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GrubMarket And The Streamlined Approach To Organic (And Digital) Grocery

Labels like “farm fresh” and “organic” used to be the exception and not the rule in food shopping and buying. Lately, they are starting to circulate more and more prominently and restaurants are as likely to boast the bona fides of their locally sourced cuisine as they are to tout those of the chefs that prepare it.

All of those signifiers of a meal that will be healthier, cleaner and presumably tastier have gone a long way toward creating consumer acceptance of food as a branded, luxury good. And until very recently, those who are in the business of selling all that organically produced and locally sourced food also specialized in pricing it that way.   

However, as of late, that trend is slipping.  

And the blame can be squarely laid at the feet of the nation’s premier purveyor of extremely expensive but philosophically sound comestibles, Whole Foods.

Though the chain has been somewhat lovingly referred to as “Whole Paycheck” for some years, the summer of 2015 demonstrated that even organic food lovers have their limits.  

Putting three sprigs of asparagus in a bottle of water and charging $6 for it will push anyone toward incredulity. That story followed immediately on the heels of an NYC-based charging scandal where Whole Foods proved that even health minded hedge-fund managers take notice if everything they buy is systemically marked up (at least that’s the allegation.)   

This left some consumers wondering if they were being charged so much for farm fresh because it was that much more expensive to produce — or if they had shown an unbelievable willingness to pay more “just because.”  

Those doubts, coupled with continuing consumer demand, have opened a space for retailers like Costco who are jumping in and offering organic and local — but at a more middle-income oriented price. Last week, PYMNTS spoke with Suzi Robinson, a spokesperson for Fresh Formats — a new venture by Stop & Shop parent company Ahold to re-imagine the organic grocery experience for the neighborhood consumer (whose neighborhood isn’t Beverly Hills).

“The motivation behind Everything Fresh in Philadelphia was to have a real innovation space where we could learn from teammates and customers, [not just] make assumptions,”Robinson told PYMNTS. “We’ve learned that people love fresh foods, smart value and local convenience, with an easy-to-shop space right in the neighborhood.”

With the creative destruction going on in grocery stores looking to cash into the farm-fresh for the everyday consumer in physical grocery, it is unsurprising to see its eCommerce expansion beginning to take a similar turn.

Which is where San Francisco-based GrubMarket enters the scene.  

GrubMarket, quite simply, is an online market and food delivery service that exists to connect consumers directly with the farm fresh produce they so crave.  

“I am a big fan of local food and supporting local farms,” founder and CEO Mike Xu noted in an interview. “

GrubMarket is not the only San Francisco-based player in the farm fresh delivery game. Good Eggs offers a similar on-demand organic delivery value proposition. They are also a cautionary tale of how difficult the business can be — the firm followed up its $30 million funding round earlier this year by laying off 15 percent of its workforce. That bad news was followed by even more last month, when the firm terminated another 140 employees and discontinued operations in every city but San Francisco.

“The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain,” wrote Good Eggs CEO Rob Spiro on the company’s blog. “We were motivated by enthusiasm for our mission and eagerness to bring Good Eggs to more people. But the best of intentions were not enough to overcome the complexity.”

GrubMarket is also expansion minded. Since starting up in the Bay Area and emerging from Y- Combinator with $2 million in funding earlier this year, the firm has expanded to Chicago, Los Angeles, Portland, San Diego, Sacramento and Detroit. But their approach to the market – and the supply chain in particular – is quite divergent from Good Eggs in that they do not rely on a warehousing system.

Instead, they work through partnerships with local producers, a small number of drivers and a technology platform for easy order and payment. GrubMarket literally provides farm-to-table with a click.

“That way, the food is always fresh,” Xu noted. “It also makes us much more nimble and able to scale our operation because we aren’t hit with this massive challenge every time we enter a market. Instead we set up relationship with local vendors and get moving pretty quickly. We manage logistics and communication with vendors, local small farms.”

The trade-off is that the food is not quite immediate — a pressing challenge when many in the online grocery field are offering delivery within a few hours of order. GrubMarket customers, on the other hand, wait on average one to three days for their orders — as the company builds efficiency of delivery into their model for keeping costs down.  

More expansion is in the firm’s future, according to Xu, as GrubMarket has just announced a $10M Series A round led by Fosun Group, with participation also coming from Y-Combinator, Battery Ventures, GGV and AME Cloud Ventures.

It’s a tough market to be in, Xu notes, adding “it’s a billion-dollar opportunity – so it’s not surprising to be competing, it would be surprising if we weren’t.”

But unlike some other startups which almost seem built to spend, GrubMarket is built for efficiency and growth without big costs upfront. And while it is not a guarantee of success, that surely makes them an interesting firm to watch.

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