Q4 2020 Blue Apron Holdings, Inc. Earnings Call
[music].
Good morning, welcome to a blue apron holdings fourth quarter, 'twenty 'twenty earnings conference call and webcast.
This time, all participants are in listen only mode.
As a reminder, this call is being recorded Thursday February 18th 'twenty 'twenty, one for replay purposes.
Slide presentation has been created to accompany today's remarks and can be accessed at the blue apron Investor Relations website should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
On this morning's call, we have Linda Findley, Kozlowski, Chief Executive Officer, a blue apron, and Randy Graben, Chief Financial Officer before handing the call over to the company. We will review the Safe Harbor statement various statements that the company makes during today's call.
Calm about as soon as true expectation plans and prospects.
Institute for wasn't looking statements for the purpose of the Safe Harbor provision under the private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by those forward looking statements as a result of risks and other factors, including those described in the company's earnings release issued this morning, and the company's S E T filing.
In addition, any forward looking statements represent the company's view only as of today should not be relied upon as representing a fuse as any support for Quint day.
The company's specially disclaims any obligation to update these statements. During this call the company will be referring to non-GAAP measures, which are not prepared in accordance with generally accepted accounting principles, which are which are which oprah.
In accordance with generally accepted accounting principles, we are encouraged to refer to the earnings release and SEC filings will it has defined these measures and to review the reconciliation of these non-GAAP financial measures for the most directly comparable GAAP measures. In addition.
[laughter] Conciliations a certain forward looking non-GAAP measures for FERC to during this call are included in the earnings release, which is available on the company's investor.
<unk> website located in investors that blue apron Dot com.
With that I would like to turn the call over to Lynn lesson caused a ski blue apron CEO Linda.
Okay.
Thank you Kate good morning, everyone and thank you for joining us today.
It's my first chance to speak with most of you. This year I'll start by wishing everyone, a happy new year and express my hope that you're all staying safe and healthy.
We're coming up on nearly a year a dealing with a tremendous challenges of a global pandemic that up and it's so much of our daily routines and experiences we likely took for granted.
I am hopeful that progress towards a safer and healthier or a new normal book continues to other friends families colleagues and investors can come together again and interact with each other in person around the dining table and at conferences and other meetings later this year.
Before diving into our fourth quarter results I'd like to introduce Randy Griffin, who joined US as Chief Financial Officer in early January.
Randy brings more than 20 years, a finance E commerce direct to consumer and food industry experience as well as a track record of implementing strategies to drive scale.
Randy skill set is aligned with our near and long term objectives, and we couldn't be more excited to have him on board.
You'll hear from him in just a few minutes and I'm sure. Many of you will have a chance to speak with him they get at Lake City.
I'll also take this opportunity to highlight that Charlie income under joined US as our Chief operating officer in late November.
Her background and experience a more than a 30 years in food operations, including food manufacturing and fulfillment or a excellent complement a blue apron leadership and operations teams.
She has a broad set of responsibilities, including oversight of our fulfillment and supply chain logistics for food safety and quality assurance physical operations and customer experience teams.
As with Randy Charlene knowledge and expertise aligns with our strategic goals and she's focused on further improvements across our operations.
We are thrilled to have such talented senior executives joined at Blue apron leadership team, both Randy and Charlene a hit the ground running and are already making a positive impact on a business.
Shifting now to what was a very active fourth quarter and full year.
We saw a number a significant improvements across many of our key customer metrics over the last nine months a 'twenty 'twenty.
Throughout all of 2020, we executed against our growth strategy quality standard and the implementation of return focused marketing programs.
Together. These initial these three initiatives represent the foundation of our strategies to better attract engage and retain customers.
The pandemic continue to impact on consumer behavior also contributed for fourth quarter and full year improvement.
We believe the progress achieved in 2020 lays the foundation for the continued execution of our growth strategy.
And our team is working every day with a commitment to continue to become better and our focus discipline and execution.
We continue to see strong demand for a meal kits with year over year revenue growth of 22 per cent and quarterly sequential revenue growth in the fourth quarter.
In addition, the fourth quarter represented the third consecutive quarter, a quarterly sequential increases in year over year revenue growth and it's notable that the acceleration in the second half of a year. It took place during where historically, our two seasonally slowest quarters, although seasonality was masked to some degree in 2020.
