      Beat me to it. I was going to say, Swansons Meat Pies.

      When my mom was suffering Alzheimers and we were still trying to keep her at home we used to buy pre-fixed meals for one from a local supermarket. She had Alzheimers. I wonder what possible excuse there is for functioning people to buy pre-packaged meal kits?

      When she started to store them in the cupboard, well…..

    • ScottS71 says:

      Agree TV dinners seem to fit the budget of the majority. Back in 2000, in London, their was a company selling meal kits at the train station, 20£ for a single salmon meal, okay for bankers maybe but far from a massive market penetration with an IPO future.

      • alex in san jose AKA digital Detroit says:

        Hamburger Helper is a meal kit … so’s Kraft Mac & Cheese … lots of things like that, where you get one ingredient like hamburger, or milk, and then the kit provides the rest.

        Hell a can of Hormel Chili was a great meal kit when I was a kid. Scramble eggs, heat up chili, and dump on top.

  10. If Albertsons can deliver meal kits and make money and pass the savings on to me, I am all for it. I buy instore and mostly unprocessed foods. I see high end services as a subsidy for low end consumers, but I am not sure it always works out that way.

  11. Lune says:

    Actually Wolf, these services have an incredibly high barrier to entry: you must have a logistics, distribution, and supply chain that’s large enough to make these types of deliveries profitable.

    That’s the problem with so many startups. They assume the hardest thing is the tech (in this case, the app), and the rest of the world is just a bunch of stupid “old-school” idiots who don’t know how to run things and are ripe for “disruption”. What they do obviously can’t be hard.

    Delivery startups have no idea how finely honed modern supply chains and distribution systems are, and how much time, effort, and smarts are required to keep them functioning. They just assume they can outsource that to FedEx (Which you can, for a price, of course) and focus on the app, which is the easiest part of their business model.

    I see similar things with startups that want to build stuff. They assume the hardest part is the design, and they focus all their attention on these gee-whiz designs that are incredibly hard to manufacture. And then they assume you can just throw the blueprints over to some contract manufacturer in China who’ll somehow make them for you for 5 bucks apiece.

    If you press them and ask them if they have any idea how much time and money is required to oversee multiple iterations of prototyping, redesigns, etc. to get something that’s reliable and cheap to make, they’ll usually give you a blank stare, and then tell you the answer is 3-d printing.

    It’s the same story in every industry (even complicated stuff like healthcare). Startups assume that their part i.e the tech is the hardest stuff, and that the rest is old-school stuff run by idiots and can’t be that hard to figure out. Then they go bankrupt when that “easy stuff” turns out to be not so easy…

    • Wolf Richter says:

      I agree with what you say except the barriers to entry. Two people can get together and start a local meal-kit company, delivering the stuff themselves on their bicycles. No barriers to entry. And they might actually be successful, just the two of them servicing the neighborhoods they can reach on their bicycles.

      The problem is that there are no economies of scale. If they want to do twice as much business, they’ve got just about twice as much in costs. These are “variable costs.” Once they multiply by 10 or 20 or whatever, they have even more costs because they’re starting to lose control as they ramp, and they have to put in control systems and management and offices to keep it under control. These are “fixed costs” that are now rising.

      There are lots of companies that perform the delivery (Uber Eats being just one of them). So you don’t need to set up the delivery infrastructure. But costs are the killer. And these costs may rise faster than sales. This is a deadly combo.

    • Michael Fiorillo says:

      Revenge of the Analog World…

    • Cynic says:

      A customer of mine used to run a global infrastructure and engineering company.

      When he hears the words ‘creative disruption’ his eyes start rolling………

    • ScottS71 says:

      This is a great post and says a lot about current state of design. a lot of know how has ben transferred to China and bright, western, kids just have an idea. We deal with this all the time; great on paper but un manufacturable. But we have dealt with high end firms too and they know what they are doing. but you need to pay for it. 2 years ago the Coolest cooler hit Kickstarter and it is a prime example of not knowing what “they”, the un experienced, are thinking. some say they are scammers but I think they just dont have the experience. Products are hard to make at a price that fits the market, in any coutry.

  12. Ed T. says:

    I guess home cooked meals have gone the way of the dodo bird.

    • William Smith says:

      If you want to eat plastic crap full of sulphites (which cause dementia) and vegetable oil which causes blindness (“macular degeneration”: it’s real: search it) and other chinese sourced ingredients with industrial chemicals and heavy metal contamination, then by all means, eat processed (so-called) “food”. Fast “food” (frankenfoods) are processed in industrial chemical factories and are deliberately massively adulterated by “food lientists” (most scientists lie as “scientific facts” seem to change all the time: see “Ancel Keys” food lientist who single handedly made america fat) so that it becomes toxic. It is *impossible* to beat evolution in designing anything; including food. When you abrogate your responsibility in choosing the best quality foods (for convenience), you are creating a health and fatness debt which you *will* pay as you get older. It is a lie to say that it is either more expensive or slower to eat minimally processed stuff. And if you say that you “don’t have the time” to shop for real food, then you ain’t doin’ life right. Natural foods are just as fast as the packaged crap, without the extra chemicals, sugar and salt which “science” is *now* saying are very bad for you. Every time I see adverts on TV for these boxed “food offerings”, I am wondering just what percentage of the cost of the “box” is advertising. Whereas the local grocery shop (you still remember those don’t you?) does not have these costs built in to their goods. I am glad that these idiot investors are getting burned for these cockamamy schemes. It reminds me of the Juicero fiasco: let’s make a new fangled “cyber” thing to complicate and expensify a formerly simple and basic process. Meanwhile we will be called a “unicorn” and siphon off billions from all these “smart and hip” investors, then sail away happily on a golden parachute with a plan for the next big “disruption” (which will be different next time; you’ll see).

