Blue Apron and the Race to Innovate Dinner

Blue Apron seeks to make home cooking accessible and convenient by delivering creative recipes and fresh ingredients to customers nationwide.

Company Overview & Business Model

Blue Apron is a meal-kit company designed to make home cooking easier and more accessible to customers in the US. Blue Apron is committed to delivering original recipes and fresh ingredients, with an emphasis on convenience and eliminating waste.

Launched in 2012, Blue Apron now delivers over 5 million meals a month, up from 500,000 2 years ago. The company is stepping in to provide value to Americans who, studies say say, love to cook, but who feel constrained by time. Subscribers can choose to opt in weekly to receive a meal-kit comprised of precisely portioned ingredients and instructions for three creative, home-cooked meals.

Operating Model & Competitive Advantage

The meal-kit delivery space has recently seen many entrants who hope to monetize the home-cooked dinner market. Despite increased competition, Blue Apron has successfully scaled its operations by efficiently aligning the core pillars of its business model to its operating process. The company recently raised ~$190MM in funding which will be used to further scale its rapidly growing network.

Blue Apron sources its ingredients from ~100 family-run farms. By developing relationships with these suppliers and utilizing three central fulfillment hubs, the company is able to procure a variety of products and to eliminate many supply and overhead costs faced by competing start-ups and other traditional food distributors. Blue Apron’s operating model also relies on efficient packaging and recipe design to promote convenience and to further eliminate waste.

Suppliers & Fulfillment – Managing Cost & Waste

Among Blue Apron’s primary value drivers is its ability to manage its supply and fulfillment networks.

Asset – Supplier Relationships: By developing relationships with family-run farms, Blue Apron is able to efficiently plan for inventory and to lock in prices far in advance. The company eliminates an estimated 20% of costs by purchasing supplies in bulk. Additionally, by coordinating specific goods and quantity ahead of time, Blue Apron can efficiently plan for maximum product use, thereby reducing food waste costs due to spoilage.

AssetCentral Fulfillment Hubs: Once supplies have been farmed, they are transferred to one of Blue Apron’s central fulfillment hubs. A significant advantage of the partnership with local suppliers is the lower shipping and packaging costs incurred in this process, particularly compared to organizations that have produce shipped internationally. Additionally, many significant overhead and grocery maintenance costs are avoided through the company’s use of just three hubs that service the whole country.

Packaging & Delivery – Maximizing Convenience

Blue Apron’s packaging and delivery process seeks to create maximum convenience for its customers.

Asset – Online Delivery Scheduling: Users are required to opt in for their weekly meals by a given date in the previous week. At that point, they are able to specify the day and time frame that is most suitable for delivery. This control is highly attractive to the time-conscious consumer. Advanced scheduling capabilities also help Blue Apron’s planning process by allowing for maximum allocation of its delivery resources.

Asset – Design of Packaging / Recipes: All Blue Apron ingredients and supplies are packed in a chilled box. This assures freshness in case the consumer is unable to accept the bundle immediately upon delivery.

Inside each box, individually packaged and labeled products are provided in the exact measurements required for each recipe. The primary value creation of this operating decision is to eliminate food waste (ie. half a head of leftover lettuce rotting in the fridge), but the smaller quantities also create a manageable and safe opportunity for consumers to be adventurous with new foods. Blue Apron also designs its recipes to have an average assembly time of 35 minutes, further increasing ease of use and accessibility to the company’s customer base.

Sources:

https://www.blueapron.com/

http://www.forbes.com/sites/alexkonrad/2015/10/14/inside-blue-apron-and-the-meal-kit-rush/

https://www.pehub.com/2015/06/blue-apron-racks-up-135-mln/

http://www.eater.com/2015/6/26/8839791/blue-apron-review-pros-cons-environment

https://agfundernews.com/meal-kit-maker-blue-apron-announces-135m-dollar-deal.html

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9 thoughts on “Blue Apron and the Race to Innovate Dinner

  1. Thanks for the post! Very interesting story. I’m wondering how Blue Apron is managing their delivery process. Given many ingredients have limited fresh time, how do they make sure the orders are delivered on time and control the cost at the same time?

