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The Pandemic Gave Blue Apron a Lifeline. Can It Last?
When shutdowns lift, it’ll be competing against unprecedented pent-up demand for eating outside of the home
At its peak in 2015–2016, Blue Apron was delivering over eight million meals per month and raking in over $1 billion in annual sales. Within just five years of its inception, it was employing 4,500 people and was valued at over $2 billion.
It looked set to dominate the meal kit market, helping meal prep delivery overthrow traditional shopping and home cooking. But then the bottom fell out of the box: The market quickly became saturated with competitors like HelloFresh, and in response, Blue Apron overspent to acquire customers and retain them. After a disastrous IPO in 2017 and facing competition from Amazon, the company was at rock bottom. By the beginning of 2020, it looked like the writing was on the wall. But then suddenly, after years of flailing, the arrival of the coronavirus pandemic became Blue Apron’s unlikely savior.
From podcast mainstay to meal kit underdog
In its first few years after launching, Blue Apron spent heavily on advertising and free meal offers to convince people to become customers (if you’re a podcast listener, you’ll likely remember the company’s ubiquitous ad spots and sponsorships). This kind of spending is known as customer acquisition cost (CAC), which is calculated by dividing all the costs spent on acquiring more customers by the number of customers acquired during the period the money was spent.
A staggering 75% of customers canceled their subscription within six months.
During this time, Blue Apron’s CAC sat around $60 — less than the CAC of its main competitor, HelloFresh, which sat around the $80 mark. But even though it had an initial cost advantage over HelloFresh, Blue Apron struggled to hold onto its new customers, who were happy to take the free or discounted boxes that were so heavily promoted but often canceled after their first shipment. A staggering 75% of customers canceled their subscription within six months, meaning that Blue Apron failed to make a profit on…