The top line year over year growth combined with our continued focus on cost optimization led to adjusted EBITDA loss and net loss coming in significantly better than our guidance targets.
As previously discussed we also strengthened our balance sheet in 2020 through a public offering a class a common stock and a new senior secured term loans.
The added financial flexibility afforded by these transactions per transactions provides us the flexibility to pursue additional opportunities to execute our growth initiatives.
Turning now to some highlights from the fourth quarter.
Customers rose year over year, but declined sequentially from the third quarter as we managed our marketing spend to partially offset the labor constraints that impacted capacity in the quarter.
However, the progress we've made against our growth plan can see in a year over year, a implementation improvements across certain key customer metrics.
These metrics include orders per customer, which were up 15% year over year record average order value.
The average revenue per customer, which was about $300 for the first for the third quarter in a row, the only quarter since 2015 with a cheesy G. At these levels.
Looking ahead from our fourth quarter and full year growth.
Our expectation is for a strong year over year growth in the current quarter, which is expected to increase again on a quarterly sequential basis. This expected improvement reflects the success of our growth strategy to date against a backdrop of increased demand due in part to ongoing changes in consumer behavior.
As a result of the pandemic, we saw that cooking habits increased in 2020, and both third party and our internal research found that those habits are expected to continue into 'twenty and 'twenty one.
It's a critical part of our growth strategy, we plan to lean into this trend to continue to provide product variety a flexibility and choice.
A recent third party report shows that 75 per cent of consumers surveyed indicated they're interested in improving their cooking skills, whether to get more enjoyment out of the process or can make their time in the kitchen more efficient.
We believe meal kits are well positioned to meet these interest.
And blue apron removes the burden of a recipe planning offers cuisine and high quality Inc.
Agreement variety and introduces consumers to new cooking techniques that helped them sharpen their skills in the kitchen.
We believe our culinary authority combined with our product innovation are key points of differentiation for Blue apron and in 2020, we introduced more products than in any prior year.
While this was a success for us last year I do want to highlight that a as we entered 2020 a road that called for the introduction of even more new products before we shifted our focus to better serve our customers during the pandemic.
We believe that the new products that were held back maybe some of our most exciting introductions to date, including expansion into different meal occasions.
I'm happy to report that the initiatives, we put into place in the fourth quarter to enhance fulfillment center efficiencies have helped open up sufficient capacity to a point, where we have increased our menu variety and rolled out new product enhancements, including introducing recipe customization and a meal prep plan nationally.
Our decision to temporarily reopened in the Arlington facility. This quarter has also given us more capacity flexibility.
We believe this positions blue apron to continue to introduce new products into 'twenty and 'twenty, one including product enhancements that we held back last year.
Staying focused on our 2020 product launches I'd like to highlight the initial successes around some of our new products.
In Q4, we launched blue apron, customized nationally, which offers our customers a bridge between our core menu at a premium offering giving them the option to upgrade or swap certain aspects of their meal.
This new feature allows for flexibility to satisfy a spectrum, a dietary needs and preferences, while minimizing the need for a compromise at a dinner table.
This offering has been well received for our customers and we are continuing to add more customization options this quarter.
Another new offering launched nationally in a fourth quarter is our option to purchase multiple orders per cycle, which allows our meal kit customers to receive a second box for any given weekly cycle.
Importantly, this offering provides added flexibility, giving the customer the option to send orders to a different addresses deliver the orders on different dates within the week double up on recipes or purchase special occasion or meal plan boxes. In addition to a signature box.
The multiple orders per cycle offering is also available to a wind customers, which allows for an additional one box for a monthly cycle.
These two offerings are built on a continuing success, we've had with a premium offering taken together are a product innovations contributed a record average order value we generated in the fourth quarter.
We also recently announced our World is 360 program, which builds on the wellness initiatives, we already had in place.
Our wellness 360 campaign showcases how home cooking can benefit a holistic wellness, which includes physical brain relationship mental and financial health.
It's our approach to helping customers better understand the benefits of cooking with blue apron, and how that can have access on their wellness journey, how that impacts on their wellness journey going beyond the food depends up on their plate.
The wellness 360 campaign includes recipes designed by our in House Nutritionists.
Feature fresh produce wholegrain high quality proteins and natural sweeteners.
This program complements and expands our other offerings to provide more variety and flexibility for.
