Investors with a fierce appetite for growth are keeping an eye on Blue Apron (NYSE:APRN). The meal-kit delivery service, widely recognized for its organic meals shipped right to the consumer’s doorstep, made a name for itself with one of the most valuable IPOs of the year.
As the health-food trend continues to grow at a remarkable rate across the country, hungry consumers have their eyes set on companies like Blue Apron, which filed for an initial valuation of $100 million.
Recent developments such as Amazon's (NASDAQ:AMZN) acquisition of Whole Foods (NASDAQ:WFM), however, have turned some investor’s stomachs sour, and jeopardized Blue Apron’s competitor’s growth potential.
As far as potential investments go, Blue Apron is nonetheless well-positioned to exploit recent disappointments and make a name for itself; following Snap's (NYSE:SNAP) lackluster performance after its initial
blockbuster IPO, hungry investors are eager to find a unicorn worth backing.
But before it can grow, the company will need to reassure investors with cold feet following Amazon’s entry into the marketplace, and make up for it’s disappointing net income of only $3 million thus far this year.
A big challenge
Dealing with the e-commerce giant will be no easy task for Blue Apron, which potentially only has a market value $3 billion and the top end of expectation, against Amazon’s behemoth, valued at $475 billion. The company must demonstrate that it’s unique business model is an adequate guarantee that it will remain viable well into the future.
Blue Apron’s explosive early growth, such as its 338% year over year gain from 2014 to 2015, set the bar high. Yet after disappointing growth of only 133% from 2015 to 2016, the company must show it’s capable of profit before investors put serious cash on the line; increasing sales past its current eight million deliveries per month may be its best bet to impress.
While it faces stiff competition in the rising food delivery market, Blue Apron’s recent expansion of its fulfillment operations signals that the company will charge undeterred into the rapidly expanding field. If it continues to successfully expand its fulfillment and delivery operations while keeping cost down, it may prove worthy of its unicorn status regardless of industry competition.
Dominance in the meal-kit market
As it continues to build partnerships with farmers to lessen its operational cost and ensure the freshness of its ingredients, Blue Apron stands well-poised to edge out other small meal-kit delivery services. Competing with pre-existing giants like Kroger (NYSE:KR), Wal-Mart (NYSE:WMT) and Amazon AMZN may prove to be it greatest challenge, and the tallest hurdle for it to clear, should it expect to remain viable well into 2018.
What Blue Apron lacks in size, however, it makes up for in expertise. Its ability to forge exclusive partnerships with local growers, who provide the lush veggies and fruits increasingly sought out by organically-minded consumers, allows the company to provide farm-fresh goods year-round.
As Blue Apron continues to corner the suburban market across the US, it also stands to benefit by marketing a broader array of goods and services. It’s cookbooks, tools and cookware already adorn kitchens from New York to California.
Blue Apron’s focus on portion control, too, gives it an edge over retail competitors such as Whole Foods and Kroger.
However, its unique niche may soon be endangered. Sixty-seven percent of Whole Food’s sales were in fresh foods, the company said in May; and with Amazon’s financing now behind it, the company is likely to expand operations to further pressure its competitors.
As domestic meal-kit delivery services continue to vie for the attention of consumers, Blue Apron must prove itself capable of more than merely gobbling up additional market share if it wants to continue to succeed. If the company continues its trend of entropy, such as its loss of $55 million from 2015 to 2016, it may struggle to raise share prices farther than its initial $15 to $17 offering.
Blue Apron’s commitment to diversifying its services may be its secret pathway to success. The company’s initiative to start a wine subscription service has already emboldened investors. As e-commerce continues to dominate the market for everyday household goods, its expansion into cookware and kitchen accessories sold through its website also stands to shore up the company’s future.
As customers increasingly turn away from the supermarket aisle and toward e-commerce and home delivery services, companies like Blue Apron stand to gain millions in revenue. The meal-kit delivery giant is on steady course to reach $1 billion in sales this year, and it’s likely to continue expanding its consumer base as it’s socially-conscience marketing and packaging appeals to a broader number of customers.
The only question that remains for investors is whether the underdog Blue Apron can translate its tantalizing potential into tangible profits.