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11/14/2018

Blue Apron Slashes 4% of Workforce

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Blue Apron Slashes 4% of Workforce Meal Kits
Blue Apron is undertaking various strategic actions in a bid to reverse its fortunes, including the reduction of its workforce by about 4 percent

Meal-kit provider Blue Apron Holdings Inc., which has encountered a number of business challenges over the past year, including a shakeup in leadership at the top, has “streamlined” its workforce by about 4 percent. The move is one of the strategic actions that the New York-based company is taking “to strengthen its focus on specific areas of opportunity in the business that it believes will accelerate its path to profitability on an adjusted EBITDA basis in 2019.”

The idea behind the layoffs, according to Blue Apron, was to “create a more nimble, focused organization and better align internal resources with the company’s strategic priorities … As a result of this action, [the company] expects to incur employee severance charges and other exit costs of approximately $1.6 million in the fourth quarter and generate annual savings in personnel expenses of approximately $16 million in 2019.”

In addition to this “organizational transformation,” the company’s other immediate actions are as follows:

Channel Expansion: The company continues grow the reach of its brand and products through targeted retail channels and on-demand platforms. Recently, Blue Apron formed a strategic partnership with Jet.com to make available same-day or next-day on-demand delivery of a rotating slate of its products to millions of New York metro-area households. The company intends to create new products for its core consumer segment of those desiring a high-quality meal solution that can be prepared in 30 minutes or under, to be available through various retail channels and on-demand platforms.

Operational Optimization: Ongoing optimization of Blue Apron’s operational capabilities are expected to drive further cost-of-goods-sold (COGS) efficiencies and propel the business forward, with various initiatives underway in fulfillment processes, labor management, and sourcing utilization. The company continues to leverage automation technology to realize additional efficiencies.

Direct-to-Consumer Business: As Blue Apron expands its product offerings and bolsters its ecommerce platform to provide a seamless customer experience, the company will prioritize customer segments within the direct-to-consumer business that exhibit such attributes as 1) proven retention; 2) a strong affinity for the brand; and 3) high potential to increase engagement with its product offerings. As the top 30 percent of Blue Apron’s customers on a net revenue basis acquired in recent cohorts account for more than 80 percent of its net revenue from such cohorts in the year after acquisition and had an average payback on the acquisition cost per customer of less than six months, Blue Apron plans to devote its innovation and marketing efforts to serving the needs of its best customers and attracting more of them, leveraging its extensive insights into their behaviors, goals and preferences to customize the customer experience via product development, brand messaging and exclusive services.

The company will also continue to forge prominent brand partnerships and develop innovative products to enhance its core offering, reallocating appropriate resources and marketing spend to support its new and upcoming strategic partnerships, while working to eliminate its investment in customers who are unprofitable to the business.

“The ways in which consumers access meals for various occasions has evolved rapidly, with expanded choice and the continued convergence of online platforms and brick-and-mortar stores,” noted Blue Apron CEO Brad Dickerson. ‘Blue Apron has an established brand and a strong foundation of loyal customers who trust and rely on the quality and convenience of our products. We are taking decisive actions to prioritize our highest-impact opportunities and build a stronger, sustainable business. … This included the difficult decision to part ways with valued employees. On behalf of the entire company, I thank these colleagues for their many contributions to the business.”

Added Dickerson: “We are challenging ourselves to think differently about the business. While our strategic priorities –– evolving and expanding our product portfolio, enhancing our overall customer experience, and entering new retail and on-demand channels –– remain consistent, the brand and product initiatives we are pursuing within each of these pillars will be driven by a disciplined and deliberate focus on consumers who have the attributes of our best customers. We expect this focus to create a more efficient business, as well as increase key customer metrics, including order rate and revenue per customer. We believe this strategic focus will have a meaningful and positive impact on our current and future customers and deliver value to our shareholders.”

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