Changes are coming for meal kit company Blue Apron as 2019 approaches.
The company announced Nov. 13 that it laid off 4% of its workforce, a move expected to save the company $16 million next year, according to a news release.
Blue Apron released its third-quarter earnings report to coincide with the downsizing. Net revenue in the quarter was $150.6 million, down 28% from the third quarter last year.
The decrease in revenue was driven mostly by a decrease in customer count as the company pulls back its marketing spend and pursues a omnichannel, multi-product strategy, according to a news release. Executives conveyed that the company is nevertheless heading in the right direction.
“In the third quarter, we outperformed our previously stated adjusted EBITDA outlook, with a 61% year-over-year improvement,” CEO Brad Dickerson said in the release. “While net revenue was in line with our guidance range, we are taking actions to address our top-line performance. As we look ahead, we are confident in our disciplined approach to pursue initiatives that will enable us to realize the results we expect, with a deliberate emphasis on reaching profitability on an adjusted EBITDA basis next year.”
The company’s strategy is to focus its marketing and its product offerings on its most engaged customer segment.
Blue Apron says the top 30% of its customers on a net revenue basis account for more than 80% of the company’s net revenue. Blue Apron makes its money back on the cost of acquiring those customers in less than six months, on average.
In addition, the average net revenue per customer for that top 30% group is 10 times greater in the year after acquisition than the average net revenue of the other 70%.
“As we focus on attracting new consumers, our priority is to put the right message and the right products in front of the right people,” Dickerson said in the third-quarter earnings call. “We believe we have the opportunity to, one, focus resources across the organization to attract new consumers who have these desirable attributes by leveraging extensive demographic and ethnographic data to ensure our investments are strategically targeted; two, deepen engagement with our existing best customers by creating more customized products and services that specifically address their needs; and, three, avoid initiatives that generate short-term revenue opportunities at the expense of overall inefficient returns on our marketing spend.
“These actions are expected to shift the mix of customers toward those that have a shorter average payback period than we see today, which we expect to result in more efficient marketing spend and, ultimately, a profitable business going forward,” Dickerson said.
He explained that Blue Apron’s partnership with WW, formerly known as Weight Watchers, is expected to resonate with this top customer group. That program launches in early 2019.
“Our research shows that consumers that follow specific dietary preferences tend to retain and engage much better than the average consumer in our type of products, so this alliance also (meshes) very, very well with our strategy on focusing on best customers and so forth,” Dickerson said.
As part of its strategy to reach shoppers through different channels, Blue Apron has pilots going with Jet.com and GrubHub.
“There are three different opportunities for us,” Dickerson said on the call. “One is to work with folks like GrubHub who can service a customer in a very close timeframe to the actual meal event itself. Two, someone like Jet, who is a little bit of a different occasion in shopping in that it’s more of a grocery shop than it is a meal shop with Jet; however, they also have much, much broader reach when they get to metropolitan areas, so their platform will be a much broader platform and broader reach in that aspect.
“Then three, the ability for us to also do this ourselves on our platform where the consumer can go on to the Blue Apron platform and order same-day or next-day delivery,” Dickerson said. “That is something you will also see us do with other delivery type partners as we look to test this and expand this across the country.”
Pilot with Costco
Dickerson also addressed the company’s first retail experience, a pilot with Costco.
“As the holiday period approaches, our presence in Costco locations has paused due to the seasonal cadence of their business,” he said on the earnings call. “As we enter 2019, we’re targeting to resume in Costco, as well as expand into new retailers, leveraging lessons learned from our pilot and evolving our product offerings to complement this environment. Look for more discussions on this oncoming in the coming months, specifically around the expansion of partnership opportunities driven by product innovation.”