    • Frederick says:

      Not here in Turkey We have home cooked food places everywhere and they are inexpensive and delicious Same thing in Warsaw Poland They still have communist era so-called “milk kitchens” and they are dirt cheap and darn good where homeless and college kids can get a good hot bowl of soup for fifty cents

  13. Bill says:

    Perhaps the Wal-Marts of the world are positioning themselves to implement some variation of Trump’s suggested food-in-box EBT cash replacement. It would make some sense, in that government could never deliver boxes of food as efficiently as a private company. And the private company could receive more in payment from the government than the open market would permit.

  14. Bobber says:

    I finally got my wife to quit hello fresh. Average meal was $40 for four and it came in too much packaging. Very hard on the environment. By the way, they make it very hard to quit. You’ll have to call them three or four times to get it canceled, which is another sign they are struggling.

    • Wendy says:

      “You have to call them 3 or 4 times to cancel” is perhaps not so much a sign of them struggling, but part of their business model as how to “retain” customers. Wrong, but profitable.

      • Harambe says:

        Heck, they won’t even let you redeem a gift card without providing a credit card and signing up for a subscription.

  15. Blues says:

    My meal kit is a lunch-box. Should I go public?

    • fajensen says:

      You first need to provide an app to direct a cluster of robots to perform the assembly of your sandwiched and their subsequent integration into the lunch box. Thats the kewl tech factor.

      There needs tp some form of subscription scheme for the lunch boxes … something that generates a stream of payments that can be securitised and turned into a high-yield bond via an off-shore black box entity so those payments can be “pulled from drips & drops in the future and into Now” as one lump sum by selling the bonds. Thats the “Make money Now” – part.

      Once that is in place, I guess you can get maybe 2 Trillion in Sil-Con funding. Easy.

  16. Night-Train says:

    Glad you did this article Wolf. Seeing the commercials for these outfits has left me scratching my head. Granted things will go in more cosmopolitan areas than will go in my neck of the woods. But l still couldn’t come up with a workable model for the consistent quality needed to maintain a loyal customer base.

  17. ScottS71 says:

    Great article and coupled with your last one.. retail investors run for cover.. It gets me thinking that their must be an investment approach by the VCs and Institutional with what to do with the free money they have and where to place it to make a return any payback what they borrowed. On the institutional, side it seems they will be able to get out in time to make a buck but does that leave the public holding the bag (retail investors that bought and dont know when to sell)? On the VC side, it seems like they have more risk pre IPO. Are any of these firms in trouble? And as you have pointed out, Wolf and Don, large Coprs are struggling to repay their debts from borrowed money.

    • ScottS71 says:

      Sorry Wolf’s last article was “Retail Investor Bullishness Collapses” not institutional, so glad to see retail investors exiting…

  18. raxadian says:

    150 companies? The market is not big enough for more than 15 big meal-kit “brands” and that’s being optimistic.

    The price war is gonna eat at the very least a fourth if them by the end of the year.

    Hey anyone here remembers the Pizza Wars?

    • Frederick says:

      Nope I only bought pizza from Espresso market and Conca DOro in my little village when I lived in NY Knew the owners personally and never worried about what went into the pie

  19. doug says:

    I think Walmart has a good chance of succeeding.

    Two income families leave little time for meal planning. Just because it is pre thought out and boxed up doesn’t have to mean it is crap processed food. Some are just learning to cook and enjoy the decisions being made for them, while provide good healthy meal for family.

    We will see. I have no idea if walmart will offer ‘good’ food, but there is plenty in their stores if they wish.

  20. Vichy Chicago says:

    And think of all the podcasts that Blue Apron supports. So much collateral damage.

    • Larry says:

      Me Undies, Blue Apron, etc., etc. There seems to be an army of “digital” businesses that market principally through podcasts.

  21. Enrique says:

    Sometimes I wish I lived in a Black Mirror-esque world where you could just forever mute/block real people. For example, every time someone unironically uses “disrupt/disruption/disruptor” in my presence. Click. Blocked.

    Or when someone speaks of a startup involving some wheel that has been invented/reinvented/invented again as a “tech company.” Because of, uh, it’s an app or something. Click. Blocked.

    Saw a television advert recently for some nonsense called (IIRC) “Shipstixx” that apparently uses an app to ship one’s golf clubs to the golf resort one is intending to visit on vacation in the near future. Now how much VC money was wasted buying that ad? At what point during the pitch to some siliCON valley VC morons were the terms “disruption” and “tech company” uttered? Because you know both were.

  22. AC says:

    Horse drawn wagons were delivering bread and milk to homes, at least two centuries ago in the US. In the early 1900s, they switched to delivery trucks, and apparently sometime in the 1960s, these deliveries stopped.

    I suspect it was because these things only work on a small, local, scale – and aren’t economical with the 12 or more layers of useless management between the delivery man and the customer, which you might find in the corporate entities that were metastasizing in the country around that time.

    It could also be that it was regulated into the abyss by excessive government, I just don’t know.

  23. Larry says:

    I think I have evidence that the meal kit has jumped the shark and moved out of the fad phase into full collapse. My local market, Big Y, has small end caps in the meat section with 2-4 person meal kits. Very narrow selection, they’re obviously testing the waters. But I can tell you for a fact, that the majority of Big Yshoppers have no idea what Blue Apron is, nor do they like the idea of a meal kit. I guess I should check on Demoula’s Market Basket to see if the trend has truly jumped the shark.

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