Dive Brief:

• In an effort to increase penetration with online and brick-and-mortar retailers, Blue Apron announced the launch of a new meal kit line that bundles sauces, grains, dairy, spices and step-by-step recipes that customers then pair with their choice of a retailer's produce or protein. The new product, called Blue Apron Knick Knacks, will launch on Jet's City Grocery platform starting tomorrow, Feb. 1. Suggested retail is $7.99 for the two-person serving, CEO Brad Dickerson said during the company’s earnings call this morning.
• Dickerson said the company has been pleased with sales of its two-serving meal kits on Jet's City Grocery platform in the four months since the tie-up began and has recently added two additional kits to the lineup. Blue Apron began offering meal kits in Costco stores last May, but paused the relationship prior to the holidays. A spokeswoman with Blue Apron confirmed to Grocery Dive that the "national retail pilot" has come to an end.
• Blue Apron reported net losses of $23.7 million for the fourth quarter compared to $39.1 million during the same period last year — a result that beat analyst expectations. Net revenue was $140.7 million, a 25% decrease from the year-ago period. To improve efficiency, Blue Apron announced it will transfer "substantial production volume" from a production facility in Arlington, Texas, to a more automated facility in Linden, New Jersey.

Dive Insight:

Struggling with profitability and with its stock price recently dipping below $1, Blue Apron is looking for new ways to get its meal kits on supermarket shelves and websites.   

Company officials said the new Knick Knacks line came out of insights gained during its recent run in Costco stores. Extended shelf life, the ability to cross-merchandise and customize meals with retailers' perishable offerings will improve profitability and entice customers, Brad Dickerson, Blue Apron's CEO, said during this morning’s earnings call. He said the new line comprises the "backbone" of the typical meal kit, with the focus on culinary inspiration, which he called Blue Apron's specialty. 

The deal with Costco, which Blue Apron officials said was paused just before the holiday season due to rotating assortment from the retailer, is now officially over, a spokeswoman with Blue Apron confirmed.

"We've completed our national retail pilot with Costco, which was our first opportunity to gain learnings and build competencies in expanding our product in the retail environment," she wrote in an email to Grocery Dive. "Through our pilot with Costco we created our retail product which we were able to use as an entry point onto Jet's platform, and we also applied learnings from the Costco pilot to create our newest product, Knick Knacks."

Blue Apron is one of the leading brands in the meal kit industry, but with more competitors moving onto grocery shelves and retailers acquiring and developing their own lines, the company needs to differentiate its offerings. The new Knick Knacks line is priced below most retail meal kits, though the build-your-own theme is already being employed by grocers like Kroger. Blue Apron also has to compete with an expanding assortment of grab-and-go meals and other prepared foods that retailers are offering.

With its core direct-to-consumer business, Blue Apron continues to shed customers as it cuts back on marketing spend, counting 557,000 users at the end of December — a 25% drop from the same period last year. This illustrates the main challenge meal kit companies face: Acquiring customers in a high-churn category comes at the expense of profitability.

The company aims to build sales among its most loyal users and to target its most promising potential customers. It also plans to forge more partnerships with companies like WW (formerly Weight Watchers), which launched an integration with Blue Apron last month. That collaboration has seen better-than-expected demand so far, said Dickerson, and should continue to grow as WW boosts its marketing efforts centered on the co-branded offerings.

Dickerson said the company is in talks with other partners and retailers as it looks to diversify beyond its struggling core business.