Is Blue Apron smart to pin turnaround hopes on Weight Watchers alliance?

Discussion
Photo: Blue Apron
Jan 02, 2019
Tom Ryan

Blue Apron, the meal kit pioneer, is hoping that a new partnership with WW Inc., formerly known as Weight Watchers International Inc., will help stabilize its business.

Under the program, Blue Apron will collaborate with WW’s nutrition and wellness experts to design a weekly rotating selection of recipes inspired by the WW Freestyle program, which allows WW members to eat certain foods (such as chicken, fish and beans) without counting calories.

For Blue Apron, the deal provides access to WW’s 2.8 million members in North America.

“Historically, we’ve been going out and acquiring one customer at a time,” Blue Apron CEO Brad Dickerson told The Washington Post. “This is a great way for us to get our brand in front of multiple customers at a time.”

WW earns a fee for every subscription it secures. The cost is the same as Blue Apron’s existing two-person plan that includes three recipes delivered weekly for $59.94, equaling $9.99 per serving.

Blue Apron, which went public in 2017, saw its stock price recover slightly on news of the WW deal, but is still trading barely over $1.00 as the meal-kit category hasn’t grown as much as expected. In the third quarter, Blue Apron’s subscriber base fell 25 percent year-over-year to 646,000.

The category has suffered from saturation with numerous other startups such as HelloFresh as well as retailers such as Kroger, Albertsons and Walmart coming out with offerings. On the demand side, Blue Apron has found that many customers want more flexibility than the locked-in subscription model.

In November, Blue Apron set a turnaround plan that included focusing even more on the top 30 percent of its customers who generate more than 80 percent of the company’s net revenue. Much of Blue Apron’s losses have stemmed from heavy marketing costs, including free trials to reach new customers.

A second initiative is to partner with retailers with on-demand offerings, including selling through Jet.com and Costco.

For WW, the partnership follows a rebranding in September that broadened its approach to helping people “reach all their wellness goals, not just weight loss.”

Will the WW partnership pay off for Blue Apron? What should be at the core Blue Apron’s turnaround strategy?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The once scalding hot meal kit category has turned lukewarm at best. Deals like the Blue Apron/WW one will be key to differentiate and expand compared to the competition"
"WW clients are meal planners, so there is a match there. However, there are only 2.8 million WW clients, so Blue Apron will need to find additional ways to fuel growth."
"The one point of view I’d add here is that this does address a few barriers for Weight Watchers — busy people and a desire to limit packaged foods."

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17 Comments on "Is Blue Apron smart to pin turnaround hopes on Weight Watchers alliance?"


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Mark Ryski
BrainTrust

As the meal kit market continues to tighten based on competitive pressure, finding new sources of customer acquisition will be key – Blue Apron’s partnership with WW is a smart move that can’t easily be replicated by the plethora of competitors in the space. Ultimately, the success of the WW partnership will come down to take rates. Blue Apron was one of the strong early entrants in the meal kit category, but to achieve sustained, profitable growth, it will need to continue to find new ways to acquire and retain customers — strategic partnerships like the one with WW are a good start.

Gene Detroyer
BrainTrust

The problem with the meal kit business model is that it teaches people how to cook and why they don’t need a meal kit. They might get a kick from WW but, in the end, WW members will either cook for themselves or buy WW prepared meals.

Dr. Stephen Needel
BrainTrust

No – the partnership won’t pay off. Doesn’t mean it’s a bad idea, but don’t expect this to turn around Blue Apron (or WW, for that matter). The maximum potential reach is 2.8 million, of which we imagine very few are already subscribers. I don’t see how they will get enough new people to turn around a failing business.

Tom Dougherty
BrainTrust

Blue Apron and WW is a mismatch.

I would have suggested they launch a new flanker brand. The Weight Watchers market is quite different, and looking for different pay-offs, than the market Blue Apron originally positioned itself in. Blue Apron and WW have different brand permissions. This is a disaster for Blue Apron. Not so for WW. They can only win in this venture.

They key here is the idea of stabilizing. Blue Apron created a market and then squandered their lead. Stabilizing is, after all, a defensive term. And, as Napoleon said “the logical end of defensive warfare is surrender.”

Dave Bruno
BrainTrust

I completely agree re: re-branding Tom. Both WW and Blue Apron’s long-term objectives are compromised if this ships under the Blue Apron banner.

Richard Layman
Guest
13 days 17 hours ago

Besides the reality that there probably isn’t a sustainable business in meal kits for any firm (anyone remember the brief trend of “meal assembly stores” in the early 2000s?), merely a line of business within grocery, that is best able to be offered by grocery stores where the cost to prepare and distribute is much cheaper compared to home delivered meals, this makes sense for Blue Apron. But only if the WW relationship isn’t one-off; if they can create similar relationships. That being said, there are few such opportunities. (I say this having worked at one time for the nation’s largest consumer group concerned with food and nutrition.)

Michael La Kier
BrainTrust

The once scalding hot meal kit category has turned lukewarm at best. Deals like the one Blue Apron struck with WW will be key to differentiate and expand compared to the competition.

Neil Saunders
BrainTrust

This isn’t a bad idea, mainly because those who are on a calorie controlled diet are more inclined to meal plan. However, the issue remains that the schemes are restrictive and tie people into plans that they sometimes don’t wish to follow. That limits membership. With competition from supermarkets offering meal kits growing, I suspect that more people will opt for the flexibility of being able to buy ad-hoc from a grocer rather than subscribe to a plan.

