Should Starbucks acquire Blue Apron?
Blue Apron’s recently announced partnership with Costco is meant to help the meal kit provider out of a year-over-year slump. But one consultant who spoke with RetailWire saw the Costco deal as a poor move for Blue Apron. Consultant Brittain Ladd envisions an acquisition by Starbucks as Blue Apron’s real meal ticket, though the success of this hypothetical buyout would also depend on Blue Apron shifting gears.
“Blue Apron needs to diversify by entering the ready-to-eat meals and protein snacks business,” Mr. Ladd said. “Specifically, I recommend that Blue Apron acquire ICON Meals, a leader in both categories. ICON offers meals for breakfast, lunch and dinner and sells a line of protein snacks.”
Mr. Ladd sees Starbucks’ thus-far weak performance with food as something that could be reversed by properly presenting ready-to-eat meals from Blue Apron. The demand, he says, is there, citing surveys that reflect 50 percent of Starbucks customers wanting more food options. He suggests discounts when food and coffee are purchased together, and giving customers Starbucks rewards for purchasing online meal kits from Blue Apron.
Mr. Ladd also notes a branding synergy with Starbucks not present with Costco.
“Blue Apron is a premium brand. Starbucks has an opportunity to better leverage their stores to add value to customers by offering premium food products,” said Mr. Ladd.
As for the current Costco deal, Mr. Ladd saw it as setting up Blue Apron to get undercut.
“Blue Apron should only sell their meal kits through Costco if Costco [were to acquire] Blue Apron and made the brand their primary meal kit,” said Mr. Ladd. “At some point, Costco will sell their own branded meal kits at a price point lower than Blue Apron. Blue Apron will be forced to reduce the price of their meal kits even more, further diluting their brand and online sales.”
Were a Starbucks acquisition of an improved Blue Apron to happen, on the other hand, Mr. Ladd sees it as Starbucks’ first step down the path toward innovation and differentiation in food.
“Acquiring Blue Apron is an inexpensive opportunity for Starbucks to enter multiple food categories that will delight customers and increase revenue,” said Mr. Ladd.
DISCUSSION QUESTIONS: Would Brittain Ladd’s two-pronged approach — Blue Apron’s purchase of ICON and Starbucks’ acquisition of Blue Apron — yield success for all parties involved? Would Blue Apron ready-to-eat meals and protein snacks boost Starbucks’ lunch and dinner food sales? Do you agree that an acquisition by Starbucks offers Blue Apron better prospects than a partnership with Costco?
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15 Comments on "Should Starbucks acquire Blue Apron?"
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Managing Partner, Advanced Simulations
I’m not sure the demand for meals is there at Starbucks, despite half the people wanting more food choices. Half the people anywhere will tell you they want more food choices. Pushing meals would be a fundamental change for Starbucks and one that would go against their current positioning.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
I am not sure I see the fit with Starbucks. The Starbucks customer wants more food choices to eat now. Blue Apron sells meals that need to be prepared.
Costco would be a better acquirer of Blue Apron than Starbucks. It may be that Costco is just testing the waters on the meal kit business and plans to acquire Blue Apron after proving the concept.
Brittain is suggesting that Blue Apron buy a company that makes ready-to-eat meals and sell those meals inside Starbucks stores. Blue Apron meal kits would be available online.
Managing Director, GlobalData
Starbucks needs to develop a much better food proposition. Customer ratings for its current offer are poor and while it does OK at breakfast, it is really underperforming at lunch and dinner. This is a massive lost opportunity, especially at a time when growth from coffee sales is slowing.
Some sort of partnership with Blue Apron could be interesting, especially if Starbucks used its stores as places where consumers could collect meal solutions on the way home from work. Of course, this would require a change in store format, marketing and many other aspects of the proposition. However, it is definitely something worthy of exploration.
Chief Business Officer, Hubba
I’m not following this suggested strategy. There are a number of things that don’t add up.
Blue Apron’s wheelhouse is rooted in the “experience” — the act of having to cook the product yourself is part of the value proposition. I don’t see any overlap with Starbucks’ core competencies (i.e. focus is ready-made, convenience). Moreover, with the Nestle deal, it’d be tough to even construct a secondary argument around a Starbucks partnership/deal adding strategic benefit within traditional retail. The Nestle announcement clearly indicates retail distribution isn’t going to be an area of focus for Starbucks.
Avoiding retail distribution partners because they introduce a competitive private label offering is short-sighted and an almost universal risk that isn’t specific to Blue Apron.
Principal, Your Retail Authority, LLC
I too do not follow this strategy. It appears to be asking Blue Apron to become something they are not already and that is “ready to eat.” The Starbucks customer may pop in for a cup of coffee to-go, however what are the stats showing that they want to take their food option home and then make it? This dog isn’t ready to hunt yet — for my 2 cents.
Contributing Editor, RetailWire; Founder and CEO, Vision First
Starbucks customers want caffeine, convenience and community, none of which are in Blue Apron’s wheelhouse.
Founder, Whereabout Studio
You can make an argument for Starbucks to acquire any ready-to-eat meal company. However, just because Blue Apron has a similar audience doesn’t mean you can change the product’s entire value proposition to fit in. People equate Blue Apron with DIY meal prep, not ready-made, period.
The only way I can see this working is if Starbucks kept the integrity of the product and served it up for the late-night crowd (4 p.m. to 8 p.m.) who is working late and needs an easy solution.
Either way, it’s a stretch.
Principal, KIZER & BENDER Speaking
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Both Starbucks and Blue Apron need to evolve their business models for different reasons. Starbucks has a large footprint and loyal customer base and seeks to grow revenue by further diversifying its offerings to encompass more food choices. Blue Apron delivers a high-quality product, but its subscription service doesn’t mesh easily with every household, which seems to have limited its growth.
As far as I can see, Blue Apron’s primary assets are its brand and its core loyal base of customers. I wonder how many of its customers already overlap with Starbucks?
The key question in this instance is, “How will this business combination deliver benefits?” It could convert Starbucks stores into a vast pick-up network for Blue Apron meal kits. It could extend the Blue Apron brand into a wider assortment of products. It could support a broader menu of food choices in Starbucks stores. (But does it need to acquire an existing business to do that?)
Strategy and Digital Consultant
Retail and Customer Experience Expert
Don’t get this one. The Starbucks acquisition of La Boulange didn’t work out, so I don’t see Blue Apron adding to the mix. People don’t go to Starbucks for meals, they go for coffee and a snack, and in a pinch they grab food for lunch. A coffee house brand and Blue Apron joining makes as much sense as mixing coffee and tomato soup.
Director of Marketing, OceanX
I am not sure that there are any real synergies here in this multi step approach. Starbucks can certainly test more ready made foods on their own and brand them Starbucks as opposed to having Blue Apron on their shelves and menus. Blue Apron does not have a better brand than Starbucks and I don’t think they have any true operational efficiencies beyond what Starbucks has. I would agree that a Starbucks partnership would be preferred to Costco but not sure that was an offer.
Seems like perhaps this analyst is trying to use storytelling and PR to move Blue Apron view in the market.