While innovation flows freely in every industry, from time to time the media latches onto a particular tech wave or flavour. Flavours of the week have gone by with the seasons, from FinTech to LegalTech. But one of the most lucrative and untapped markets is in what we put into our stomachs: FoodTech.
Food Fight Heats up
During these past few years, the FoodTech industry have seen innovation in meal preparation from companies like Delivery Hero and FoodPanda. But where is food and technology making the latest and most exciting convergence? We are about to find out. Blue Apron, a service that mails you a box of fresh, pre-measured ingredients with the recipe included, is nearing an IPO that is expected to value the company at around $3 billion. The public offering is the first from a much hyped new market.
Startups like Plated, HelloFresh, Sun Basket and Home Chef have each raised tens, if not hundreds, of millions in private capital to make meal subscription services mainstream. If that's not enough, Amazon now has the potential to eat Blue Apron's lunch too. With its pending deal to buy Whole Foods (WFM) for $13.7 billion, Amazon could upend the grocery shopping experience online and in stores.
A Very Competitive Industry
The Blue Apron IPO and Amazon's grocery splurge highlight the growing importance of food in Silicon Valley. Suddenly there's billions at stake to change the way we shop for groceries. It also shows how unpredictable the competitive landscape can be. This month, it's Amazon shaking everything up. Next, it could be Google or Uber, both of which have experimented with grocery deliveries.
Blue Apron's sales hit nearly $800 million in 2016, more than doubling from the year before, according to its IPO paperwork. Unfortunately, that growth rate is slowing and Blue Apron is bleeding more money than ever. The company lost about $55 million last year, up from $47 million a year earlier. Much of that loss is likely driven by the cost of marketing. Blue Apron invests in TV commercials, outdoor ads, countless podcasts and promotional offers to continue growing its customers base.
Food Tech Companies Plan to Go Public
The problem for Blue Apron and its competitors is that none has cornered the market yet. So each company may be forced into a endless war of discounts and aggressive promotions, not unlike the ride-sharing wars between Uber and Lyft. It is important to state that most food tech companies face an added challenge: managing a supply chain. They must source, store and deliver fresh ingredients, creating logistical and food safety issues that set them apart from other recent tech IPOs like Snapchat.
Blue Apron doesn't mention Amazon or its other competitors by name in its IPO filing. But it does note that business combinations and consolidation in its industry could result in competitors with significantly greater resources and customer bases than theirs. By going public now, Blue Apron may boost its brand recognition and get more funds to compete for customers and talent. Its head start may not last for long, though. On a similar note, Chef's Plate, a startup based in Canada, is also planning an IPO in the next year or two.
Badr Berrada is a tech entrepreneur & international best-selling author. As a Founder & CEO of BBN Times, he manages a team of more than 150 renowned industry experts. He has been featured in renowned publications such as Forbes Magazine, Business Insider, Yahoo! News, Thrive Global, Irish Tech News, Khaleej Times, Herald-Tribune and IdeaMensch. He co-authored The Growth Hacking Book: Most Guarded Growth Marketing Secrets The Silicon Valley Giants Don’t Want You To Know and The Growth Hacking Book 2 : 100 Proven Hacks for Business and Startup Success in the New Decade. Badr holds a master's degree in Economy, Risk and Society from the London School of Economics and a bachelor degree in Finance from Cass Business School.