Phil Masiello
BrainTrust

It’s great to have access to those customers. However, the problem with Blue Apron and other meal delivery services comes down to three problems that this partnership does not address. First, the inherent economics in the cost of creating and shipping these meal kits. It is generally higher than the revenue generated from the orders. Second, getting consumers to see value in paying more to feed their families in exchange for the time they are getting back by having the meal prepared for them. Third and probably most important is retention. The cost of acquiring a new customer can only be overcome by keeping that customer for several years and purchasing at least once per week.

I am surprised they are still hanging on. But until these points are addressed by the company, the result is not going to change.

Richard Layman
Guest
13 days 17 hours ago

Yep. The cost per portion is at least twice the cost of buying and preparing food yourself. It seems cheaper though compared to buying a restaurant meal, where it is one-third to half the cost. E-commerce isn’t just about reducing item cost. It can be about getting people to pay more for items too.

Georganne Bender
BrainTrust

A couple of things come to mind here. First, it’s a good deal for Blue Apron because WW has a far reach. That being said, Weight Watchers has always been about finding good things to eat in everyday foods. It’s a lifestyle change, not a diet. Blue Apron supplies recipe kits, so is WW branching out to become more like Nutrisystem?

And secondly, I can’t get past the new moniker. To those of us who are 50+ WW will always stand for World War.

Art Suriano
BrainTrust
There might be some potential here for success, but there are a few considerations to keep in mind. WW which has been in existence since the 1960s has always prided itself on teaching people how to eat healthily and properly on their own. Unlike other competitors like Nutrisystem where you lose weight fast, you’re forced to buy the company’s products which are expensive, and typically once you go off the program, the pounds usually come back and for many, rapidly. I’m not comparing Blue Apron food products to Nutrisystem, but some customers may see it that way. Also, the main problem is Blue Apron still is expensive. So the appeal will be for the career-minded people who can afford it and don’t have the time to cook healthy on their own. Blue Apron would be smart to create and feature some exclusive WW meals with incentives for trying them. With access to 2.8 million WW customers, there’s no reason for Blue Apron not to make sales. However, how many sales will be determined by the… Read more »
Laura Davis-Taylor
BrainTrust

The one point of view I’d add here is that this does address a few barriers for Weight Watchers — busy people and a desire to limit packaged foods. My mom just finished up a successful run with Nutrisystem and the foods she ate were 60 percent frozen or packaged — which means tons of preservatives, salt and other icky stuff. Weight Watchers has many packaged items too, but to eat only fresh with them requires prep time and planning — meaning time. I’ll be watching this with interest. I think it has some potential.

Evan Snively
BrainTrust
I have to believe the fees paid to WW are a more cost-effective approach than the free trials that they currently rely on, unless of course WW members can also get a free trial, which would compound the acquisition cost. The upside is WW members are certainly predisposed to paying a premium because of the effort they are already making towards this area of their lifestyle. Blue Apron might be wise to create a special profile/dashboard for WW members utilizing some gamification tactics and WW data to create a stickier and more unified UX. Keeping the funnel healthy is a necessary evil for any company, but at the end of the day Blue Apron needs to put more effort into enhancing the excitement that their product offers throughout the journey. Focusing on their top 30 percent will allow for execution of that goal, so it gets my stamp of approval. The novelty of unboxing and eating the “Turkey Taco Bowl” no doubt experiences diminishing returns at some point – customers need more. The experience of… Read more »
Mohamed Amer
BrainTrust

Blue Apron has to demonstrate not only increasing sales, but loyalty in the form of repeated sales. Partnerships such as with Weight Watchers are important and can be mutually beneficial especially given WW’s broader wellness goals.

Blue Apron will find greater traction through a strong network of retailers and wellness companies – this is a much less costly “customer acquisition” strategy than a solely direct consumer strategy. This will increase consumer awareness and wrap their offerings in a larger lifestyle experience that leverages established brands.

Dave Bruno
BrainTrust

I think this move had potential but, as Tom suggested in his comment, I think this may have been better executed as a stand-alone brand for Blue Apron. That being said, I do think there are lots of ways that Blue Apron can add value to a WW client. They can teach them that eating healthy is possible, and that you can do so with food that stretches far beyond the preservative-laden packaged foods that WW sells. Including healthy/weight-management cooking tips with each meal can help WW clients learn how to cook healthy foods. This actually has the potential to help create lifestyle changes, if executed properly, and Blue apron has a chance to integrate into that new lifestyle for the long haul. In addition, WW clients are, by nature, meal planners, so there is a match there. However, there are only 2.8 million WW clients, so Blue Apron will need to find additional ways to fuel growth. I would suggest a much deeper focus on their top 30 percent.

Craig Sundstrom
Guest

I think the success of this partnership will depend on Blue Apron retaining its own identity. Otherwise it will simply become “the Weight Watchers Diet Plan” and while that isn’t necessarily a bad future, it is a limited one.

wpDiscuz
Braintrust
"The once scalding hot meal kit category has turned lukewarm at best. Deals like the Blue Apron/WW one will be key to differentiate and expand compared to the competition"
"WW clients are meal planners, so there is a match there. However, there are only 2.8 million WW clients, so Blue Apron will need to find additional ways to fuel growth."
"The one point of view I’d add here is that this does address a few barriers for Weight Watchers — busy people and a desire to limit packaged foods."

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