For example, we started to offer a home cooks recipe is designed for a quicker prep and easier cleanup like sheet Pan in one part dinner.
They can focus on the things that keeps them away from the kitchen, but still enjoy delicious meal without sacrificing on flavor.
We also find that our customers continue to look for us to help them celebrate moments big or small with restaurant quality meal and.
In 2020, we introduced our first ever Thanksgiving box in partnership with chef, Eduardo Jordan, which generated stronger than anticipated demand.
And this year, we teamed up with Stella Artois to create those stadium bites, which offered a chest curated fan favorite menu items to join to enjoy during the big football game.
In addition to the new occasion based offerings, we plan to introduce this year, we have an exciting product roadmap that will build on the innovation introduced last year.
The new products planned for this year, a important initiative and further differentiating blue apron from peer offerings, which we believe will help drive additional engagement order value and retention.
Turning now to operations.
We continue to make progress with our operating efficiencies first introduced in a fourth fourth quarter.
These efficiencies leverage for facilities and infrastructure, we already have in place that are capable of addressing higher demand as we continue to work to overcome labor availability challenges we've experienced.
These new initiatives have helped increase line speed overall labor utilization and equipment optimization and effectively decrease the labor required per pack line and labor minutes per box.
With improved operational efficiency and the temporary a reopening of our Arlington facility. This quarter. We believe that we are positioned to address forecasted demand.
We plan to drive additional demand by stepping up our marketing and to continue that higher investment throughout the year, while still positioning the company to drive higher variable margin as we expect to continue to benefit from a new operating efficiencies.
Our work to become more efficient in our marketing spend continues and we've been seeing faster payback periods.
With regard to a supply chain availability and safety, we have not experienced any significant disruption as a result of the pandemic. In fact, we've been able to continue to leverage a robust supply chain and strong supplier network to expand the diversity of ingredients available to create a weekly menus and to support our new customization and premium options.
As highlighted by the first quarter guidance. We provided this morning, we're expecting a strong start for the year as we continue to execute on our growth strategy and as our operating momentum continues in 2021.
We've taken the time over the last several years to improve our operations, including from how we connect and engage with our customers to how we've enhanced our menu variety and fulfillment center practices and so much more.
As a result, I believe that the growth that we achieved in 2020 is just a launching point for blue apron.
We expect that the ongoing changes in consumer behavior as a result of the Pynzenyk will continue to some extent even after the direct impact for the pandemic ends.
And we have the right operating strategies in place and drive to drive a neat consistent increase demand.
I believe that we are a more competitively positioned to attract retain and engage more customers than at any time since I joined blue apron, almost two years ago.
I also believe that we will be able to continue to demonstrate how much we've improved across the business and how much more we will be able to achieve going forward.
As always we appreciate our long standing customers as well as those who have recently turned a blue apron, we take seriously our commitment to provide every customer that invites us into their homes with a quality a meal experience and world class service.
Every day, we seek to improve so that we can retain our customers and attract new ones.
Finally, I want to acknowledge the ongoing impact of a pandemic is having a a daily life and health of our employees customers and the communities where we operate.
I'd also like to send my thoughts for those are impacted by the recent winter storms across the country. Our employee safety remains our top priority and a service to blue apron at our customers has been exemplary.
I will now turn it over to Randy to talk about our financials in more detail.
Thank you and good morning, everyone. It's great to be speaking with you for the first time since joining blue apron in January.
As highlighted in this morning's release, our fourth quarter results were ahead of the guidance. We provided when you look at the year over year comparison. It is clear a return to growth strategy is continuing to move the ball forward.
Net revenue in the fourth quarter of 2020 rose more than 22% year over year to $115 $5 million, which was ahead of the upper end of our guidance range of $112 million and represented our third consecutive quarter of double digit year over year net revenue growth.
As stated in our third quarter earnings call, our fourth quarter guidance had assumed that we would recover up to $2 million related to credit issued in connection with a voluntary supplier a recall of onions from a third quarter.
Have you recovered that in the fourth quarter. It would have had up to $2 million of additional positive impact on both the top and bottom line.
Fourth quarter meal kit demand was driven by a more expansive menu offerings the continuation of our celebrity chef partnerships, including a successful program with chef Eduardo Jordan and the continued rollout of new products, such as our customization initiative.
