Blue Apron Company Analysis: Supply, Demand, and Market Position

Introduction

Blue Apron is an American based company which specializes in the delivery of recipes and ingredients which are used in the preparations of meals at homes by the customers. It was founded in August 2012 in New York and trades in the NYSE. The company have shown a good performance as they strive to build a consumer lifestyle brand that symbolizes the emotional human connections which are formed through the cooking experience which the company creates to the users. The company offers varied products such as knives and pep tools, cookware and bakeware, wine, gifts and cookbooks. It sells its product through its online stores where it has been attracting a larger pool of customers. In their operations, it is supply and demand concepts of the market which have been influencing their operations, strategies and decision-making process overtime. Supply is the quantity of goods and services which the sellers are willing and able to bring to the market at a stipulated time and price (Creative Educational Video, Inc, 2008). On the other hand, demand is the quantity of goods of the Blue Apron Company which the sellers are willing and able to purchase at the market prevailing price at a given time. Therefore, in the case of this study, the main aim is to evaluate the supply and demand condition of the company, its elasticity of demand, the cost of production, the overall market analysis as well as the recommendation for improvement over time.

Supply and demand conditions and price elasticity of demand

In the market, the company's demand for its product was very high after the introduction of the meal kitting machine which enhances the way the customers demand its product. The high level of demand was due to a high level of service which they were delivering to the customers as they anticipate meeting the customer's needs, lifestyle and preferences. The company's supply chain ensures that the goods were available on demand to the consumers as per their zip codes in the New York city and beyond. Besides, the demand was very high due to the provision of the fresh pre-portioned ingredients which can assist in cooking a meal for a period of 30 minutes or less. Also, the consumers had the capacity to order add-on culinary products from the company's suppliers and partners. Some of the partners comprise of Vermont creamery cheeses, Irving Farm Coffee and broths from Brodo. Moreover, the company's products were fresh, and they always ensure a fast delivery from the farm to the consumers are prompt, a process which increased the consumers loyalty ("Market – Blue Apron," n.d.). However, the demand for its products are affected by the presences of the competitors such as Hello Fresh, Kroger supermarket and super corporations (Amazon and Wal-Mart) that produces substitute goods which provides a stiff product rivalry in the market realm. For instance, superstores run an in-house meal kit which are similar and function as efficient as the Blue Apron Kit. These thus dilutes the market, a process which affects the demand and supply adversely.

On the other hand, due to the complexity and pressure to meet the key standards for food transport, and warehousing, the company have decided to achieve a competitive edge through automation. It is working on the kitting automation to supplement its inventory management as well as boosting the workplace quality to improve innovation and teamwork. The meal kitting strategy is still on demand but due to the presence of the competitors, the demand and supply tend to be elastic (Garman, 2018). It simply means that when the price of the products Blue Apron Company offers in the market increases, the demand tends to fall while, when the prices of the products decreases, the demand increases, respectively. However, when compared with other competitors' products, in the situation where the prices of the substitute goods increase, the demand for the Blue apron products increases while when the prices of the prices of the blue apron products increases in prices, the demand for other products tend to incline. These normally happens when all the other factors affecting demand and supply of these products are held constant. to the fact that since the introduction of the ready to cook meals by Blue Apron company, more than 150 rival meal kitting options have entered the market. It thus shows that for Apron to keep the pace of the market, there must be value addition to the services which are provided in the market. These will enable them to achieve market leadership in the industry either in the short or long run.

Cost of production, overall market and recommendation

Cost of production

Cost is an essential factor in the determination of the company's operations and performance. In its manoeuvres, the company divides its costs into three main sets. These comprise of the fixed costs, variable costs and marginal costs. The fixed costs are the costs which the company uses to install the machines and other equipment which they use in their production of the goods and services (Garman, 2018). Besides, the variable costs are the costs of the raw material, and labour which they incur as they produce the products to the consumers. However, they also incorporate the costs of producing an additional unit of output over time. These thus determine how profitable the company is especially when the costs benefits analysis is done. In order for the company to meet a competitive edge, they have to develop strategies which can assist them to minimize costs. For instance, in the past 5 years since 2014, the company has not been efficient in the management of the operating expenses (cost of goods sold, cost of technology, product, general and administrative costs), a process which have subjected them to a high level of costs over a given period. The net loss which was recorded in the process can be expressed in the table as shown below:

From the graph, it can be evident that the net loss is recorded from the year 2014 to the year 2017. It is due to the fact that the company incurs high operating expenses which tend to subject the company into extreme losses. It thus shows that when only the cost of production is taken into consideration, then the company can be able to make a positive profit.

