Big Read: Blue Apron wants to put vegetables you've never heard of on the dinner table

By Sarah Halzac

Chef Mike Isabella and his wife, Stacy Isabella, prepare a meal sent to him by Blue Apron. Photo / Yana Paskova
Chef Mike Isabella and his wife, Stacy Isabella, prepare a meal sent to him by Blue Apron. Photo / Yana Paskova

The fairy tale eggplant is nearly-seedless, light purple and white-streaked, and tiny enough to fit in the palm of your hand. It's shape is familiar but it tastes less bitter than the common variety.

Fairy tale eggplants are hardly a staple of the American dinner table and are nearly nonexistent in supermarkets. And yet, Blue Apron, the meal-kit delivery service, has plenty of use for them: The company expects to buy half a million pounds of them this year. In fact, executives think they are buying literally the entire commercial supply of the obscure produce.

They plan to do the same with Shokichi Shiro squash, Atlas carrots and at least 40 other specialty crops this year.

Blue Apron's vegetable binge is helping the young company build a fast, almost-cult following among people who want to prepare original home-cooked meals without the fuss of dealing with a shopping list.

And it is hardly alone. Investors have poured hundreds of millions of dollars into a wave of ambitious start-ups with names like Plated and Sun Basket that are aiming to take a piece of a grocery industry that has proven difficult to disrupt.

Each meal-delivery player has its own hook: HelloFresh has enlisted celebrity chef Jamie Oliver to whip up exclusive recipes, while Marley Spoon is doing the same with Martha Stewart.

Purple Carrot, backed by former New York Times food columnist Mark Bittman, touts plans for vegans. PeachDish promises customers seasonal food with Southern flair.

Earlier upstarts tried to win over shoppers by delivering food to their doorsteps and saving them a trip to the grocery store.

The dinner-in-a-box companies, though, are betting that they can bypass the supermarket altogether by adding the convenience of curating recipes and portions so that all families have to do is chop and stir and fire up the stove.

It's still too soon to know whether they will ultimately become a threat to traditional grocers. But Blue Apron thinks the secret might be changing the logistics of how fresh food moves to the pantry, fundamentally rethinking the food supply chain by starting all the way back at the farm.

Chef Mike Isabella and his wife, Stacy Isabella, prepare a meal sent to him by Blue Apron. Photo / Yana Paskova
Chef Mike Isabella and his wife, Stacy Isabella, prepare a meal sent to him by Blue Apron. Photo / Yana Paskova

Rogelio Bautista's farmstead is nestled in Upstate New York's Black Dirt region, so named for the dark-colored, highly fertile soil that is unique to this stretch of one-time swampland.

On a sun-drenched spring day, only the tiniest shoots of green appear in his plot of 23 acres. But by the end of summer, if all goes well, much of the land will be bursting with tens of thousands of pounds of fairy tale eggplants destined for the dinner plates of Blue Apron subscribers in the Northeast and Mid-Atlantic.

Bautista, like many of the 16 farmers cultivating the tiny vegetable for Blue Apron this year, hasn't grown the crop before. But the company helped him make a plan: Its agroecologist, Alison Grantham, earlier visited Bautista's farm in Goshen, New York, to take soil samples. She consulted localized temperature and precipitation data. And she asked Bautista about what crops he has grown successfully in the past.

With that information, she gave guidance to Bautista about topics including planting dates, plant spacing and pest management for growing the fairy tale eggplant.

This kind of partnership is at the heart of Blue Apron's strategy: If farmers grow only what they need, and then if Blue Apron delivers to customers only the precise portions a recipe calls for, that efficiency could both benefit the environment and keep a lid on the company's costs, a key to competing in an industry notorious for thin profit margins.

Agriculture experts say this attempt to match supply with demand resembles a CSA, or community-supported agriculture model, where farmers sell directly to a pre-paid group of families - but on a massive scale.

We get one shot to make all of our money in a small space.

Bautista said the arrangement marks a welcome change from his previous set-up, in which he was largely dependent on sales at farmers' markets: One rainy day could keep away so many customers that he would end up throwing away armloads of perfectly good food that would spoil before his next selling opportunity.

"It's been easier for us as a business," Bautista said.

Blue Apron has built a team of regionally dispersed experts to replicate with small farmers across the country what Grantham has done with Bautista: to incentivize and help them to grow crops Blue Apron wants to use.

If this all sounds pretty straightforward, it isn't. Weather can be fickle. And every step, from crop planning to seeding to harvesting, comes with a thorny array of challenges, each a domino that could set off other challenges in the supply chain.

For example, in the company's early days, it bought a citrus fruit called yuzu from an orchard in California. The team didn't forecast correctly how much fruit each tree would yield, and so it had to include a substitute of kaffir limes for about half the orders.