As Linda noted product innovation is a key priority for blue bird and even as we rollout more new product innovations in 2020 than ever before we expect to launch additional new products in 2021, which will be supported with a significantly higher marketing spend we believe for these efforts will drive future demand.
When Blue Apron report reported third quarter result management highlighted some anticipated impacts for the fourth quarter demand as a result of the ongoing labor availability challenges.
As a result, we did not lean heavily into marketing as we otherwise would have that said, we modestly stepped up our marketing investment with fourth quarter spend of $12 5 million were 10, 8% of net revenue compared to $10 $9 million for nine 7% a net revenue in the third quarter a 2020.
We believe we are well positioned with a right equipment facilities supply chain and food safety protocols in place to support higher demand and in the fourth quarter, we continued to execute operational efficiency products and other initiatives such as a supplier pre packaging, a certain ingredients, which ultimately led to reducing labor hours and <unk>.
Crude capacity.
In addition, we temporarily reopened our Arlington, Texas facility this quarter to enable us to leverage existing assets, while we continue to identify and implement other operating efficiencies.
We expect our progress with efficiency and capacity initiatives will allow us to meet forecasted demand in the first quarter and full year, even if some of the pandemic driven challenges persist. We believe we are positioned to execute on the critical parts of our growth initiatives focused squarely on driving demand, including the increased investments in product innovation and increased <unk>.
Investment in marketing as I noted earlier.
Turning now to a review of our key customer metrics, which continue to reflect the benefit from a focus on customer engagement and retention.
We had 353000 customers in the fourth quarter, a 2020 up from 351000 in last year's fourth quarter and down slightly from the third quarter, largely reflecting our decision to manage demand given the capacity constraints we've discussed.
Orders per customer a five three remained at improved levels and were up more than 15% year over year.
Orders per customer continued to track around our highest levels over the last five years.
Average order value was a record $61 compared to $58 in the fourth quarter of 2019.
Average revenue per customer was more than $300 for the third consecutive quarter rising 22% year over year for the second consecutive quarter to $327 and marking our second highest quarter ever.
Selecting our operating momentum the last three quarters have been the only time Blue apron has reported average revenue per customer of more than $300 of whose prior for 2015.
On the cost side cost of goods sold excluding depreciation and amortization as a percentage of a net revenue improved year over year by 40 basis points to 66% are variable margin was 39, 4% in the fourth quarter of 2020 compared to 39% even in the fourth quarter of 2019.
<unk> and Cogs and variable margin as a percentage of net revenue largely reflects our continued focus on cost efficiencies, which more than offset the frontline wage and bonus investments. We've made in a fulfillment centers since the beginning of a pandemic.
Our focus on cost discipline is also evident in product technology, and G&A costs with P. P. G&A as a percentage of net revenue declining 550 basis points to 31, 9%.
On the bottom line, we reported a net loss of $11 9 million, which compares favorably to our guidance for a net loss of no more than $15 million.
Adjusted EBITDA loss was $1 7 million a.
A favorable comparison to our guidance for adjusted EBITDA losses of $5 million and an 80% year over year improvement.
For the full year 2020, net loss and adjusted EBITDA improved, 24% and 88% to losses, a $46 2 million and $1 million, respectively, demonstrating our ability to manage costs throughout the organization and maintain efficiencies in a fulfillment center network.
We recorded a negative operating cash flow and free cash flow of $1 3 million and $2 $5 million respectively.
These metrics demonstrate significant improvement improvements of roughly $10 million each compared to last year's fourth quarter.
As detailed on our third quarter conference call, we strengthened our balance sheet and improved our financial flexibility in 2020.
At December 31, 2020, we had cash and cash equivalents, a $44 1 million a.
A $34 1 million in total outstanding borrowings under the senior secured term loan of which $36 million was classified as long term debt and $3 $5 million was classified as current portion of long term debt.
As such we remain confident that we have positioned blue apron to better compete in the marketplace and we continue to believe we have the necessary capital resources to drive for profitable growth.
Turning to our financial outlook for the first quarter.
Let me first share some assumptions.
Our guidance assumes split the consistent benefit to our business from the execution of a strategic growth initiatives and ongoing operational improvements as well as continued higher levels of demand as a result of changes in consumer behavior, and our planned increases in marketing initiatives and spending for.
