Cooking

Exclusive: Blue Apron serves up half a million meals per month

March 24, 2014: 7:00 AM ET

The subscription startup that mails cooking kits to your door has quietly hit a considerable milestone, but it has a growing number of competitors in a hot space.

By Daniel Roberts, writer-reporter

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FORTUNE -- Tech has finally caught on to the food revolution. Even as dining culture explodes and innovative restaurants with celebrity chefs gain exposure and foot traffic, a slew of recent startups cater to the opposite activity: eating in.

Seamless and GrubHub are used for ordering takeout and have new competition with FoodToEat and Caviar. Urban Spoon and Foodspotting help locate nearby restaurants, and Yelp and Foursquare let you check in and review them. That's not to mention a host of additional apps and websites in those categories, as well as ones that tailor to other dining-out functions.

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But Blue Apron and other similar services want to help you be a better cook. They're zeroing in on the idea that our lives have become so digital that making a meal at home may be the only chance in the day to share an activity with loved ones. "The best food, ultimately, is made at home," says Matt Wadiak, a professional chef and co-founder of Blue Apron. "Our goal is to empower people and give them the tools to prepare good meals on their own."

Wadiak co-founded Blue Apron with former venture capitalist Matt Salzberg (now CEO) and computer engineer Ilia Papas (CTO). The subscription service sends you a box of ingredients each week -- enough to cook three meals for two, four, or six people, depending on your choice. The ingredients arrive in just the right proportions to follow a recipe included in the package.

Of course, this requires you to commit to cooking three times each week. For some families, that may be standard routine, but for busy singles with demanding jobs, that's often nearly impossible.

Still, the benefits of such a service are many. For starters, by sending only exactly what you need for each recipe, Salzberg says, Blue Apron is reducing the food waste that often comes from buying, say, a whole container of sour cream when what you're cooking only requires a dollop. Cooking at home can also be healthier than getting delivery or eating out.

Alexandra Cassis, a fashion marketer in Boston, says the service is saving her money. Since Blue Apron's smallest option is for two people (some might see this as a negative), it allows her to have leftovers and stretch the three meals into six. "I've had one of their meals provide me with three more meals," she says. "Breakfast, lunch, and dinner the next day. It's a good deal for what you get, but it's on the expensive side. It's $60 per week for two people, so it ends up being $20 per meal, though I really consider it $10 per meal since I get leftovers out of it."

Salzberg, Wadiak, and Papas came up with the idea for Blue Apron in spring 2012, and only launched the site some 18 months ago. That's why it's impressive that, as Fortune has learned, it just hit the milestone of 500,000 meals delivered per month. Headquartered in New York but with an office in California, the startup has received $8 million in funding -- relatively small -- and has just over 200 employees. Its growth, then, is thanks to two trends: the rise of the snail-mail subscription box -- think of Birchbox and Dollar Shave Club -- and, within that, the popularity of the ingredient-delivery game, in which the players are multiplying quickly.

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Another player in the space is Plated, which comes out of startup accelerator Techstars. It launched in September and has $6.4 million in funding. The model is slightly different from Blue Apron's; while Plated does have a subscription option, you can also go on and order a single meal right now, to be delivered on a specific day. You choose from seven different recipe options per week, whereas with Blue Apron, the three weekly recipes are selected for you out of six that week. Plated won't share numbers, but as a comparison to Blue Apron's 500,000 meals per month, Plated was at 100,000 total last June and cofounder Nick Taranto told Fortune, "We have accelerated our growth and are doubling the business every two months." Chefday! and HelloFresh are the other startups competing in this space.

John Frankel, a partner at ff Venture Capital, says his firm invested in Plated (as has Lerer Ventures) because he sees it as an exciting alternative for those who don't have a fancy grocery store nearby. "There's a paradox of choice out there. People go to the pantry and have lots of food, but say they have nothing to eat," he says. Indeed, that's how the dress-rental site Rent the Runway was born: Co-founder Jennifer Hyman's little sister complained that she had a closet full of dresses, but nothing to wear. (See: How we started Rent the Runway.)

Of Plated, Frankel raves, "I've never invested in a company that's growing this fast. The retention rates, after people have used it three times, are ridiculous. We've had periods where the demand has outstripped supply until we caught up."

The logistical challenges are considerable. The success of the service, of course, relies on the ingredients being fresh upon arrival. Blue Apron operates its own fulfillment centers and outsources delivery trucks. It delivers to 40 states, but primarily on the East and West coasts. It says its ingredients should last up to one week before cooking. ("The way most consumer food works is it gets sent from a farm to a broker or distribution center, then rotated to a storage room, then rotated onto a shelf," says Wadiak. "What we do is buy the food and send it right to the customer. There are two points of rotation that we eliminate just by doing that.") It guarantees a maximum of two-day shipping of the boxes, though Frankel says pugnaciously, "We think that's dangerous. Plated ships one-day." And the packaging matters: It needs to protect delicate foods like eggs, and keep cool any foods that require refrigeration. Becca Brennan, an attorney in New York City, says when she tried Blue Apron, the packaging looked excessive and made her worry that it was wasteful. "It comes in this huge box, and then every little thing is portioned off," she says. "A [large-looking package] had two eggs in it. And there was so much cardboard and plastic." She plans to test out the others next.

As is often the case among startups, each likes to claim it has no direct competition. Salzberg insists that Blue Apron and its peers are each competing "more with the status quo" (that is, supermarkets, takeout, or restaurants) than with each other. And that may be fair. As Frankel says, "People say it's a crowded space, and I say, 'Are you serious?' This is not one-winner-take-all. Is there only one supermarket in the U.S.? These companies can grow 100-fold before they start eating away at the margins of restaurants and supermarkets."

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Next, these businesses will all look to beef up (so to speak) their array of options. Only last week, Blue Apron began offering choices for those who do not eat certain foods, like pescetarians or those with shellfish allergies. ("I think they really need a low-calorie option," says Cassis.) Matt Salzberg says that further change is coming: Blue Apron will soon announce additional menu options tailored to complex needs. Frankel knows it's the necessary next step: "I think if you're hypoglycemic or kosher or gluten-free and the like, there will be a service that caters to you, but I don't know if it will be a Plated," he says.

The rise of eating-out technology and cook-at-home tech is not mutually exclusive. Both will likely thrive side by side. In fact, Blue Apron's biggest subscriber market is New York City, which may be surprising. "The irony is that restaurants are the biggest here too," acknowledges Salzberg. "But the way we're going, currently every week is our biggest week ever."

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