Blue Apron: Disrupting the Way People Cook and Eat.

Blue Apron was launched to disrupt the traditional way consumers shop, cook and eat meals at home. See how Blue Apron is also disrupting the traditional grocery store food model.

Blue Apron was launched in August 2012 as a weekly subscription service for home cooks. The company offers meal plans and delivers fresh, pre-measured ingredients and step-by-step recipes directly to the consumer. In a little over three years since launch, the company has over 2,500 employees, delivers over 5 million meals per month to 80% of the country and was recently valued at $2 billion. [1]

Click below for a short video on the company and its strategy:

Get to Know Blue Apron

Business Strategy:

On the surface Blue Apron is a meal delivery service, however as CEO and founder Matt Salzberg describes it, the company’s business strategy revolves around changing the lifestyles and lives of its customers. [2] The company’s product model provides the following value to its consumers:

  • With weekly menus curated by master chefs, people are able to discover new recipes and ingredients they would have never previously cooked or eaten.
  • Allows consumers to eat healthier by focusing on fresh, seasonal ingredients that are mostly local and organic.
  • Saves their subscribers time and money. Experts source high quality ingredients that are typically challenging to find and with each meal costing $9.99 Blue Apron is actually better priced than grocery stores.

To ultimately change people’s food shopping and cooking behavior Blue Apron had to disrupt the incredibly large and complex food industry. The current industry is focused on grocery, with lots of suppliers and distributors taking cuts of the profits before it gets into consumer hands. Sourcing large grocery leads to a lot of waste, for example with perishable items, and this ultimately contributes to higher costs for the consumer. [3] Blue Apron’s disrupts this model by sourcing directly from local purveyors and delivering fresh, seasonal product directly to the consumer.

Operating Strategy:

The centerpiece of Blue Apron’s operating model is sourcing locally and planning nationally. The company uses the same weekly menus nationally in order to not complicate its operations. The consumer has only two menu choices: vegetarian or non-vegetarian. At the same time, the company uses regional distribution centers spread across the country to source the majority of its product locally. This allows them to provide the fresh, seasonal product its consumer desires. The regional, refrigerated warehouses have flexible packaging operations that allows Blue Apron to package any item in any quantity. This infinite flexibility within the distribution centers combined with little customization for consumers allows the company to focus on high quality menus that change every week. [1] [2]

Another important cornerstone is Blue Apron’s sourcing strategy. It uses an extensive team of in-house food sourcing experts along with in-house chefs to plan meals months in advance based on seasonality and its extensive relationships it has with its suppliers. The majority of its suppliers are farmers and family-run businesses instead of large food distributors. This allows them to control the quality, as well as negotiate cost savings for typically expensive local and organic products. [2]

Finally, Blue Apron is strong on utilizing technology in its operations. Examples include using software to predict incoming demand and supply costs and having iPads attached to its assembly lines to track pacing and check for missing items. [4]

Creating Competitive Advantage:

The subscription meal service is a very competitive marketplace with competitors such as Plated, Munchery and HelloFresh going after Blue Apron’s consumer base. This is on top of competing with traditional grocery stores. There several ways in which Blue Apron’s business strategy and operating strategy align to create competitive advantages:

  • Due to the direct relationship Blue Apron has with its consumers they have complete control over the data of the marketplace. This allows the supply chain model to be planned intelligently where they only buy what the consumer wants. This results in almost zero waste, which is always a struggle for traditional grocery stores. [5]
  • Blue Apron’s relationships with its suppliers allows for fulfilling consumer ingredient needs while maintaining low prices through purchasing in bulk. They also avoid costly overheads like rent for store locations, and they pass on these savings to the consumer. [4]
  • The strategy of not allowing customization of its menus allows them to be very efficient at their operations and as a result scale more effectively. No other subscription service has reached the 80% national penetration that Blue Apron has.
  • From the beginning Blue Apron has focused on quality. Its decision to handle its distribution in-house and staff its warehouses with employees instead of contract workers allows them to control the quality of product it provides consumers. [5]

 Challenges For The Future:

While Blue Apron has had success so far, it has yet to be profitable, and there is question on whether it can make money at a $9.99 price point. While Blue Apron claims that its supplier buying power allows it to make margins per meal, once marketing costs are added it is likely that it will take several weeks per user for the company to break-even. [4] This is why retaining customers is essential for continued success. Blue Apron will need to fight subscription fatigue as consumers become overwhelmed with all of the different subscriptions being offered. Finally, Blue Apron will have to ensure they maintain their operational efficiency as they grow larger and add more products and services. The company has recently added a family plan offering and is starting to sell cooking supplies online. Each of these layers of complexity will need to be carefully evaluated to ensure it maintains its competitive edge.

 

[1]  http://www.businessinsider.com/blue-apron-founder-story-sai-100-2015-10

[2] http://www.foodtechconnect.com/2013/12/04/blue-apron-ceo-business-model-scaling-distribution-sourcing/

[3] http://www.businessinsider.com/blue-apron-founder-story-sai-100-2015-10

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

[5] https://www.hottopics.ht/stories/consumer/blue-apron-supply-chain-model-secured-its-growth/

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3 thoughts on “Blue Apron: Disrupting the Way People Cook and Eat.

  1. I really enjoyed this analysis. One item you note as an advantage is the efficiency Blue Apron achieves by not allowing customization of their recipes. In a world that data allows for unique tailoring of almost everything, do you see this as being an issue to maintain a competitive advantage against others who figure out how to be efficient and customized?

  2. Thanks for your post! I found it especially interesting to read about how they created competitive advantages in a highly competitive environment with many companies entering the industry and going after the same customer base. I am wondering whether and how they will be able to adjust their business or operating model to actually become a profitable company. It’s going to be an interesting company to follow over the next few years!

  3. Enjoyed your post. As you mentioned, they have several formidable challenges that they face. Of particular, how do they get consumers to use the service on a consistent basis. It will be interesting to see how their operating model evolves over the years as the pressure for profitability increases – I wonder if there is an opportunity to monetize the recipes and the intellectual capital that the chefs in their network have?

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