Does Blue Apron’s ‘meh’ IPO spell trouble for meal kit services?
Could it be that meal kits aren’t destined to disrupt the foodservice and retailing worlds after all? Despite high expectations, Blue Apron’s initial public offering (IPO) didn’t go as well as expected yesterday. That has once again raised doubts about whether meal kit delivery can move from its current niche to capture the dollars of American consumers on a mass scale.
Blue Apron was looking for its share price to range from $15 to $17 before the first of its shares were sold. Instead, its stock never rose above $11 per share, finally closing at its opening price of $10. Some investors, according to Reuters, were apparently concerned about the IPO following so closely behind Amazon.com’s $13.7 billion bid for Whole Foods. Others see Blue Apron’s heavy investment in marketing as unsustainable beyond the short term.
Blue Apron founder and CEO Matt Salzberg was not outwardly discouraged by the stock’s performance on its first day. In an interview on CNBC’s “Squawk on the Street,” he said, “We’re focused on the long term, and the stock price today whether it’s up, down, left or right is really just the beginning of this new chapter in our company’s life, and were excited about it.”
According to a recent Market Force Information report, Blue Apron is the most popular of the meal kit delivery services currently available. Thirty-nine percent of those who have tried meal kit services have used Blue Apron, followed by Hello Fresh (30 percent) and Home Chef (10 percent).
Much of the buzz around meal kit services has centered on its potential. A recent report by Pentallect puts the size of the current market at $2.2 billion with annual sales growth projected to range between 25 percent and 30 percent over the next five years. The firm estimates fewer than four percent of households have tried a meal kit service.
The potential of the market has led to companies including Amazon.com, Campbell Soup, Kroger, Nestlé USA, Publix and Unilever either buying into third-party services or developing their own meal kit offerings.
Sun Basket, a provider of meal kits featuring organic foods, recently picked up a $9.2 million investment led by Unilever’s venture capital arm. The service plans to follow Blue Apron in filing an IPO it hopes will raise its valuation to $1 billion.
- Blue Apron Holdings, Inc. Announces Pricing of Initial Public Offering – Blue Apron Holdings, Inc.
- Blue Apron’s Shares Flat in Trading Debut – The Wall Street Journal
- An IPO was Blue Apron’s destiny: CEO Matt Salzberg – CNBC
- Meal-kit maker Blue Apron goes public, demand underwhelms as Amazon looms – Reuters
- Will Unilever’s investment in an organic meal kit maker pay off? – RetailWire
- Will consumers decide meal kits just aren’t worth buying? – RetailWire
- Meal Kits: Are They a Real Threat to Foodservice, Retail or Both? – Pentallect
DISCUSSION QUESTIONS: How do you explain the lukewarm performance of Blue Apron’s initial public offering of stock? Will the lack of enthusiasm have any effect on retailers and food manufacturers that are currently making their own meal kit investments or considering it?