Fifteen years or so ago, I did a newsletter about a service called Webvan, an internet start-up that was offering free home delivery of groceries ordered online and packed in a fully automated warehouse. This was back in the Dot Com boom days. At itś IPO, Webvan was valued at more than Safeway or Krogers, the biggest supermarket chains in the country at the time.
After Webvan went broke a few years later, you could still see their custom refrigerated delivery vans operating around the Bay Area, but the name was always painted over by whoever had bought the van at their bankruptcy auction. Safeway picked up several hundred of them.
As most of you are probably well aware, the boom times are back in technology, pushed by venture capitalists seeking the next ¨Unicorn¨ — a company worth a billion dollars or more. Among those is Blue Apron, which delivers portioned and packaged ¨meal boxes¨ that you cook at home. Currently valued at $2 billion dollars, Blue Apron sells its meals for just over $10 per person, and is selling millions of them every year.
Anyone cooks regularly understands exactly how difficult it is make a meal at home for two people for less than $20, even if you already have things like olive oil, spices, and condiments stocked in your kitchen.
Unlike you and me, however, Blue Apron has to pay people to trim and chop meat or fish and vegetables, and measure out and package things like rice, pasta, olive oil, soy sauce, and spices. They are not preparing the meals in Bangladesh or Guatemala, but right here in the U.S. The idea that they are making a profit doing right now quite simply doesn´t pass simple logic.
Blue Apron and their numerous competitors are literally giving away food right now, courtesy of their VC funders. Why wouldn´t millions of people buy their meals?” Most Americans have a very good sense of how much food costs, and know a great deal when they see it.
It didn´t take a degree in Rocket Science to predict that Webvan would crash and burn. And it doesn´t take a Ph.D in Economics to see that Blue Apron will be forced to either raise its prices or cut its costs. Or it will simply run out of venture capital funding and disappear.
In the meantime, it is simply reinforcing the idea, firmly entrenched in the American pysche, that food should cost less than it actually does. And while they claim to support local farmers, they are known for paying as little as possible for fruit and vegetables while demanding the highest quality standards.
Small farms like Terra Firma don´t get millions from venture capitalists. And contrary to a popular urban myth, fresh produce farmers do not receive any subsidies from the federal government. If we sell our crops for less than it takes to produce them — or if the weather wipes them out — we have borrow money the old fashioned way. And if we can´t pay it back the next year, another ¨round of funding¨ is extremely unlikely.