(Bloomberg) — Days after e-commerce giant Amazon.com Inc. rattled the food industry with its $13.7 billion deal to acquire Whole Foods Market Inc., meal kit delivery company Blue Apron Inc. is vying for some of the spotlight.
Blue Apron, No. 197 in the 2017 Internet Retailer Top 500, is marketing 30 million shares of Class A common stock at $15 to $17 each in its initial public offering, aiming to raise as much as $510 million, according to a regulatory filing Monday. The company would have a market value of about $3.2 billion at the high end of that price range, based on the total number of shares outstanding after the offering.
Blue Apron is scheduled to price its shares on June 28, according to data compiled by Bloomberg. That gives management less than 10 days to convince potential investors of its growth prospects as they embark on IPO road show presentations. In the wake of the Amazon-Whole Foods deal, Blue Apron executives have already been tweaking the message, according to a person familiar with the matter.
Blue Apron’s management plans to stress that its business model is different from the basic grocery delivery currently offered by Amazon’s Prime service and Whole Foods’ partnership with Instacart Inc., said the person, who asked not to be identified because the details are private. Executives want to convince possible investors that its tailored recipes and prepared ingredients add value, said the person.
Blue Apron sends boxes of pre-portioned ingredients and instructions for customers to cook meals at home. The $59.94 box, with recipes such as sesame soba noodles and soy-marinated chicken thighs, includes ingredients for three meals for two people.
The Amazon (No. 1) deal is especially pertinent to Blue Apron because the New York-based startup appeals to a similar customer base as Whole Foods: The top-10% of households by income, according to Kurt Jetta, chief executive officer of retail and consumer analytics provider Tabs Analytics.
“It’s a very high-end, desirable customer base, but it is very limited,” Jetta said in a phone interview. “They are both just clawing for that share of the wallet, and now you’ll have a stronger presence from Amazon-Whole Foods.”
Shock Waves
Amazon’s biggest acquisition ever sent shock waves through the $800 billion grocery sector when it was announced Friday, driving down rivals’ stocks and fanning speculation that other food retailers will pursue deals to help try to compete with the new grocery giant.
Blue Apron has already been touting its brand and what it labels as “superior products at compelling value” as it seeks to differentiate itself, according to the IPO prospectus. The company is aiming to add new customers for its standard boxes, as well as broadening its portfolio to cater to a wider range of diets.
On Monday, it added a line to its IPO filing acknowledging that “business combinations and consolidation in and across the industries in which we compete could further increase the competition we face.”
Management also plans to point out that the so-called total addressable market in the U.S. still provides opportunities for growth, the person familiar with the matter said. Only about 1% of grocery shopping in the U.S. is done online, while Blue Apron said in its IPO filing that its market penetration in the U.S. was just 0.7% in the fourth quarter of last year.
A representative from the company declined to comment.
Hungry for Customers
Founded in 2012 in Long Island City, Queens, Blue Apron filed for its IPO on June 1 after reportedly delaying listing preparations while it worked to improve financials. While revenue more than doubled last year, Blue Apron is still losing money as it fights to win customers from competitors.
At the end of the first quarter, Blue Apron had 1 million customers who made 4.1 orders each — compared with 649,000 customers making 4.5 orders apiece a year earlier. The average order value fell to $57.23 from $59.28 in the same period, while average revenue per customer slipped to $236 from $265.
Standing out among the competition in the busy U.S. food-delivery has already proven to be expensive: Blue Apron spent $144 million on marketing last year, or about 17% of its total operational spending, according to the earlier filing.
Blue Apron’s listing is being led by Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and Barclays Plc. The sale can be increased to 34.5 million shares if the overallotment to underwriters is exercised, which would boost the IPO to $586.5 million, according to the filing. Rival Sun Basket, which recently sold a stake to Unilever’s venture arm, hired Bank of America Corp. and Jefferies Group LLC to lead its own IPO.
After the offering, the company will have a total of about 187 million of Class A, Class B and Class C shares outstanding. The company plans to use the proceeds to pay down an existing credit facility and for working capital, capital expenditures and general corporate purposes.