Blue Apron to Sell Meal Kits in Costco Stores

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Blue Apron to Sell Meal Kits in Costco Stores

By Randy Hofbauer - 05/04/2018
Blue Apron to Sell Meal Kits in Costco Stores

Blue Apron has partnered with Costco Wholesale Corp. to sell exclusive meal kits in the club chain’s Pacific Northwest and San Francisco Bay Area stores, with the opportunity for further integration.

On its May 3 call to discuss second-quarter earnings for fiscal 2018, Blue Apron CEO Brad Dickerson, who replaced co-founder and CEO Matt Salzberg late last year, announced the plan as part of the company’s growth strategy through building new products to serve more occasions, and introducing on-demand offerings through its own platform or in partnership with others offering a strong regional or national footprint. The meals will rotate monthly and are designed as a “convenient, on-demand dinner solution,” bypassing the need for a subscription.

“This pilot extends our relationship with Costco while exposing the Blue Apron brand’s new consumer insights,” Dickerson said. “In the months ahead, we will continue to launch new partnerships with different products and price points to further broaden our geographic reach, introduce the Blue Apron brand to new consumer segments and expand our total addressable market. In our view, we have only scratched the surface of how the Blue Apron meal experience can engage with consumers."

Responding to one attendee’s question, Dickerson noted that while Blue Apron has focused for five-plus years on building a brand dedicated to offering “great culinary experiences,” it's also currently more of a “weekly planning mechanism for customers to plan out about a week in advance ... how many meals they want.”

The Wall Street Journal first reported in March Blue Apron’s plan to begin rolling out its meal kits in physical stores, noting at the time that it had been hemorrhaging subscribers, including a one-quarter decline to 750,000 in February compared with the number a year prior. The New York-based service also has had a lackluster IPO, cut staff and even replaced its CEO as it continued to hold onto its subscription-only model.

Meanwhile, rival service Chef’d has teamed with Southern California grocer Gelsons and Northeastern food retailer Tops Markets to extend its brand via brick-and-mortar operators, while Bashas’ and Costco have begun offering True Chef meal kits, the latter of which are specifically designed for retail and boast a long shelf life. Also, Albertsons has outright purchased Plated, expanding the service’s offerings to its own physical locations. Further, grocers such as Walmart, Kroger and Publix have introduced private label meal kits.

Meal kits offered through brick-and-mortar food retailers have experienced impressive gains, new research from Chicago-based market researcher Nielsen shows. Sales of in-store meal kits grew 26.5 percent over the past year, reaching $154.6 million, with growth likely attributed to two advantages: They require less commitment than those purchased via subscription-based services, and they offer more flexibility for retailers and suppliers to experiment with components and “levels” of convenience that keep customers coming back.