Meal-kit company Blue Apron plans to sell off its operational infrastructure to FreshRealm, signing a non-binding letter of intent that calls for the grocery fresh meals provider to pay up to $50 million for the assets, the companies announced Tuesday.
Blue Apron said it plans to continue its direct-to-consumer meal kit business even as it shifts to an “asset-light model,” with an ongoing focus on the creation and marketing of its product, customer data, customer support and consumer-facing technology.
The deal is expected to close by June 9, the companies said.
“The company does not expect changes to its existing revenue streams as a result of this relationship,” Blue Apron said in a statement. “By shifting to this asset-light model, Blue Apron plans to focus on further growing its strong brand and delivering the high-quality products its customers have come to expect. The company also plans to add new convenience product options for a broader customer base in the future.”
Ventura, California-based FreshRealm, which was founded in 2013, currently provides ready-to-heat, ready-to-cook and kit-based meals to retailers including Amazon Fresh, Kroger, Publix, Meijer and Walmart, among others. The company announced a $200 million capital raise last July, enabling this acquisition.
Acquiring Blue Apron’s operational infrastructure will add nearly 1 million square feet of facility space to FreshRealm’s portfolio, the company said, adding meal-production capacity in Linden, New Jersey, and Richmond, California.
Separately, FreshRealm said it intends to open a new facility in Lancaster, Texas, near Dallas.
“The Blue Apron-acquired infrastructure includes equipment, know-how and an expanded workforce that will broaden FreshRealm’s capabilities and efficiencies,” FreshRealm noted.
Blue Apron, which has struggled with customer declines and supply chain challenges in recent years, said the deal will strengthen its balance sheet and drive efficiencies as it seeks to achieve profitability. The company, which was founded in 2012, went public five years later.
In March, New York-based Blue Apron reported that fourth-quarter orders fell 13%, to 1.46 million, from the year before, while total customer count declined 11.3%, to 298,000. The company’s net revenue dipped 0.2%, to $106.8 million, during the period.
Earlier this year, Blue Apron received a delisting notice from the New York Stock Exchange after its closing stock price dipped below $1 and its market capitalization fell below the required minimum of $50 million.
In December, Blue Apron said it would lay off about 10% of its workforce as it sought to cut $50 million in expenses.
“Over a decade ago, Blue Apron pioneered the U.S. meal kit industry and remains a leader in offering delicious, chef-curated meals to thousands of customers every week. As we continue to evolve, we believe there is an opportunity to simplify our direct role in the fulfillment of our product, allowing us to focus on growing our brand, our customer base and revenue in the long-term,” said Linda Findley, Blue Apron’s president and CEO, in a statement. “We expect that this will allow us to focus all our efforts on providing even greater innovation and convenience to our customers as we remain at the forefront of culinary trends. We are confident that we can continue to deliver the same product our customers know and love, while increasing efficiency and accelerating our path to profitability.”
FreshRealm currently manufactures Blue Apron’s line of heat-and-eat meals. Blue Apron said it expects the transaction to uncover additional sales channels as it benefits from FreshRealm’s full product offering.
“Today’s meal industry is focused on profitability and expanded product offerings,” FreshRealm Founder and CEO Michael Lippold said in a statement. “From the beginning, FreshRealm has believed this is best achieved through organizations staying withing their core competencies. This announcement positions Blue Apron to focus on the customer experience, while FreshRealm continues on the path to be the leading platform to support retailers across multiple channels with a broad and efficient solutions offering.