(Bloomberg Gadfly) -- What's on the menu at Blue Apron Holdings Inc. this week? A leadership shake-up.
The flailing meal-kit service announced Thursday that one of its co-founders, Matt Salzberg, would step down as CEO, turning the job over to current CFO Brad Dickerson. The search is on for a new CFO, and Salzberg will be executive chairman.
There are two significant takeaways from Blue Apron's CEO shuffle: One, there are real-world consequences when a company botches its debut as a public company. And two, Blue Apron's new chief executive is well-placed to patch some of the company's problems, but perhaps no one can fix what looks like an ailing business model.
On point one, Salzberg might still be in the CEO job if he hadn't made so many disruptive changes at the same time Blue Apron was going public. The company opened a new food-distribution center, debuted more flexible menu options for customers and reshuffled management, all in the months leading up to its IPO or just afterward. Co-founder Matt Wadiak left the chief operating officer job back in July, so now just one of the three co-founders -- Ilia Papas, the chief technology officer -- is involved in day-to-day operations.
Those changes may have been necessary, but they also weren't normal for a company pitching itself to public market investors. Companies tend to go public when their businesses are relatively stable and predictable. Blue Apron's IPO was destined to be rocky, coming just as Amazon spooked the food universe by buying Whole Foods. Blue Apron shaking up its own business didn't help.
Since then, Blue Apron has continued to lose the faith of investors. It has blamed much of its troubles on growing pains associated with opening its new food-distribution center in New Jersey. (Note to readers: It's an easy strategy to blame anything bad on New Jersey.) Shares had declined 70 percent from the IPO price before Thursday's CEO announcement, making Blue Apron the worst-performing stock of any company that has gone public in the U.S. this year. The disclosure that Salzberg was being replaced as CEO sent Blue Apron shares up as much as 10 percent on Friday.
All of that is to say that Dickerson has a very tough job on his hands. It's true his experience as CFO and chief operating officer at Under Armour Inc. makes him a more experienced leader of a sprawling, fast-growing enterprise than Salzberg. That might provide some tonic for the troubled company.
Dickerson on Thursday told Bloomberg News, "Margin is really the key to unlocking the future, both for near-term and long-term success." He's well-equipped to identify labor and supply-chain efficiencies to help pad margins and finish steering the company through its transition to that new fulfillment center in New Jersey.
But it's unclear just how far such fixes can take Blue Apron, because its model appears to have some fundamental, structural impediments.
For example, in the company's most recent quarterly results, average revenue per customer was $245, up from $227 a year earlier. Sounds great, until you unpack what drove the change. The company spent less on marketing during the period, so it acquired fewer new customers. Therefore, its pool of users simply skewed more toward long-time, loyal ones. So if it spends more on marketing, then it will likely have a bigger customer base, but presumably that important revenue per customer measure will go down.
Meanwhile, Blue Apron is loading up on new offerings: You can now vary how many meals you get per week and have more dishes to choose from than in the service's early days. This helps the company reach more customers, but it also makes the business more complicated. So far, Blue Apron doesn't seem to be managing it well.
In other words, the company just seems to be mired in a trap in which fixing one of its problems seems to exacerbate a different one.
It's also troubling that Blue Apron's quarterly orders per customer haven't budged much in its short life as a company:
That suggests its service hasn't become a bona fide ritual for customers. Without that, this business won't ever get on steadier footing. And it's tough to see what Dickerson can do to change that.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.
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