Blue Apron Q3: Meal Kit Maker to Increase Marketing Spend After Capital Raise

On Blue Apron’s third quarter earnings call today, CEO Linda Findley said the meal kit maker experienced a return to more “normal” pre-pandemic conditions during the third quarter and is now aiming to up its marketing spend to attract more customers following a capital raise closed last week.

Blue Apron’s net revenue dropped 2% to $101.7 million in Q3, but is up 10.2% over two years. Its average order value (AOV) was up 6% to $62.30, while orders per customer (5) and average revenue per customer ($313) were down year-over-year, though still posting growth from Q3 of 2019. Its average revenue per customer hit over $310 for the sixth consecutive quarter, Findley noted.

The growth came despite customers’ higher travel rates at the end of the summer, which led to cycle skips in the quarter. The company had 350,000 customers this quarter, down from 386,000 in the same quarter two years ago.

Blue Apron has grown through its strategy to add “variety, flexibility and choice” to its suite of products, Findley said. Recent product innovations, such as premium recipes and add-ons, have provided a 19% bump in AOV in Q3, and Findley said Blue Apron expects innovation — such as the Heat & Eat line, the company’s first ever single-serving meal offerings that launched in September — to continue driving AOV in Q4.

Last week, the company completed a $78 million equity capital raise, which was initially announced in September. It plans to use the funding to support marketing initiatives in 2022, with the goal of driving new customer acquisition and growing engagement and retention, Findley said. It expects marketing spend to be “substantially higher” than over the past few years, especially as the company has cut back on marketing since 2018. It spent $14.9 million, or 13.5% of revenue, on marketing this quarter.

New initiatives will include marketing tech investments and the expansion of new and existing marketing channels like mail, inserts and video ads, along with testing paid social channels like TikTok and Pinterest, according to Findley. Blue Apron also aims to double its partnerships in 2022, adding to a list which currently includes WW, Calm, Disney Studios Content and Amazon Alexa. Blue Apron expects these efforts to result in mid-teen percentage net revenue growth.

“This new funding provides Blue Apron with a strengthened balance sheet and we are prepared to accelerate our growth strategies,” Findley said. “We are proud of the revenue building and product initiatives we’ve put in place, and believe our ability to further lean into these programs will help us grow our competitive position and lead to the creation of new value for our stockholders.”

As it continues to face higher costs across food, logistics and labor, the company also added a shipping surcharge to all orders in the last few weeks of Q3. Despite this, Findley said it continues to see strong consumer engagement with “negligible impact on churn.”

Following these supply chain costs and marketing investments, CFO Randy Greben said he anticipates Blue Apron will post a single-digit increase in year-over-year revenue growth for the full year 2021.

Findley also announced Blue Apron’s plan to be carbon neutral by the end of Q1 2022 through purchased carbon offsets supplemented by emissions reductions within the company. Earlier this year, it committed to transitioning to 100% recyclable, reusable or compostable packaging by the end of 2025.

“We do feel strongly that today’s consumer looked at some of the initiatives we’re doing around sustainability, carbon neutrality, etcetera, as extremely important to their buying decisions as customers get much more aware of where their food comes from and how their food is sourced,” Findley said. “So we’re excited to be able to jump tail our framework that we’re building around ESG [Environmental, Social and Governance] and our sustainability initiatives to really help drive deeper consumer engagement alongside that marketing.”