Investors’ fears about Amazon Inc. coming after Blue Apron Inc. may be realized.
Shares of Blue Apron
plunged 9% Monday after an Amazon trademark filing surfaced for prepared meal kits. Blue Apron went public around the same time that Amazon bid for Whole Foods Market Inc.
during which investors and analysts were unsure about Amazon’s
intentions in the food space, but were nervous that Amazon could pose a large competitive threat.
Amazon applied July 6 to trademark the phrase “We do the prep, you be the chef.” The filing says the phrase is related to “Prepared food kits composed of meat, poultry, fish, seafood, fruit and/or and vegetables and also including sauces or seasonings, ready for cooking and assembly as a meal.”
The filing is under 1B status, meaning it’s an application “based on intent to use,” according to the United States Patent and Trademark Office.
Amazon did not immediately respond to a request for comment.
Going up against the internet giant does not necessarily mean it’s the end for Blue Apron, but it “makes life hard,” said Max Wolff, market strategist at 55 Institutional. Amazon has a large economy of scale, meaning that the company can likely produce products at a lower cost, and has an advanced distribution network, which could be enhanced by its acquisition of Whole Foods.
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Blue Apron appeared to acknowledge the threat from Amazon as it added a risk factor to its filing ahead of the IPO and around the timing of Amazon’s bid around the consolidation of companies.
“Business combinations and consolidation in and across the industries in which we compete could further increase the competition we face and result in competitors with significantly greater resources and customer bases than us,” the company said in its prospectus.
On the other hand, Judge Graham, chief marketing officer of Ansira, a marketing agency, said while he’s generally “an optimistic guy,” he does see Amazon’s entrance into the space as a “potential death sentence” for Blue Apron.
“Amazon continues to dominate the direct consumer space,” Graham said. “This is just one more avenue Amazon is going to go in and dominate.”
Still, Wolff said he believes Blue Apron could combat the threat by becoming more “niche focused” or teaming up with another player, such as Wal-Mart Stores Inc.
and a more luxury brand, in a fight against Amazon.
Graham also sees potential if Blue Apron delivers better recipes or better quality of food, which is something the company touted in its prospectus.
Meanwhile, the company needs to communicate better and prove to the public and investors that its business model will not be affected by Amazon.
“I think the confidence is broken, so every possible setback gets an exaggerated importance,” Wolff said.
Analysts have also been cautious on Blue Apron because of its subscription model, which has yet to prove whether it’s sustainable. It also has a high customer acquisition cost, which is a cost Amazon is unlikely to face as it already has an established base of Prime customers.
A meal-kit offering would likely do well with this base of customers, who likely are already focused on convenience and quick delivery, said Jim Fosina, chief executive of Fosina Marketing Group. That base, in addition to Amazon’s ability to market should make Blue Apron and others “very concerned,” he said.
“They have a installed base that mirrors the population of customers that are in the sweet spot of those interested in these services,” Fosina said.
Shares of Blue Apron have fallen 21% month-to-date, while the S&P 500 index
has gained 1.5%.
The company’s stock fell below its IPO issue price of $10 in its second day of trading on June 30. The stock has not reached $10 since that day.