Should Starbucks acquire Blue Apron?

Discussion
Photos: Getty Images; Blue Apron
May 15, 2018
Matthew Stern

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?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"...just because Blue Apron has a similar audience doesn’t mean you can change the product’s entire value proposition to fit in. "
"Some sort of partnership with Blue Apron could be interesting."
"Avoiding retail distribution partners because they introduce a competitive private label offering is short-sighted and an almost universal risk..."

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15 Comments on "Should Starbucks acquire Blue Apron?"


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Dr. Stephen Needel
BrainTrust

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.

Phil Masiello
BrainTrust

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.

James Richards
Guest
11 months 3 days ago

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.

Neil Saunders
BrainTrust

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.

Christopher Jordan
Guest

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.

Lee Kent
BrainTrust

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.

Patricia Vekich Waldron
BrainTrust

Starbucks customers want caffeine, convenience and community, none of which are in Blue Apron’s wheelhouse.

Gabriela Baiter
BrainTrust

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.

Rich Kizer
BrainTrust
I read this article and then went to the “high-volume” Starbucks I visit every morning, except Sunday. And I asked questions of both baristas and customers. Today my impromptu and very casual focus group consisted of high volume, upscale customers. Many of these customers consistently purchase food, and so I stopped the food purchasers this morning. I asked if they liked the selection of offerings, how frequently they bought food, and and when they ate it. Most of the purchasers said they bought 3 to 5 times weekly. I inquired about selection expansion, and inquired if they would like to see more. Many of the customers said they were fine with the selections, but they would welcome larger selections (not a surprise answer). When do they eat their early morning purchase? Most replied that they eat their food immediately in the car during rush hour (the most frequent response), with a few stating it was for lunch later. No one claimed to stop in during their trip home to purchase more food. I even asked… Read more »
James Richards
Guest
11 months 3 days ago
I first had to go to the ICON Meals website to understand what Brittain is suggesting and my 2 cents is that the idea is brilliant. Starbucks has been criticized by a large number of analysts for not offering better food options. A search of the internet pulled up several articles calling out Starbucks for their lack of food options with two articles mentioning prepared meals as options for Starbucks. Brittain isn’t suggesting that Blue Apron move away from what they’re doing today, he is suggesting that Blue Apron diversify into ready-to-eat meals and protein snacks to complement their business model. Why is it hard to imagine Starbucks selling ready-to-eat meals that according to the ICON website, only take 2 minutes to heat in a microwave? How does Starbucks prepare the sandwiches that customers order today? By heating them in a microwave. Brittain is also recommending that Starbucks can acquire Blue Apron and give their customers access to Blue Apron’s actual meal kits that customers will prepare on their own. This is Blue Apron’s core… Read more »
Veronica Hernandez
Guest
11 months 3 days ago
I have to join this discussion as there are too many critics of the idea. I am also at Starbucks with my coworkers and we engaged half a dozen people here at Starbucks to see what they had to say. Britt Ladd…your idea is FABULOUS!!! These are the comments: Love the idea. I would rather buy a meal and take it with me for lunch than eat muffins and an egg sandwich. Wow, I’ve never even thought of Starbucks selling Blue Apron. Makes perfect sense. Can I buy meal kits to take home with me? I’m really surprised this hasn’t happened sooner. My wife and I would buy Blue Apron ready to eat meals in the store but the value to us is buying Blue Apron meal kits we can make at home and get loyalty points to use at Starbucks. Great idea. This is the best comment from two Starbucks employees: What a great idea. Customers always come in wanting better options for breakfast and lunch and meals that can be heated would be… Read more »
James Tenser
BrainTrust

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?)

Brittain Ladd
Guest
I love the discussion. Thank you again, RetailWire, for writing the article. Several readers are at Starbucks and they contacted me through LinkedIn. I understand why some people are against the idea as Starbucks and Blue Apron seem an odd combination. All I can state is that I completed a project for a client where this topic was part of my research. I visited 100 Starbucks stores in 15 states; something not easy for me to do as I don’t drink coffee. I engaged customers who left the stores and I asked them a series of three survey questions related to food. The results of the survey are why I came up with the idea for Blue Apron to acquire Icon Meals and for Starbucks to acquire Blue Apron. The bottom line is this — Starbucks is underutilizing their stores for food. Blue Apron may or may not be the best option to fill the void but nevertheless, a food void exists according to the people who matter most — customers. Starbucks customers voted favorably… Read more »
Kenneth Leung
BrainTrust

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.

Jeff Miller
BrainTrust

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.

wpDiscuz
Braintrust
"...just because Blue Apron has a similar audience doesn’t mean you can change the product’s entire value proposition to fit in. "
"Some sort of partnership with Blue Apron could be interesting."
"Avoiding retail distribution partners because they introduce a competitive private label offering is short-sighted and an almost universal risk..."

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