Further our guidance assumes that we will not experience any unforeseen significant disruptions in a fulfillment center operations for supply chain as a result of the pandemic or otherwise.
In addition, because the timing of the onion recall recovery remains uncertain, we are not assuming a recovery of the up $2 million of credit in our first quarter outlook.
Reflecting these factors and assumptions, we expect first quarter net revenue will increase year over year by approximately 23 percentage to 27% to a pox approximately $125 million to $129 million.
Which would be our fourth consecutive quarter of double digit year over year revenue growth.
This growth is expected to reflect a year over year and quarterly sequential increase in customers driven in part by the significant increase in marketing investment would be a plan for the first quarter.
We expect to incur a net loss of no more than $16 million in the first quarter and an adjusted EBITDA loss of no more than a $6 million.
Looking forward for a full year 2021, we expect to achieve double digit net revenue growth.
For easy reference a reconciliation table from net loss to adjusted EBITDA is included in our earnings release, which has been posted on Blue apron Investor Relations website.
Linda and I will now take your questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing a key.
Is that any any time. Your question has been a dress and you would like to withdraw. Your question. Just press Star then two at this time, we will pause momentarily to assemble a roster.
Our first question is from Maria <unk> from Canaccord.
Go ahead.
Good morning, and a Randy congrats on joining the company.
Thanks for taking my questions.
So first as we look at your 'twenty to 'twenty, one projected revenue growth any color you can add around how do you think about customer growth wishes highest spend per customer and I guess related to that can you share. Your view on how your marketing spend may play out a outside of Q1 and for the balance of the year.
And then a have a quick follow up.
Sure I'll start that question and a friend he wants to add to it he certainly can.
We are not specifically disclosing some of those spend levels held for what we have said is that we are going to continue to lean into marketing in Q1 based on our planned investments that we stated last year and a in this quarter as we added more liquidity for the company through through the equity offering last year. So this is primarily to a.
Best in customers and so we plan to invest in long term strategic growth, where we can make sure that we can maintain them a part.
Our customer growth.
In a in a healthy manner on a long term basis, so I can't give more guidance than that but what I can say is we plan to continue to lean into investments as appropriate by quarter, but maintaining a significantly a efficient paybacks as we have always done.
And we stated previously that it would be within a year, a payback and we have seen acceleration in that payback and we intend to continue to see that that same acceleration.
Randy anything.
The only thing that I'd add is just a double down on a last point that you made Linda which is we remain extremely diligent diligence about ensuring that our marketing paybacks are efficient and effective and it's something that we continue to monitor always beyond that nothing else to add thank you.
Thank you that's that's very helpful and then a can.
Can you talk about your fulfillment capacity and how long do you expect to utilize the Arlington facility and maybe more broadly whats your sort of a high level view on where you are with fulfillment capacity and do you see a need to expand new capacity ahead of expected demand and then can you just maybe talk for a minute.
About some other steps you have taken to increase labor availability.
Sure.
I'll try to and if I Miss any of those please remind me.
As I am as I'm going through but but we've taken several steps in order to increase capacity and as we've discussed before we wanted to make sure that we're not just thinking about the immediate term, but thinking about long term efficiencies that we can build into our operations in order to build ahead of capacity going for at or ahead of demand going.
For it.
Plus of course, the more efficient that we get the better we can not only continue to scale that continue to.
Invest in the growth of the business as we lose a business for it.
So a few things that we've done specifically is establishing better packing process across our lines to save labor. There. We've adjusted the distribution of labor in our facilities to make sure that we're a best utilizing our labor across our kitchen to add to our a Pac operations better use of our equipment. As you know we are a very.
Automation facility and we have a lot a fantastic automation equipment that helps us be a lot more efficient and now we're better utilizing that equipment and then also using some of our strategic supplier relationships to pre pack certain ingredients, where we have an advantage to having those pre packed with the same level of quality.
Debt that we would hold ourselves to as far as our highest standards, but be able to more efficiently use labor.
So those are just a few of the things that we've actually done.
And we are seeing that result in a much more efficient use of our labor that while we still continue to hire additional labor. We also can scale capacity, while we're building and that complexity for our new product initiatives. All at the same time. So we're very confident in all of those different.
Areas around a around the fulfillment center, we are looking ahead and making sure that we can always continue to scale above and beyond.
