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2017 IPO Prospects: Blue Apron Ready to Deliver an IPO next

Posted on Monday, May 15th 2017

Meal-kit delivery services like Blue Apron have seen stellar success in the recent past, driven by convenience offered to the consumers. By providing recipe instructions along with pre-portioned ingredients, consumers can prepare delicious home cooked meals. Researcher Packaged Facts pegs the US meal kit delivery services market to be worth $1.5 billion last year. It estimates that the industry will grow to be a multi-billion dollar market over the next five years.

Blue Apron’s Financials

New York-based Blue Apron has developed a successful following for its meal-kit business. The company earns revenues through a subscription model that allows consumers to choose from multiple meal plans based on the number and frequency of meals required. It claims to be supplying nearly 8 million meal kits within America each month.

Blue Apron is privately held and does not disclose financials, but recent reports suggest that the company may have earned revenues between $750 million to $1 billion in 2016. The revenue is a significant increase from the $300-$400 million target that the company had laid out for its investors last year. That is also a meteoric growth from revenues of $3 million in 2013 and $70 million in 2014. According to other reports, Blue Apron managed to turn in profits in the third quarter of 2016. Overall, though, it still remains unprofitable.

Blue Apron is venture funded with $194 million in funding raised from investors including Jason Finger, BoxGroup, Bessemer Venture Partners, Stripes Group, Fidelity Investments, Peak Opportunity Partners, Joseph N. Sanberg, First Round, Alan Gould, Eric Gould, and Nat Turner. Its last round of funding was held in June 2015 when it raised $135 million at a valuation of $2 billion. In April 2014, it was valued at nearly $500 million. Analysts observe that the company is now looking to go public considering that it has hired bankers like Goldman Sachs, Morgan Stanley, and Citigroup.

Blue Apron’s Growth

Blue Apron is not the only meal kit delivery service around. It is surely the biggest one with a 71% market share according to a 1010data report. But its competition is rising. Hello Fresh comes in a distant second at 23% and Plated owns 6% share. Then there are local service providers like San Francisco’s Gobble and El Segundo-based Chef’d that are playing for the same market. Additionally, grocery stores like Whole Foods Market and the Fresh Market are also looking at entering the market themselves.

Most of these companies are differentiating themselves based on the recipes they provide and the ingredients they source. Blue Apron boxes have gone beyond food by suggesting wine pairings and even offering a wine subscription service. Its ingredients include exotic products such as romanesco cauliflower and fairy tale eggplants that are sourced from family farms and artisans. These high quality ingredients come at a price. To manage some of its ingredient pricing, Blue Apron is looking to acquire the vendor directly.

Last quarter, it announced the acquisition of BN Ranch for an undisclosed sum. BN Ranch is a leading provider of sustainable, responsibly raised beef, lamb, and poultry in the US. The acquisition will bring the BN Ranch brand under the Blue Apron umbrella and give it access to BN Ranch’s experts and global network of farms and ranches. BN Ranch’s founder Bill Niman will also join the Blue Apron team as President and Founder. Bill Niman has been known for his high standards pertaining to raising animals for eating. He raises meat in a wholesome, humane, and environmentally conscious manner and will continue to bring that philosophy into the Blue Apron world. Besides supplying Blue Apron, BN Ranch will continue to supply to its current retail, institutional, and restaurant customers, adding a new line of revenue for Blue Apron. It is an interesting strategy for Blue Apron. Through the acquisition, not only will it have access to prime cuts of the meat, but also be able to design meal plans more economically to ensure that there is minimal wastage of animal meat.

I am very curious to see what else they acquire by way of suppliers of high quality produce.

This segment is a part in the series : 2017 IPO Prospects

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