Meal kit delivery companies like Blue Apron claim to help people save money on groceries, but potential and ex-customers are citing the cost of the services as a major concern.
According to a new poll by Morning Consult and Money Magazine, 49% of respondents who canceled a meal kit service cited the cost as the biggest reason for their cancellation. Additionally, cost was the biggest issue for 59% of respondents who have never tried a meal kit service.
The cost of the meal kit service was the number one factor for both potential and ex-customers by a wide margin. Not liking the recipes (13%) and unavailability in their area (15%) were the second biggest factors for those who canceled their service and those who have never tried a meal kit service.
When it comes to popularity, Blue Apron led the pack among meal kit companies with 43% of those who tried a meal kit service saying they used Blue Apron. That was followed by HelloFresh with 33% and Plated with 20%.
The leading meal kit delivery service is losing money on roughly 70% of the customers it attracts, according to analysis by Daniel McCarthy, an assistant professor of marketing at Emory University.
“Even though Blue Apron turns a profit on the remaining 30% of customers, the break-even point is moving farther away with every new cohort due to declining revenue and growing [customer acquisition cost] for newer customers,” writes McCarthy.
Blue Apron acknowledged this issue in its IPO prospectus, saying, “If we fail to cost-effectively acquire new customers or retain our existing customers, our business could be materially adversely affected.”
The company’s IPO has not gone well either. Blue Apron shares are down 36% since their June 30 debut and news that Amazon is launching its own subscription meal-box kits certainly won’t help the company going forward.