Then there's the challenge of trying to offer local produce across all of their geographic markets, despite varying climates. This year Blue Apron is working with a farmer in Texas to test a certain kind of eggplant that will be planted July for harvest in September - a departure from the usual growing schedule there, given the border state's heat. The hope is that in the future, Blue Apron can avoid shipping that crop from California to its Texas fulfillment center for part of the season.

Chef Mike Isabella and his wife, Stacy Isabella, prepare a meal sent to him by Blue Apron. Photo / Yana Paskova
Chef Mike Isabella and his wife, Stacy Isabella, prepare a meal sent to him by Blue Apron. Photo / Yana Paskova

Almost two hours north of Bautista's New York land, the growers at Ironwood Farm in Ghent, New York, said that quest for stability has made it attractive for them to grow thousands of pounds of pea shoots for Blue Apron for dishes like "Falafel pitas and tzatziki with pea shoot salad."

"A lot of wholesale is through restaurants," said Aliyah Brandt, one of the farm's co-owners. "They kind of know what they want, but it's not precise. This is so precise."

"And we know we can sell all of it," adds Jenny Parker, also a co-owner.

In the late-morning heat, as the Ironwood team takes two of Blue Apron's co-founders, Matt Salzberg and Matt Wadiak, on a tour of the farm, it is easy to see why this precision matters.

They've got only nine acres of land, and that means little room for error.

"We get one shot to make all of our money in a small space," Jones said.

As the women invite Salzberg and Wadiak inside a greenhouse bursting with rows of salad greens, it's not long before Wadiak - a former chef and tomato farmer who today heads Blue Apron's operations - is crouching down to pick off a piece of arugula and taste it, immediately praising how spicy it is. Salzberg, the chief executive, is soon crunching on the arugula as well. Stepping out of the heat of the greenhouse, Salzberg says the punchy flavor captures why working with small farmers is a core business strategy for Blue Apron.

Traditional grocery stores can't sell the variety of products we can, because they don't merchandise as recipes.

"It tastes better," Salzberg says. "It's the quality control."

Also, there's this: At a moment when small-batch goods and local produce are ultra-trendy, Blue Apron can use these relationships with farmers to create a halo of uniqueness and a feel-good vibe around its brand.

But Wadiak and Salzberg think the business case is broader than that: The grocery business is extremely competitive, and they think what Blue Apron is doing with specialty crops would be hard for a supermarket to replicate.

"Traditional grocery stores can't sell the variety of products we can, because they don't merchandise as recipes," Salzberg said.

Here's what Salzberg means by that: Take a crop like pink lemon, another item that Blue Apron thinks it has bought the entire commercial supply of. If shoppers saw the uncommon green-and-yellow striped fruit at the supermarket, they might not know what to do with it - and so they probably wouldn't buy it.

But Blue Apron isn't selling a pink lemon. It's selling a recipe. It's selling something like "Za'atar Chicken and Pearl Couscous" that is dressed with a pink lemon compote. By providing the pink lemon as part of a broader suite of ingredients, and providing instructions on what to do with it, Blue Apron thinks it's better positioned to do a big business in unconventional produce, and differentiate itself from other sellers.

Farmer Rogelio Bautista is one of 16 farmers supplying fairy tale eggplant to Blue Apron. Photo / Yana Paskova
Farmer Rogelio Bautista is one of 16 farmers supplying fairy tale eggplant to Blue Apron. Photo / Yana Paskova

Blue Apron is still a relatively tiny presence in the behemoth grocery business: Marketing research firm Mintel estimates that all the meal-kit delivery companies combined account for less than 1 percent of the home grocery market.

And yet it has grown rapidly since it was founded in 2012 by Salzberg, Wadiak and chief technology officer Ilia Papas. After a humble start testing recipes in Wadiak's apartment and packing the boxes themselves, the company now delivers 8 million meals per month. Its expansion is breakneck: Blue Apron is hiring about 100 employees a week in its fulfillment centers and has nearly doubled the size of its warehouse in Jersey City, New Jersey, to 190,000 square feet. Its corporate headquarters in New York's SoHo neighborhood have been expanded twice already, and they are once again running out of space.

Last year, Blue Apron announced it raised $135 million in venture capital funding in a round that valued the company at $2 billion. There are even rumblings an initial public offering might be down the road.

Analysts say Blue Apron and others of its ilk seem to have tapped into something very powerful and appealing to today's consumer.

"Everyone's busy; no one has any time. This is a trend we're seeing across multiple industries, not just food. People are increasingly demanding that products and services come to them," said Fiona O'Donnell, an analyst at Mintel.

