Blue Apron Partners With Costco, but That Doesn't Make Its Stock a Buy
CEO Brad Dickerson said the meal kit delivery service "began to methodically reaccelerate marketing late last year" which caused its marketing spend to rise 56% from the fourth quarter to $39.3 million, even though that's 39% less than a year ago. So it picked up 40,000 more customers in the quarter at a cost of $14.1 million in extra marketing, suggesting each new member cost around $352. Sure, not every marketing dollar spent went to new customer acquisition, but it shines a light on how difficult and costly it is to get people to try meal kit delivery and explains why Blue Apron moved into the grocery store. Not many people can afford the $60 to $80 a week it would cost to have a couple of Blue Apron meals delivered, but putting meal kits in grocery stores makes it easier for customers to discover Blue Apron products, even if they aren't converted to the delivery model. Yet Blue Apron is not alone in making meal kits available in supermarkets. Shares of Blue Apron have lost nearly three quarters of their value since the IPO, and though the stock sells at just a fraction of company sales, the meal kit service hasn't proved it's capable of earning a premium. As it becomes another me-too product by moving into supermarkets, its costly legacy business is still the bulk of revenue at the moment, and there's nothing to argue it deserves a premium yet, either. However, the Costco initiative is a necessary step to experiment and grow distribution, so feel free to pick up its meal kits while you're out shopping.