Blue Apron Goes Public, But Amazon Looms
Blue Apron Holdings Inc, the biggest U.S. meal kit provider, raised $300 million as it went public on Wednesday, a third less than it had hoped, as Amazon.com's industry-changing deal to buy Whole Foods Market Inc weighed on the sector. New York-based Blue Apron said late on Wednesday its initial public offering of 30 million shares of class A common stock was priced at $10 per share, at the low end of the $10 to $11 per share range issued earlier in the day. It lowered the estimate from a range of $15 to $17 after potential investors expressed concerns about the $13.7 billion Amazon-Whole Foods deal, as well as Blue Apron's marketing costs and lack of profitability, people familiar with the matter said.
Total Retail's Take: Unfortunate timing on Blue Apron's part. Amazon's acquisition of Whole Foods, announced two weeks ago, has thrown the grocery sector, including online meal delivery services such as Blue Apron, into a state of disarray. Investors see Whole Foods’ 400-plus stores across the country as the perfect distribution system for Amazon's meal kit business, putting the futures of online delivery services such as Blue Apron, HelloFresh, Plated and others very much at peril. Amazon appears ready to conquer the grocery business. In addition to concerns over Amazon, potential investors were scared off by Blue Apron's high marketing costs, which the company deemed necessary to compete for customers who often switch service providers, or cancel their subscriptions altogether. According to Reuters, Blue Apron spent roughly 18 percent of its $795.4 million revenue in 2016 on marketing, posting a net loss of $54.9 million. Concerns over its ability to turn a profit and now the looming threat of Amazon casting a shadow over the entire grocery industry led to a less-than-stellar IPO from Blue Apron.