Blue Apron Sees Shift to Asset-Light Model Accelerating Profitability Beyond Q2

Meal kit provider Blue Apron has its sights set on achieving profitability starting in the second quarter of 2024, executives told investors on the company’s second-quarter 2023 earnings call on Wednesday (Aug. 9).

“Our internal model reflects sufficient capital from our operations to achieve our adjusted EBITDA profitability goal and to continue to move the business forward. This is based on aggressive cost reductions and the shift to an asset-light model,” Blue Apron CEO Linda Findley said on the call.

As part of that shift, Blue Apron closed the transfer of its operational infrastructure to fresh meals provider FreshRealm — a transaction which sent the company shares soaring as much as 71% in early June.

By removing its direct role in the fulfillment of meal kits, Findley said, the company can be more agile and focused on new product innovation, while retaining its full direct-to-consumer business, including creating and marketing recipes, along with the necessary data and technology support.

The transaction has further contributed to an “exceptional” reduction in corporate headcount and cash burn in operating activities, improving it by 72% to approximately $13 million compared to the second quarter of 2022. And even with cash burn expected to increase slightly in Q3 and Q4 2023 “in line with typical seasonality,” Findley reiterated that “the actions we are taking are expected to get us to adjusted EBITDA profitability in Q2 of next year.”

The meal kit company also reported a decrease in loss by 84% YoY and strong margin improvement during the quarter which it attributed to increases in efficiency across the business and the implementation of rigorous cost and productivity improvement measures implemented prior to the transfer of operations to FreshRealm.

Other key quarter highlights are a price increase the company implemented in May 2023 and a “deliberate” 36% reduction in overall marketing spend, which led to a decline in customers from 687,000 to 679,000 at the end of June 2023.

This move was part of Blue Apron’s efforts to enhance its testing program, which aims to ensure that “every marketing dollar we invest delivers on the targeted payback period while also attracting the right customer,” Findley noted. And those efforts seem to be paying off, she said, with significant improvements in payback periods, efficiencies, cost per acquisition, and conversion rates in Q2.

Looking ahead, Blue Apron plans to introduce more convenient No Prep options on the menu in the first half of 2024, in addition to identifying new revenue-enhancing opportunities to back its asset-light model, and a focus on innovation.