The demand that we have in place because we do want to be prepared for those new product initiatives and the investment in marketing of course as they continue to accelerate that throughout the year as well.
I can't I'm not sure if I missed any of your questions I apologize, but feel free if cause I know you had several there for Maria did I Miss anything.
Yeah, Yeah, that's very helpful and just a quick one for how long do you expect the Arlington facility to stay open.
Got it so we're basically looking at that on an ongoing basis and seeing what makes them a sense with a combination of both consumer demand and also of course, making sure that we have redundancy and capabilities as we continue to ramp up some of these new product initiatives. So we don't have a an official date for state yet, but we continue to model.
Or is that on an ongoing basis.
Got it that's very helpful. Linda Thank you so much for the color.
Thanks, so much for you.
Again, if you have a question. Please press Star then one.
Our next question is from Matt well about a day from Morgan Stanley go ahead.
Thanks for taking a question I have two if I may you guided to double digit percent revenue growth in 'twenty. One can you talk a little bit more about one or two other key factors that gives you confidence from the sustainability of this growth trend as we emerge from Covid and then second can you provide context around the evolution of customer churn and you've increased optionality for the.
Consumer thanks.
Sure. So I will start on that and again Randy can add any additional color. So first let me start on the comments about sustaining growth and again, we've said this time and time again that we have always been focused on a building sustainable growth for the company not just short term growth and a big part of that.
It goes back to what we were talking about what the product initiatives that we're putting into place the product innovation and the acceleration of the fact that we were able to still introduce more products in 2020.
And then we had in any previous year, even during a pandemic time also.
Adding to that the fact that there were several products that we did have on a roadmap that we had been pushed to 2021. In addition to new product innovations that we're going to do in 2021 is really the competitive advantage that we're looking.
And going forward. So specifically, we feel strongly that the customer roadmap of new innovation roadmap that we've put into place has been designed to both increase the engagement and retention of our existing customers as well as our attractiveness in it and the ability to recruit new customers on top of that more efficient marketing program that we have.
Put in place.
So in addition to the external factors that say people are going to continue to cook at home in larger numbers beyond the pandemic. We're really more focused on what are we doing structurally with our product and with our marketing programs to make sure that we can more efficiently attract and retain customers going forward and so we're confident in that.
We've already seen results from the from the initiatives that we've put in place so far and we expect to continue to see results going forward on the customer churn question. We don't currently discussed any of our customer churn numbers, but I will say is we have a specific programs in place for 2021 can make sure that we are both growing.
And retaining our customer base.
Randy anything you want to add to that.
The only thing that I would add on the last point is while we will not disclose our churn numbers you can see real evidence in the quarterly results that we just announced around the effectiveness of some of the things that we've been doing as measured by things like increase in orders per customer and average orders per customer.
Those are indicative of the companys ability and focus on decreasing churn and driving more benefits for our existing customers.
Yeah, and just one added little point on top of Randy's and again just to reiterate we are seeing a significant increase in those customer metrics, including.
A record number that we saw in Q4.
Great. Thank you very much.
Thank you.
Our next question is from a weak.
Cole from Cole capital go ahead.
Thank you very much.
M. Linda a happy new year to you as well on your from a colleagues and I'm glad to see all your hard work at a improving operations a internally a blue APE.
For and are beginning to show a good song continued improvement.
Question number one.
So a market size opportunities.
Clearly you are kind of a neat and the meal kit and a meal prep portion of a market.
If you look at the entire.
Online meal delivery a market as a whole could you give us a sense for how large each of the segments are so you're kind of in mill profit. There's also other ports.
Call.
M.
M oven ready are ready to heat and you may want to have one or two other categories, but I'm trying to get a sense for how large the category you focus on right now is relative to some of the other categories, where you don't have offerings today.
Sure I can give you a little bit of a context, there I think probably we.
Have to dig into some of the numbers about some other categories above and beyond as you know as we have further calls and by the way happy New year to you as well are you it's great to talk to you.
So.
Specifically, though I wanted to go back to what we had previously stated about our total addressable market.
And I think it's interesting because what we're seeing is that market is of course, expanding we had originally stated that we feel like the addressable market.
It's around the $8 billion to $9 billion range that we could specifically address at this time, meaning what we had the opportunity did you do within meal kits and that was based on looking at the overall market size for a for.
For grocery for online grocery delivery et cetera, and assuming.
