Meet the zombie brands: Why Blue Apron, Allbirds, and others are still alive, only different
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Meet the zombie brands: Why Blue Apron, Allbirds, and others are still alive, only different
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In 2017, Blue Apron bet the farm. With its valuation at $2 billion, its brand sizzling hot, and its IPO imminent, the meal-kit delivery startup snapped up BN Ranch, a network of sustainable meat producers founded by grass-fed-beef pioneer Bill Niman.
BN Ranch had been providing Blue Apron with pork, beef, and poultry for dishes like Seared Hanger Steak with Rosemary Fingerling Potatoes and Green Bean Salad since 2015. The acquisition cemented their relationship, with Niman staff joining Blue Apron’s fast-growing team. It also signaled Blue Apron’s ambitions to cut out the middlemen from its operations, working closely with ranchers and growers. “We are furthering our vision to build a better food system,” Blue Apron cofounder Matt Wadiak said at the time.
But Blue Apron’s dreams to re-imagine the industry, bringing food from organic farms to the tables of its then 746,000 subscribers, soon withered. Three months after announcing the BN Ranch deal, Blue Apron went public, and it didn’t go well. The company lowered its target share range from $15 to $10, and raised just $300 million—a third less than its stated goal. Investors questioned Blue Apron’s decision to spend such a massive sum on marketing and its ability to fend off on-demand food-delivery entrants such as GrubHub. Net revenue dropped by half between 2017 and 2019, and the figure has been stuck below $500 million ever since. The company has struggled to turn a profit. This summer, its market cap hovered around $50 million as it retreated from its once-expansive operational vision to focus on . . . recipe development.
If the plan was to make Blue Apron attractive to buyers, it worked. In October, serial entrepreneur Marc Lore’s Wonder Group, which is developing what it terms a “mealtime super-app,” recently agreed to buy Blue Apron, ending the company’s troubled public-market tenure. The deal values Blue Apron at around $103 million.
Many of the brands that blazed the path for direct-to-consumer (DTC) startups alongside Blue Apron are becoming shadows of what they once were. Shoemaker Allbirds, once worth $4 billion, now has a market cap of $200 million; it doubled its net losses to $101 million last year. Mattress retailer Casper, after spending millions of dollars on failed attempts to develop “sleep economy” products such as smart night-lights and CBD gummies, was taken private in 2022 and has been studiously trimming costs. Other formerly promising startups are on similar trajectories. Online wine club Winc filed for bankruptcy in November 2022, only a year after its IPO. Its famous Summer Water Rosé and other assets now belong to a spirits conglomerate. Gen Z underwear maker Parade agreed to sell to a Fruit of the Loom licensee in August, amid reports that it had never been profitable.
Pressure to reduce burn and readjust business models in the face of investor skepticism and rising interest rates has pushed many DTC companies into a kind of zombie existence. To the consumer, they are keeping up appearances, but behind the scenes, they are hollowing out. In the 2010s, the ne plus ultra of a successful DTC company involved a digitally native brand attached to a vertically integrated supply chain and a splashy SoHo storefront. Today, that operational infrastructure is increasingly outsourced, removing the companies’ distinctive qualities. Often only a brand veneer and intellectual property remain.
Take Stitch Fix, for example. Last October, with its stock price down 95% from its January 2021 peak, it shut down the Pennsylvania cut-and-sew factory it had acquired in 2017, along with the size-inclusive private label it produced there. Luxury reseller the RealReal, meanwhile, is closing stores, shedding inventory, and looking for ways to sell ads and monetize its data with its stock down 92% from its IPO. And then there’s Allbirds, which once boasted about its “vertical retail distribution” strategy, with physical stores serving as “brand beacons.” Now, the company touts to investors its “steady progress with high-quality, third-party partners,” including such retailers as Dick’s Sporting Goods and Nordstrom. In other words, indirect to consumer.
Blue Apron made its transition to zombie-mode Wall Street official earlier this year, announcing that it is adopting an “asset-light” model. This means that it will be focusing on recipe development and marketing while partnering with third-party food-prep specialist FreshRealm to pack and ship its meals. (FreshRealm has subleased Blue Apron’s two packing facilities, in California and New Jersey.) The deal, which could be worth as much as $50 million in Fresh-Realm payments to Blue Apron, allowed the meal-kit company to pay off its debt.
When Blue Apron launched as one of the original meal-kit companies, it had to create its own facilities. “Anyone who’s starting a new process that didn’t exist before almost has to be verticalized, by definition,” says Linda Findley, Blue Apron’s president and CEO. Today, however, specialized providers can handle all of the different production processes associated with meal kits. “This is a natural, elegant evolution of a new industry,” Findley says. And Blue Apron, she argues, was never about the supply chain anyway: “Our differentiator is in what we put in the box: the creativity of our recipes, the flavor of our recipes, the quality of our ingredients.” In 2022, she says, Blue Apron wrote enough recipes to fill 15 cookbooks.
As for BN Ranch? Blue Apron retired the brand, leaving nothing more than a set of sourcing standards for the meal-kit company’s beef.
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