Amazon files for a trademark for meal-kit delivery. Blue Apron loses about a tenth of its market cap in a day. This shows how much market-moving power Amazon has. For all we know, Amazon’s meal-kit delivery service could very well just be in its infancy, unless it’s secretly in talks to acquire a smaller player than Blue Apron. From the business model adjacency’s point of view, this was a natural progression for Amazon, now that it has Whole Foods in its portfolio. Meal-kits delivery customers are very much like those of Whole Foods’: young-ish professionals and trendsters who like the idea of cooking like Bobby and Giada but don’t want to go through the trouble of shopping for the best ingredients, which is one of the most important parts of being best chefs. More importantly, these customers are willing to pay more for the trendy lifestyle. The concept of “extreme couponing” is completely lost on them.
The meal-kit delivery service business is a thin margin business, largely due to the costly logistics expenses. Does anyone remember Webvan, an online grocery store in the mid-90’s that delivered groceries to people’s homes? It failed in just five years because it grew too fast and couldn’t get its logistics figured out, and it lost money on every delivery it made, especially in service areas where people’s homes were far apart from each other. Deliveries in Manhattan and San Francisco were much more cost efficient than those in Atlanta and Los Angles.
Logistics is Amazon’s core competency. The company is banking on the fact that it can deliver more efficiently than anyone else. The future doesn’t look good for Hello Fresh, Home Chef, Plated, and Sun Basket, on their own. Blue Apron has money now that it’s completed its IPO. It can use the cash to fend off Amazon, for now. With the largest market share in dollars at over 70% as of Q4 of 2016, the platform of customers is its best advertisers. But the IPO also makes the company an expensive acquisition target, should it continue to lose money. A distant second position player, HelloFresh with about 23% market share as of Q4 of 2016, may want to consider partnering with a large grocery chain, say Kroger or Safeway, who see Amazon Fresh as a threat. My enemy’s enemy is my friend? In this case, there is no other way for the smaller meal-kit delivery companies to survive in the long run unless they find patrons whose own survival would be in jeopardy, should they ignore the aggressive attacks from Amazon.
If you were Blue Apron, would you want to talk to Walmart or ALDI, who owns Trader Joe’s?
Image credit: CNBC
Marketshare data: Business Insider