There are certain topics or companies that I follow for learning purposes and to test prior lessons learned. Blue Apron is one of the companies that I’ve been following for a while due to the relevance to my wife’s business (Lilian’s Table). Blue Apron is a publicly-held company that went IPO in 2017 with a lot of fanfare that quickly dissipated. Revenues were almost $900 million back in 2017 and they closed 2019 at $455 million!!
In my opinion, the company followed the common strategy of “growth at all cost”. In 2017, they spent $154 million in marketing to sell to anybody that will buy at least one meal. At some point in 2018, they realized that this strategy made no sense and they started slashing the marketing spent to $117 m and $48 m, in 2018 and 2019, respectively.
Obviously, with a lot less marketing spent you will expect that the growth of new customers will be equally impacted. However, what is interesting is that the total customers from Q1 2017 to Q4 2019 has steadily decreased from 1 million customers to 350k customers. So not only they are not growing, they are in a free fall as it relates to keeping customers on their platform.
Kudos to them to try to bring the company to profitability, but my question is how come it took all this time to realize that the “Growth at all Cost” was the wrong strategy? Their Q4 2019 press release indicates “….the company’s strategy to focus on marketing efficiency and targeting high-affinity consumers within its direct-to-consumer platform”
The company may be running out of runway as they disclosed that basically, all options are on the table “…. These alternatives could include, among other things, a strategic business combination, a capital raise through the public or private markets, a transaction that results in private ownership or sale of the company or its assets, or some combination of these”
The “Growth at all cost” strategy is like betting the entire house, you can win big or lose big. As a finance person, I prefer the good all fashion “Profitable Growth” strategy. What is your take away?