Overall market

In the industry, the company is equally competitive, and conduct is activities efficiently. The market for the company is broad since the management believe that the customers prefer to buy Blue Apron products as oppose to shopping at the grocery shops. These in return enables the company to make more sales as they tend to serve a large pool of customers. In accordance with the study done by the Euromonitors, the aggregate sales in the grocery market totalled to $781.5 billion and that in the global market was eight times larger than this. In the industry, the key strengths which gives the company a competitive edge comprise of existence of a powerful and emotional brand connection since most of the customers cook Blue Apron's meals, like to drink the company's wine and uses its tools which exists in the market. In the situation where the customers share their cooking experience with their families, a stronger bond develops between the company and a large pool of customers (Garman, 2018). Besides, the company has a superior product at a compelling value since the company provide the customers with distinct cooking experience which are centered on original recipe which are developed by a culinary team every week. Also, there is a constant product innovation, existence of attractive units' economics and the presence of hard to replicate value chain. These gives the company strength to overcome competition in the market, a process which gives them a competitive edge both in the short- or long-term basis.

However, during the company's operations, there are various risks which it undergoes in the market which creates red flag for the industry. These comprise of a higher record of losses, and inability to sustain stable profitability, a situation which can result into low level of liquidity. Besides, the company fails to cost effectively acquire new customers in the market or develop strategies of retaining the existing ones hence adversely affecting the business operations overtime. Since due to the market changes caused by variation in the consumers tastes, preferences, economic as well as financial conditions, the business can be adversely affected either in the short or long run. Therefore, to overcome these challenges, the company must have a strong leadership to ensure that they meet the set objectives, a situation which shall ensure a going on concern.

Conclusion

In conclusion, it can be evident that Blue Apron Company stands a chance to control the market demand and supply. Even though they are not market leaders, their production patterns influence the market forces during the determination of the market equilibrium. Therefore, for the company to remain liquid, there is need for the management team to minimize the operating expenses to ensure that the profit margin is enhanced. They should also capitalize on their strength to overcome the stiff competition which exists in the market.

Recommendation

From the above analysis, the following are the recommendations:

• For the company to make profit, there is need for them to reduce the operating costs to improve their margins. These can be done by ensuring that the cost minimizing strategies are efficiently implemented.
• Given the stiff competition which exist in the industry, the company should make more investment on research so as to come up with a new method of production, a process which shall improve their customers retention.
• The management team should embrace teamwork in decision making process to maximize labour and ensure that the needs and obligations of the business are met either in the short or long run.
• The company should cost-effectively acquire new customers and device the best and cheap mechanisms of retaining the existing ones.

Therefore, given the conditions which affect the company in the market, there is need for them to strictly implement these corrective measures to retain an optimal operation of the company.

References

Creative Educational Video, Inc. (2008). Supply & demand. Lubbock, TX: CEV Multimedia.

Garman, N. (2018, August 30). Behind the Scenes: Exploring Blue Apron's Logistics and Supply Chains. Retrieved from https://news.thomasnet.com/featured/behind-the-scenes-exploring-blue-apron-s-logistics-and-supply-chains/

Market – Blue Apron. (n.d.). Retrieved from https://support.blueapron.com/hc/en-us/categories/201172118-Market

Retrieved from https://www.sec.gov/Archives/edgar/data/1701114/000104746917004287/a2232570zs-1a.htm

Walker, E., & La, P. L. (2009). Supply & demand: Pilot series & second series. MIllers Point, N.S.W.: Universal Pictures (Australasia) [distributor].