Americans Are Traveling More — And Skipping Their Blue Apron Meal-Kits

(Bloomberg) -- Blue Apron Holdings Inc. is contending with pent-up demand for travel as customers eager to go on vacation pause their meal-kit subscriptions.

Widespread vaccines, ebbing Covid-19 cases and loosening travel restrictions have spurred more of the company’s U.S. customers to take trips they might have put on hold due to the pandemic, causing them to skip meal-kit deliveries. And with remote work still popular and the Thanksgiving and Christmas holidays approaching, the company says it doesn’t expect the travel impact to subside anytime soon.

“We saw a bunch of pent-up demand for travel,” Chief Executive Officer Linda Findley said in an interview on Friday. “That created a spike in travel skips for us, the highest we’ve seen since we started tracking the data.” 

To mitigate the travel impact, Blue Apron said it gives customers the option to temporarily change their shipping address, although Findley didn’t disclose what percentage of vacationing customers do so. 

After four years of clamoring back from a highly criticized public offering and adjusting to the aftermath of a pandemic that rapidly drove up demand for at-home dining, New York-based Blue Apron has leaned into higher-paying customers as a way to boost revenue and cope with rising inflation and labor costs. Investors have taken notice -- the shares have advanced more than 70% so far in 2021.

High Spenders

Catering to high-spending customers has also helped offset a steady drop in users: Blue Apron hit a four-year low of 350,000 customers in the third quarter, down from its 2017 peak of 1 million users. 

Findley said that number reflects the number of people who ordered a meal kit during the quarter, not the company’s total customer base. Unlike other subscription services, she said meal-kit customers often stop and restart the service.

“Customers come in and out of meal kits,” she said. “Churn doesn’t necessarily mean the same thing as churn in a normal subscription.” 

Current customers are also spending more with the service, Findley said. She said the average revenue per customer increased 25% to 30% in the last two years. Orders per customer remain higher than before the pandemic, with customers ordering an average of five times in the third quarter, compared to 4.5 times in the third quarter of 2019. The average order value was also up 8% in the third quarter compared with the same period in 2019. 

To better cater to a higher-spending audience, Blue Apron has ramped up its offerings of premium items this year to keep customers in their kitchens. Those higher-quality meals include options like lamb and scallops, as well as a marketplace that features wine and high-end kitchenware like wine decanters and cast-iron skillets. 

Those premium additions have helped to eke more out of their customers. 

“We need to make sure we’re holding onto them as long as possible and keeping that value up,” Findley said. 

Increasing Costs

In the most recent quarter, the meal-kit company was also hit with higher costs amd supply-chain disruptions, food inflation and a widespread labor shortage. The company said it has leaned on its relationships with producers to create workarounds on food procurement and that 70% of its ingredients are sourced directly from farmers, ranchers, growers or manufacturers.

Last month, Blue Apron raised starting pay to $18 an hour and introduced more benefits to attract workers. It has also been able to mitigate some of the higher costs by adding a blanket $9.99 shipping charge on all orders and increasing prices between $2 and $4 per kit for certain meal plans. Despite having to rejigger recipes to substitute hard-to-procure ingredients -- replacing, say, scallions with chives or shallots -- the company said it has not scrimped on portion sizes or reverted to lower-quality ingredients.

Findley took over the top job in 2019. By cutting marketing spend by 60% in her first year and introducing premium options, more customization and more variety, Findley said she has been able to keep the revenue per customer higher than $310 for six straight quarters.

©2021 Bloomberg L.P.