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Goldman Sachs 26Th Annual Global Retailing Conference September 5, 2019

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Goldman Sachs 26Th Annual Global Retailing Conference September 5, 2019 Blue Apron Holdings, Inc. Goldman Sachs 26th Annual Global Retailing Conference September 5, 2019 Heath Terry (Analyst, Goldman Sachs): Great. Thank you all for joining us this morning. My name is Heath Terry. I cover the internet sector for Goldman Sachs. Really excited to have with us today Linda Kozlowski, Chief Executive Officer of Blue Apron, and Tim Bensley, CFO at Blue Apron. Linda, first, thanks for taking the time to be here with us. I know it's an incredibly busy time for the company. Maybe just to start out for people in the audience that know you best maybe as a customer of Blue Apron or just are aware of the product, what's the right way to think about what you're trying to build as a company? Linda Findley Kozlowski (Chief Executive Officer, Blue Apron): Well, first, I'm always happy when people know us first as a customer and a product, because I think we have such an exceptional product. And frankly, one of the things that's really amazing about Blue Apron is we still have the highest brand recognition in the industry. And I think that comes from the fact that we have such a strong product. So, I actually love it when people think of that first. I think that as a company there's a few interesting things. So, first of all, we are a meal solution company that has both the kits as well as wine and marketplace products, and I think that's really about creating these amazing culinary experiences at home. And what makes us different is part of this culinary DNA that really draws people because our recipes, our ingredients and everything are such high quality and so unique in the industry. But I think when I think about the company it's really about this concept of the opportunity for growth really stems from the fact that we have this incredibly high brand recognition and we also have so much left to do in the process. So, the changes that we have been through really have put us in the best position from a solid financial stability, financial rigor, operational rigor that has been developed over the last 18 months with Tim and with Alan, our COO, working together on really driving some efficiencies. So, they've got us to a point where we can grow from this level through our new strategy, which is really about three parts. One, we've talked a lot about our best customers and our customers are really – they love us. They're really quite strong. But there's a lot more of them out there. So, first, we're expanding our customer audience to think more broadly about modern demographics, including singles and including empty-nesters. Then, secondly, we're behind, frankly, on the evolution of our product. So, we are planning a lot of different areas where we're going to be improving and changing the flexibility, the choice within our product and making that a lot more friendly to consumers. But the exciting thing about that piece is because of the infrastructure that we've built we do feel strongly that we have the ability to not only learn from what's been happening in the industry but, frankly, leapfrog when it comes to choice and flexibility, going forward. And then the third piece is there's a huge amount of untapped opportunity in large-scale partnerships, and that's one of the bigger areas that we're going to be going after over the next couple of years, is thinking through how do we get people to come to our core product, our direct-to-consumer product, through these partnerships that would actually bring the right level of scale. So, I think what people may or may not understand about the company itself is what we've been through has put us in such a strong foundational position for growth, and now we have a really focused and clear strategy in order to get us to the next phase. Heath Terry (Analyst, Goldman Sachs): Great. So, there's a lot to dig into there. But to start with, you've been at the company five months as CEO. I guess maybe, first, what drew you to the opportunity at Blue Apron? And what's surprised you in the time that you've been there? Linda Findley Kozlowski (Chief Executive Officer, Blue Apron): Honestly, what drew me is, first of all, I've been a customer, first. So, I've been a customer for three years and a very loyal and very high-usage customer, as well. I tend to only skip when I travel. And I come from a background of cooking has always been a passion for me. It's always been something that's important. But what's been more important to me is this concept of how food figures into health and life, and I think that's changing over time in how people think about it. Cooking at home itself, by every piece of research out there, automatically is healthier than eating out. Then you move into this idea of when you are using whole ingredients and you're much more aware of what you're eating, then you become even healthier. On top of that, you actually have the connection in the community that's built from cooking with your family, cooking with your partner, which is something that is also consistently an aspect that ranks high in some of the healthiest populations in the world, is that feeling of connection. So, one of the first things that drew me to Blue Apron was I love the product, but also I feel that it's actually a critical part of society in thinking about how we can make it easier for people to cook at home. Eighty-two percent of meals are actually prepared from the home. There's a lot of data out there that talks about the increase in eating out, and the reality is it's an increase in spend in eating out because eating out is getting more expensive. The frequency of eating out is actually going down. And so, that's part of the reason that we think we have such a great opportunity. I also personally like opportunities where the brand is strong, the product is strong, the customer love is strong, and there's a lot of room for execution. So, personally, I saw a lot of parallels between Blue Apron that I saw when I came to Etsy, of that same type of gap between the potential of the brand and also things that had not yet been leveraged in order to grow, and that was attractive to me. The final piece of it was back to what I said before. It's rare that you come into an opportunity for a turnaround situation where much of the hard work of the financial and operational foundation has already been done. And because of the strong team with Tim and Alan and the organization before, a lot of that had already been addressed and put the company in a much better position to start the growth process. Heath Terry (Analyst, Goldman Sachs): That's great. When you – obviously, whenever you start a new job you come in with a lot of sort of expectations and plans. How have your, sort of your plans for Blue Apron evolved as you've learned what it's like to actually be inside? Linda Findley Kozlowski (Chief Executive Officer, Blue Apron): There was a lot of open discussion about what needed to happen in the process of interviewing and talking to people at the company. So, a lot of it was fairly clear. I think the thing that's very exciting to me is truly understanding the operational strength and capability that we've developed and how much more room there is for scale. We're at a point right now where we have the ability to scale our operations and maintain and grow our efficiency as we scale, as opposed to needing to invest significantly more money in order to gain this flexibility. So, I think that's actually very exciting. The area that I see even more opportunity than I originally saw before was the technology platform itself. So, the ecommerce platform itself I think has a lot of room for improvement, which again I only look at as a good thing because it's open field. Heath Terry (Analyst, Goldman Sachs): So, you made the point about scale. Obviously, the investments in operational infrastructure, Tim, were a big part of where the company had been focused over the last couple of years. When you look at sort of where capacity utilization is – or whatever the right term, the right KPI that you sort of look at in measuring this – where is Blue Apron now? And how high is that ceiling? Tim Bensley (Chief Financial Officer, Blue Apron): Right. Absolutely. It's – we definitely as a company put a lot of capital into the ground in 2017 with the expectation of continuing on a very high growth rate. Obviously, that hasn't happened. The good news is that at the same time that we did that – we literally built out our fulfillment centers, the newest one in Linden, New Jersey, as well as in Texas and in California, really fully automated, ready to go. We have the ability to significantly increase our revenue now behind some of the growth plans that Linda is talking about without really putting any more significant capital into the ground.
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