Blue Apron Heavy Media Raises Questions

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Blue Apron published its S-1 report on June 1st, in advance of its Initial Public Offering, and it makes for interesting reading.   In the first three months of  2017, the company spent $61 million in marketing, which is a heavy outlay considering sales were $245 million for the same period.    The company helpfully breaks out the marketing spend as follows:

  • $34 million – offline media
  • $17 million – online media
  • $9 million – customer referral programs

So the “good news” about this breakout is that most of the marketing spending was going towards building awareness of the Blue Apron brand, as opposed to price discounting through customer referral programs.

But the remaining $51 million is a very heavy offline/online media spend for a brand with sales of $245 million in the same time period.  It is worth asking whether word-of-mouth recommendations will help drive the brand’s future growth, similar to what occurred for Uber.   And how does Blue Apron evaluate the return on investment for that level of media spend, considering that average revenue per customer dropped from $265 in the first three months of 2016 to $236 in the first three months of 2017?

One challenge facing Blue Apron is that consumers’ price sensitivity is greatest for items which they purchase frequently, and let’s face it, people have to eat every day, so this price consciousness is likely higher for food purchases, as opposed to rides from Uber, or apartment rentals through Airbnb.

Additionally, although Blue Apron’s offerings are certainly well curated, it falls short of being a disruptive product.   On a personal note, I recently subscribed to FeedFeed, an appealing website “connecting people who love to cook”, and can use their recipes to guide my future shopping trips for fresh produce at a nearby GreenMarket, which in some ways is a simpler and even more “green” approach than buying from Blue Apron.