This was about a year and a half ago, assuming a fairly rapid growth in online grocery spend now of course, what we're seeing is an acceleration in online grocery spend which we still see as a leading indicator and actually we are in the process of looking at how we can identify those expansion opportunities as they impact the.
Eight to 9 billion debt, we first saw as far as a as far as a potential addressable market for the meal kit industry.
I can't quite speak yet to the market opportunity beyond that except for to repeat that we are looking at a lot a product initiatives. This year that do expand into other relocations and we will be continuing to update on how we see those markets playing out throughout the year.
Great. Thank you and then.
An operational question regarding the meal customization.
Milk optimization.
I know it was rolled out during the fourth quarter. So only some of your customers have at the beginning of a quarter on average for the December quarter, what portion of your 350000 odd customers have access to meal customization of a full quarter and then a second question is.
Operationally, how how accurate has been I guess your fill rate and other things for the customization because I know, it's difficult to do and typically get a 100% accuracy when someone asks for a shrimp versus chicken, but just trying a a sense for how well you were doing that.
Yeah. So I think a part of the reason that we did the the sort of staged rollout of and of course I think this is a standard practice.
This actual program is to make sure that we were accounting for any concerns or issues, we might have in the process and getting a fulfillment center operations smoothly a ramping up into that.
Actually very quickly went to a national rollout in Q4. So a good portion of Q4 saw full national availability of of customization for our customers. Because we started some other pilot rollouts I'm actually in a Q3 and so we did have a pretty broad availability, although I will.
Say that we are continuing to add customization, particularly on the areas of protein swaps and ability to add.
AD out availability to a two additional vegetables et cetera in the swaps.
But we did get to for a 100% availability in December.
So.
We're not actually talking about the attach rates specifically to those customization, but we did have a 100 per cent of customers a be able to access those customization and we're getting very very positive customer feedback and response and attachment from those again continuing to ex to add more in Q1 net and throughout the year.
Because we do think that this is an advantage for people who are looking to either a bulk up their meals, particularly for our family of customers and I'm, sorry, or for a P customers, who are looking to expand and add more food and or people, who are trying to manage specific dietary restrictions and or taste preferences.
In their households, so it's going quite well and we are a continuing to see success with it.
Okay. Thank you just one last question on the marketing related.
I've been a b.
Customer for a long time for my question is for people, who are not customers today, how do you more effectively a convinced.
Convince or persuade them before they've become a trial customer that your solution really is better for them versus others. Because when you go on the Internet and you type in a meal kit.
Can you read reviews, it becomes a little overwhelming as a consumer to see 10, 15 choices, where the where the reviewer said, they're all pretty good. So the question really is when you're marketing to a prospect how do more effectively persuade them at blue apron.
Day really is a very very good solution for them versus the other all the other competitors.
It's a great question area and and as you know and as we've said before we do significant brands a research twice per year and continue to be the number one recognized brand in the space and so our big priority. At this point is building off of that and looking at those purchase intent driver is that a match with the differentiators for blue apron.
Including the fact that people are really appreciating the discovery aspect of a new ingredients a new techniques appreciate the quality and a high animal welfare standards as well as high quality standards of our approach of a protest and and the quality and flavor of a recipes, which really sort of go beyond your average meal debt.
Continue to get simpler.
And easier to prepare and easier to clean up from but aren't sacrificing any of that flavor.
So and this has been very carefully a very closely with our wellness program as well, which is really designed to maintain all of those great things Blue apron is known for but help you enjoy a a well rounded healthier lifestyle debt does not necessarily sacrifice are involved restrictions in that process.
So we're working very hard to make sure that we're bringing those messages board more clearly.
And continuing to enhance our targeting and our efficiencies in reaching those audiences that they know the advantages of blue apron, even before they get there for a sparks.
Great. Thank you best of luck going forward.
Thanks, so much.
This concludes our question and answer session I would now like to turn the conference back over to Linda left Findley Kozlowski for closing remarks.
Thank you very much and we really appreciate everyone's time on a call on behalf of everyone at Blue apron, we want to wish you your families colleagues and friends well and let you know that our teams are working diligently and effectively to bring incredible home cooking into People's homes, We look forward to providing an update when we report our first quarter results.
The conference has now concluded thank.
Thank you for attending today's presentation you may now disconnect.