The data team is working very hard on making more intelligent recipe recommendations.

And yet, the meal-kit category overall appears to have work to do on the customer retention front: According to e-commerce analytics firm Slice Intelligence, less than half of shoppers that used subscription meal services between January 2014 and February 2016 ended up ordering more than three times.

Plus, Blue Apron's growth opportunities are somewhat constrained by the design of its menus and the relative inflexibility of its delivery schedule.

Blue Apron offers two plans: A family plan that includes two or four dinners a week that feed four people, or a couple's plan that includes three dinners a week that feed two people. That means there is a huge swath of consumers its model doesn't work well for, including one-person households, which make up a greater share of the population than ever before. What if a couple wants to cook only once a week? What if some nights a busy mom is cooking for two, and other nights cooking for four?

And although Blue Apron does offer vegetarian plans and accommodations for certain dietary restrictions, it's not doing much right now to cater to dining preferences. What if someone simply doesn't like the taste of cilantro or often finds Indian dishes too spicy?

It's clear that Blue Apron is considering more options to address these limitations. Salzberg said Blue Apron is trying to reach more households, and pointed to the 2012 addition of vegetarian plans and the 2015 addition of the family plan as evidence of how it has already done that.

Papas said more personalization is in the works.

"The data team is working very hard on making more intelligent recipe recommendations," Papas said. "We see a lot of how you're rating the recipes, what you tell us about what you like to eat, what you don't like to eat, so we have a lot of data there that we can used to make more informed decisions."

So, for instance, if a user constantly gives low ratings to spicy dishes, perhaps Blue Apron could offer a substitute when those pop up on the menu.

One thing that we learned very early on is it's an incredibly easy business to start.

Going to one of Blue Apron's fulfillment centers in Jersey City, New Jersey, helps give a sense of how much complexity this level of customization could introduce into the system.

Much is done by hand to pack about 140,000 boxes a week in this facility: On a Tuesday in late April, workers were using a custom scoop to mete out the right amount of slivered almonds and were hand-counting spears of asparagus. There is automation, too: A machine is putting apple cider vinegar into tiny vials and then sealing and labeling them. It gets through about 100 bottles a minute. Blue Apron plans to invest in more machinery that can automate additional parts of the fulfillment process.

On this day alone, some 45,000 meal kits are scheduled to leave this facility. Some of the food will have been in the warehouse for only several hours, and most of it will be on customers doorsteps within a day.

Then layer in the Blue Apron's recipe planning, and it gets even more challenging: Wadiak's team of chefs starts building what they call a "shopping list" about one year out from distribution time. The shopping list contains all the ingredients that they know they'll have to work with. Then begins what Wadiak describes as the "Iron Chef"-like process of figuring out what dishes they can put together with those ingredients. Several months out, those then become recipe templates, but even then, they can't be firmly locked in. They are making tweaks down to several weeks out based on whether various crops and other products are going to be ready at the time they initially expected.

It's a puzzle, and adding more meal options will only make it more so.

"One thing that we learned very early on is it's an incredibly easy business to start," Papas said. "It's a very difficult business to scale."

The fact that they have been at it a while, the founders hope, should be an advantage as they try to fend off mushrooming competition from other meal-kit companies.

Papas and Salzberg founded what would become Blue Apron in 2012 after Papas, a software builder, became frustrated when he and some friends spent a weekend zig-zagging to three different grocery stores to get the ingredients they needed to make Argentine-style grilled steak. He told Salzberg he wished there was a service that put all the ingredients together and delivered them to customer's homes.

"And then I immediately followed up and said, 'I would never do it, though, because it's way too logistically complicated,' " he recalled with a laugh.

But Salzberg, a Harvard Business School graduate who had done a stint working at a venture capital firm, was intrigued and began doing research. He soon set out to recruit a third partner who had culinary chops and found Wadiak, a former chef and farmer who has shaped the company's ethos about food.

(Early on, for instance, Papas said they mused about whether they should try to work with food-service colossus Sysco to source ingredients. "Absolutely not" was Wadiak's response.)

The range of in-home dining competitors is growing rapidly: There's Munchery, which delivers prepared meals that typically just need a quick spin in the microwave. There are Instacart and Postmates, services that bring the groceries that you've selected from a supermarket to your doorstep. And then there are grocery titans such as Whole Foods Market, which is experimenting with more prepared foods to lure a convenience-minded customer, and Walmart, which is partnering with Uber and Lyft on a pilot grocery-delivery program.

Blue Apron figures its best defense is to play offense by working with farmers to cultivate offbeat produce.

"If you have really great ingredients," Wadiak said, "The food almost cooks itself."

- Washington Post

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