    Also, it seems like the Blue Apron is running on a subscription model. Is it possible for them to offer one-time order and make the purchase more flexible for customers? How could they improve their model if they want to achieve this?

  2. Super interesting; thanks for the post! I’ve always thought of Blue Apron as a bonding activity with my SO more than a home-cooked meal. At around $10 per person, Blue Apron is more expensive and less convenient than takeout, but it’s healthier, we get to feel less guilt than if we were to eat out, and we can do something fun together.

    It is pretty interesting that one of the core tenets is to eliminate waste, though, when the process involved the presumably expensive sorting, packaging, packing, and shipping of individual weekly boxes to customers. I wonder if there are any numbers behind this; it is possible that the Blue Apron process is actually more cost-effective and environmentally friendly than having the same customers shop at supermarkets, which themselves need to be sourced for and stocked.

  3. Awesome post. It will be interesting to see how this space plays out as copycat business models enter the space – while there does seem to be a barrier to entry around capital investment, given enough funding it feels like the premium “at home” dining experience is ripe for further disruption.

  4. This is great! I’ve used Blue Apron many times and really love them – they make cooking so much simpler. However, one major backlash that the company always receives is that it is quite expensive for an average American. What are your thoughts on their pricing strategy? Do you think they price their meals at the higher end of the range? If so, does that limit the company’s ability to make home cooking “more accessible” to customers in the US?

  5. Very interesting post. I’ve been intrigued by this business/operating model for a while now given the impressive growth the Company has experienced and, as Kari mentioned, the premium at-home dining experience does feel ripe for disruption. To Shivani’s question, I have to imagine these guys make a pretty nice gross margin on each meal sold. Part of the beauty here, in my opinion, is that they charge a fixed price to consumers in advance and yet have the control over what meals/ingredients they actually deliver. This creates a situation where they are basically immune to any major commodity shocks / raw ingredient price increases as they can largely switch from one offering to another (for example, if beef prices rise dramatically they are not tied to offering beef that month, in the same way a steak restaurant is or a butcher department at a grocery store is). This somewhat fixed gross margin is key to the company’s success and suggests they might have room to lower prices at some point, BUT it seems they have been forced to spend so much on marketing and customer acquisition that my sense is they’re barely turning a profit today? I will be very curious to see how the premium in-home dining market develops in the near future and who the winners and losers end up being. With the latest venture round valuing this business at $2BN, there are certainly big believers of Blue Apron out there!

  6. Very similar to my Field II client, ChefTime in Brazil.

    It’s clear they are starting to solve the scaling question — I wonder whether they will be able / required to penetrate the broader food delivery market (as opposed to being just a “dinner subscription replacement”. Blue Apron’s famous “blue cards” that share easy-to-use recipes are highly replaceable (i.e. once I’ve cooked it once with my Blue Apron order, I might just go to the grocery store and buy the same ingredients).

    They appear to already be starting to expand into cutlery / pots / pans and alcohol. No question it’s a great idea, but whether they can remain “sticky” (pun intended) will be the true test.

  7. I love Blue Apron!! The waste thing is so real — as someone who really struggles to cook consistently, usually grocery store quantities are not really that conducive to a more rare cooking schedule. The only concern I’ve had with them is around their food preference options (i.e. vegetarians, pescatarians, no pork, etc). I was not able to find an option for people with nut allergies like myself, so some of the recipes I received I was unable to eat. I wonder how they will be thinking about broadening these options long-term: It seems more efficient (like Benihana) to only offer a very limited set of options / variability but I wonder how much food preference customization they could handle before disrupting the efficiency of their model?

  8. I love Blue Apron! I’m hungry just thinking about it. I’m curious though, as they attract more customers, how their operations will scale, If they already have contracts with 100+ local farmers, it seems that it may be a slight logistical challenge to scale up even further.

  9. Thanks for sharing, Sam! Like Feiran, I wonder how Blue Apron handles delivery. It seems like they would need to manage their own courier system rather than rely on UPS or FedEx. The logistics behind delivering small, perishable packages to homes seems pretty intense. That being said, I think this is such a clever idea given the busy working professional. It perfectly aligns with the current health craze on “real food” instead of packaged or prepaid meals. For that reason, the price is high but I sense that a certain type of person is willing to pay.

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