Investors in Blue Apron were left feeling, kind of, blue on Thursday (August 2nd) as the company reported disappointing results and the stock fell by 20%. Blue Apron shares (Friday $1.83) have lost about half their value since the beginning of 2018 and more than two-thirds of their value from a year ago, when they traded at $6.37. Ouch!

Subscription meal kits have been the investors favorite a while back, but things will change swiftly as revenues start lagging. Blue Apron’s subscribers receive regular boxes of ingredients and recipes to cook at home (Like HelloFresh). The company’s second quarter was thoroughly dismal to say the least: revenues dropped by 25% compared to a year ago. Not to mention a 24% drop in customers (most likely from other competitors and Amazon and Walmart). Those who did stick around spent less on the Blue Apron service.

Subscription businesses are a very tough gig, especially when companies have to deal with serious challenges such as product shipping costs, supply chain management and support, logistics just to name few. Another challenge with food subscriptions is that the product goes to waste if you don’t use it – not the case with fully digital platforms that supply digital services only (i.e.: Netflix-Spotify, etc…). Rotting veg in the fridge can lead people to unsubscribe quickly. In response, companies might ramp up marketing spend and offer discounts, making it tough for investors to assess whether Blue Apron and friends will ever turn a profit.

Almost all food related startups reported higher marketing and promotion costs (duh). Delivery Hero (Germany’s GrubHub) reported second-quarter results that were better than hoped. However, its stock dropped by 3% as it announced higher marketing costs in order to take on Dutch rival (which shares also fell on Wednesday – similarly, it announced heavy marketing spend to compete against its German challenger). Shares of Just Eat fell on Tuesday, too, thanks to higher investment costs related to delivery logistics.

Considering the increasing number of competitors and a reversal from sales and customer growth to declines in the last few quarters, it’s far from certain that Blue Apron will turn things around.  With the a lack of competitive advantages, diminishing sales, and steady losses, investors would probably do well to stay on the sidelines for now (especially with a Blue Apron EBITDA of -134.68 !). As we said before this is a very tough market and the jury’s still out on whether such investments will pay off. We see a serious re-alignment in this ecosystem in the coming months and years. Mergers, acquisitions or straight close-outs.

From CNBC: Blue Apron shares down almost 20 percent after revenue miss

Latest Blue Apron stock price.