'We're focusing on acquisition and customer value growth': Blue Apron CEO

Linda Findley Kozlowski, Blue Apron CEO & President, joins Yahoo Finance’s Alexis Christoforous to discuss the company’s demand amid COVID-19 pandemic and Blue Apron's growth outlook for 2021.

Video Transcript

ALEXIS CHRISTOFOROUS: Last quarter, the meal kit company saw revenue jump 22% while its net loss narrowed to $11.9 million. Joining me now is Blue Apron CEO Linda Findley Kozlowski. Linda, good to have you on the show. I know that business has been very busy over at Blue Apron. But paint the picture for us, and tell us what demand is like now, compared to the early days in the pandemic.

LINDA FINDLEY KOZLOWSKI: Well, I think what you're seeing now is a bit more of an even sort of continued acceleration. We put a lot of things in place during the pandemic that really enhanced both our product and our marketing. So we're focusing on acquisition and customer sort of value growth right now, much as the same as we would outside of the pandemic.

We're really using all of our marketing muscle, bringing in the new platforms and marketing that we put into play and really focusing on driving product changes that will actually drive long-term sustainable engagement with customers, not necessarily focused on pandemic sort of swings in traffic at this stage. So it's evened out quite a bit over the last year, and now it's really a focus on retention and engagement.

ALEXIS CHRISTOFOROUS: So to that end, I know that Blue Apron actually lost customers for the second straight quarter. What are some steps that you are-- I would imagine there's sort of a holistic approach in trying to retain the customers. Yes, you've got to up the marketing and let people know that you're there and what you're offering, but also a lot of product innovation. Can you just give us some insight into how you plan on not just winning the customer, but keeping the customer?

LINDA FINDLEY KOZLOWSKI: Well, the product innovation is really key. And when you look at the customer numbers from Q3 and Q4, which we talked about in our Q3 earnings, we had intentionally constrained some of our marketing activities as we were ramping up some of the capacity for long-term scalable, efficient capacity. So we had some labor challenges in Q3 and beginning into Q4 that caused us to hold back a little bit on marketing and really focus on serving our existing customers throughout the quarter.

Also, of course, Q4 tends to be a seasonally lower quarter because of the holidays. We were actually able to increase the value per customer pretty significantly with revenue per customer around $327, which is the third straight quarter it's been above 300, as well as the highest AOV that we've had on record. And we did that because those product moves really help engage customers. That increased the value of customers, what we're going to, leading into 2021, where we ramp up our marketing spend back on the acquisition train.

ALEXIS CHRISTOFOROUS: As more of the economy opens up and we're getting some more indoor dining, do you see a direct correlation with demand at Blue Apron? Does it ebb and flow with how restaurants are functioning during the pandemic?

LINDA FINDLEY KOZLOWSKI: Not really. I mean, restaurants, for us, are really a part of the ecosystem. We're assuming that in normal times, people are going to be doing a combination of eating in, eating out, et cetera. What we care about more is how people are cooking at home and what they're looking for in solutions for cooking at home.

We know people are planning on cooking more at home after the pandemic than they did before the pandemic because they developed new skills. They're starting to get a lot of sort of additional technical skills in the kitchen and getting pretty proud of them. So we want to be a part of that moment.

We actually look at restaurants as very complementary to what we do because we partner with chefs all the time to bring restaurant quality food to people's homes. And so, we're anticipating there's always going to be a balance of eating in and eating out. And we just want to create the best possible solution for when you're eating at home, so you can get great value, great products, and great time with your family over a great meal.

ALEXIS CHRISTOFOROUS: I think it's a good point. A lot of us, I think, are feeling a lot more comfortable in the kitchen, maybe even out of necessity during the pandemic. Can you point to any trends you're seeing? I know for a while, you know, kale was really big. I mean, what are some of the food trends you're seeing at the moment?

LINDA FINDLEY KOZLOWSKI: It's actually really interesting that you bring that up because we do tend to be pretty seasonal because we have a direct sourcing model. We have very high quality produce, high quality ingredients in our box. We tend to have seasonal ingredients in our box.

So there's a lot of kale going on right now because it's a great vegetable this time of year. And it's great in so many different applications around soups and stews, et cetera. We've had a lot of people tell us that they came to love kale because of Blue Apron, because they realized how they could cook it and how they could make it better.

