Dive Brief:

• Jana Partners has sold its 2% stake in meal kit company Blue Apron, according to Reuters. 
• The hedge fund’s investment was announced in an August regulatory filing, and was seen as a vote of confidence for the beleaguered company. Jana also recently sold its stake in Sprouts Farmers Market, which had also acquired in the second quarter of this year.
• Jana pressured Whole Foods to sell itself after it bought a 9% stake in the company back in July, and ended up pocketing $300 million on the subsequent acquisition by Amazon. 

Dive Insight:

The roughly $3 million Jana invested in Blue Apron was a drop in the bucket compared to the $794.5 million stake it bought in Whole Foods earlier this year. But in terms of significance, many felt Jana's investment in the struggling meal kit company could be as impactful as the investment it made in the specialty grocer just a few months earlier.    

But things have only gotten worse for Blue Apron since then. Last month, the company laid off 6% of its workforce — about 300 people — following a temporary hiring freeze and the firing of part of its recruiting team this summer. Then just this month, shares fell more than 21% after CEO Matthew Salzberg said its new fulfillment center in Linden, New Jersey was costing more than expected and was a drag on profits. Every week, it seems, brings some fresh woe for the company.

In its third quarter earnings report, Blue Apron noted that its marketing costs were down 32%, and that its customers were spending more each month. But its customer base had dropped by 6% over the past year and 9% since the previous quarter.

This is the conundrum Blue Apron faces: Marketing spend is a huge drag on performance, but without it the company loses customers. Combine that with Blue Apron’s execution woes and rising industry competition, and its road ahead seems narrower and narrower. As of September, according to Earnest Research, Blue Apron’s market share was 43%, compared to 57% last year.

Jana’s cash-out is just the latest dire development for Blue Apron. But the meal kit trend overall remains a growth opportunity. Albertsons recently purchased Plated, while other supermarkets are introducing their own kits. HelloFresh recently announced it plans to go public, and upstart companies are offering fresh takes focused on faster prep, unique ingredients and additional meals.

At the same time, kit companies face the same fickle customers and high marketing costs that Blue Apron faces. Companies are working hard to stand out, but analysts see industry consolidation ahead. So while consumer demand remains steady, the makeup of the meal kit market is very much in flux right now.