What Blue Apron needs to do to survive the threat of Amazon – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From MarketWatch

For a while, it looked as though Blue Apron was destined to become a culinary juggernaut in the American kitchen.

Founded in 2012, the company APRN, +1.89%  carved out a clever business model by mailing perfectly portioned, pre-packaged ingredients and recipe cards to home cooks in need of handholding. It’s not yet profitable, but growth is impressive. Last year, the company had $795.4 million in 2016 by delivering about 8 million meals per month to customers.

Recently, though, there have been challenges. Shares that the company had hoped to sell between $15 and $17 apiece in June were priced at just $10, hurt in part by Amazon’s AMZN, +0.23%   announced acquisition of Whole Foods WFM, -0.02% earlier that month. They now trade for less than $6, pummeled in part by Amazon’s plans to launch its own meal kits.

The twin revelations about Amazon are no doubt unnerving to Blue Apron’s executive leadership team and investors. And yet, they should also see them as encouraging signs. That Amazon sees so much potential in the industry is proof positive that the meal kit represents a new American staple, and not just—pardon the expression—a flash in our collective pots and pans.

True, Amazon is a formidable rival. And yes, the meal kit business is increasingly crowded. (Current contenders include: Plated, HelloFresh, Purple Carrot, and Sun Basket.) But Blue Apron has an opportunity to differentiate itself. To do so, it must focus on the needs, wants, and values of its target audience: mainly millenials.

First, Blue Apron should make taste innovations a priority through partnerships with organic farms and ethnic food suppliers. Second, Blue Apron must work on its environmental record by investing in a greener supply chain and more eco-friendly packaging for its ingredients. Finally, Blue Apron must communicate its strategy to customers in an inspirational and compelling way.

The basic proposition of meal kits is that they mimic home cooking with the added benefit of convenience. Customers feel good about preparing a meal-kit dinner: it’s wholesome, filling, and practically homemade. And apart from a bit of chopping and stirring, it’s easy. As the landscape grows more competitive, though, customers will demand more.

Of course, people might tire of Blue Apron or realize that (horrors) they can cook a reasonable meal without its help.

Read the full post at MarketWatch.

Sharmila C. Chatterjee is a Senior Lecturer in Marketing and is the Academic Head for the MBA Track in Enterprise Management (EM) launched at MIT Sloan in Fall 2012.

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