Right now, we're seeing a lot of trending towards special occasion meals. So people are really getting more comfortable with those higher end techniques and something a little bit more special. So our premium meals continue to sell well, and also, of course, our specialty boxes that we introduced, including we just had our box with Stella Artois, the Stella stadium bites that we introduced around the Super Bowl. And then prior to that, we had our Thanksgiving box. We've also done some specials for Valentine's Day, et cetera.

So it's less about a specific ingredient right now, although scallops are definitely having a moment. And it's more about the techniques and the occasions.

ALEXIS CHRISTOFOROUS: I'm a big fan of the scallop, so that's a winner for me.

LINDA FINDLEY KOZLOWSKI: Me, too.

ALEXIS CHRISTOFOROUS: Are you looking at--

LINDA FINDLEY KOZLOWSKI: Incredibly popular in our box.

ALEXIS CHRISTOFOROUS: That's great. Are you looking at hiring more workers as you try to continue to scale up your fulfillment centers?

LINDA FINDLEY KOZLOWSKI: Well, so we've been taking a two-pronged approach in our fulfillment centers. We have a lot of great equipment in place. And really, our facilities are very well set up to scale. When we were coming across labor challenges, we approached it in two different ways. One is we are actually still doing hiring in our fulfillment centers.

But more specifically, we looked long-term and said, how can we make sure that we're maximizing the automation we have in place, the teams that we already have in place, and getting a lot more scale out of our existing labor pool? Because that creates long-term efficiencies when it comes to margin and when it comes to the strength of the business. So that two-pronged approach has really helped us. And we've been able to accelerate our capacity ahead in order to prepare for growth in the future.

ALEXIS CHRISTOFOROUS: And I know that during the pandemic, you saw this big boom in growth. You also had your first ever profitable quarter since going public back in 2017. I believe that happened almost a year ago, in the spring quarter last year. What's it going to take-- you know, there are a lot of naysayers out there, a lot of analysts who say, once we truly reopen, the growth that Blue Apron saw will begin to shrink. What do you say to those analysts, and when might you be able to repeat that profitable quarter?

LINDA FINDLEY KOZLOWSKI: You know, I think there's a lot of interest in the fact that people are looking at different meal solutions now. And so the fact that you've seen growth across meal kits in general isn't just about the pandemic. The reality is there are lots of sources for food. There's online grocery. There's a lot of different ways that people can get food.

The benefits that meal kits bring in are really about food waste production, increase in variety in what you're actually eating and being able to experience at home, connection with your family of cooking together. There's so many benefits around the concept of meal kits that were true before the pandemic and will continue to be true after the pandemic. You know, we were leaning into the turnaround from our own perspective as a business around product innovation and marketing. And we still have a lot of that momentum to go forward into 2021.

So it's for me, there's still a lot ahead. It's still a young industry. And people are seeing more and more of the benefits of meal kits as they've been trying them through the pandemic, and even before the pandemic, starting to see those values beyond just convenience.

ALEXIS CHRISTOFOROUS: Do you see things like DoorDash and Uber Eats, which talk about convenience-- there, you've got it. Do you see those as competitors at all to your business?

LINDA FINDLEY KOZLOWSKI: For us, it's really a bit more about the different type of experience you're looking for. So for us, we think that having a high quality meal from whole ingredients that you can prepare at home really brings an entire different experience. You know, we're talking something that per serving is so much less expensive than having a prepared food delivered to your home. There's no delivery fees. There's none of that attached to it.

You're really getting high quality ingredients, and these days, faster and faster prep. We've introduced one-pan and one-pot meals that involve only one pan to cook, much shorter cooking times, much easier clean up. And so we can bring a lot of convenience you would actually see with takeout, but with much fresher ingredients, much fresher flavor, and frankly, a much better value per serving than some of the takeout options. So for us, it's a clear winner when it comes to an experience at home that tastes delicious and really shows the value of the meal kit.

ALEXIS CHRISTOFOROUS: Yeah, those-- as a working mom, those one-pot meals sound good to me. Linda Findley Kozlowski, CEO of Blue Apron, thanks for being with us.

LINDA FINDLEY KOZLOWSKI: Thanks so much for having me.