Retail

Grocery Roundup: Ahold Delhaize Acquisition, Another Toilet Paper Rush And A SNAP Explosion

Ahold Delhaize

The biggest grocery shopping weekend of the year is upon us, as it will be the last weekend before the Thanksgiving holiday. Though, as PYMNTS’ recent data have recently demonstrated, that may mean less than it once did, since consumers who are shopping digitally are no longer relegating their grocery pickups to Saturdays and Sundays. Whether that emerging trend will carry over into Thanksgiving preparations remains to be seen.

Meanwhile, the grocery industry, as has been the norm for the last several months, has been constantly busy this week. Players like Ahold-Delhaize are looking to raise the level of their competitive game by acquisition, up-and-comers like Farmstead are growing by investment and the pool of digital shoppers is becoming wider and more inclusive as digital SNAP continues to expand.

Ahold’s FreshDirect Pickup 

Dutch global grocery conglomerate Ahold Delhaize — the firm behind grocery behemoths Giant and Stop & Shop — has acquired a majority stake in supermarket delivery startup FreshDirect in an attempt to up the level of its digital grocery offerings amid the online shopping surge created by COVID-19.

“We are strong believers that the future of grocery retail involves getting customers the best quality food, exactly when they want it, with the best customer service. We have built FreshDirect into a reliable and recognizable business to serve this purpose,” David McInerney, CEO of FreshDirect, said in a statement on Thursday (Nov. 19).

Under the terms of the deal, FreshDirect will keep its brand name, be supervised by a seven-member board and continue its independent operations in New York City. Financial terms of the deal, which is expected to close in Q1 of 2021, have not thus far been disclosed.

Experts speculate that Ahold’s global reach will allow FreshDirect to further expand, likely in East Coast markets initially. More importantly, as Farhan Siddiqi, the chief digital officer of Ahold Delhaize noted, the deal signifies the permanence of the digital shift within the grocery industry.

“Delivery, to me, is here to stay,” was the assertion that Ahold Chief Information Officer Ben Wishart shared with PYMNTS in a recent interview. He said that online sales have grown 40 percent since the pandemic began. “We’ve seen a massive increase in demand for eCommerce for our business,” Wishart noted. “The physical constraint — the expected growth of eCommerce and what you need to fulfill that in terms of picking capability, fulfillment delivery or pick-up capacity — is the hardest thing to build at fast speed.”

Farmstead Picks Up $7.9M to Grow Its Online Grocery Business 

Online grocer Farmstead has announced that it has picked up $7.9 million in a Series A round of funding, bringing its total amount raised to $14.5 million. The funds, according to the firm, will go toward expanding the online grocery business nationally. Today Farmstead’s services are only available in California and in the Raleigh-Durham area of North Carolina.

Farmstead does not maintain physical stores, instead only running so-called dark grocery locations for staging their delivery-only experience. The company relies on data and artificial intelligence (AI) to maintain what they call a “just enough” inventory system. Farmstead’s goal is to have the right amount of stock to avoid product outages, but not so much that they are left with unsold inventory.

Farmstead also launched its Grocery OS product in September, a software program designed to help other grocers transition to this type of eCommerce. According to the startup, it is already in use with a “top three” American grocer, though it declined to name which one.

“In order to fix grocery delivery and make it profitable, Farmstead took the bold approach of breaking the traditional model and starting completely from scratch, while opening up Grocery OS to other retailers,” said Tim Reynders of Aidennlair Capital, one of Farmstead’s new investors.

SNAP Customers Flood Into the Digital Grocery Market 

Making digital grocery shopping available to consumers who use the SNAP (formerly known as food stamps) program has been a long and at times arduous climb. The idea was first proposed in 2016, but the logistics of putting it into place have been time-consuming, to put it mildly.

According to recent Bloomberg reporting, it is increasingly looking like a long climb that could pay off for retailers like Amazon and Walmart, which have been active participants in pilot programs allowing EBT cards to be used as a payment method for online grocery ordering, for either delivery or pickup.

When Congress began allowing more food assistance due to the pandemic, the U.S. Department of Agriculture (USDA) expanded the online program, which as of today is available in 46 states and the District of Columbia and includes over a million American households that are now shopping for groceries online using government benefits. That figure represents a 50-fold increase since the beginning of the pandemic.

Amazon, according to reports, has been particularly active in courting the $55 billion spent by food stamp recipients last year – mostly at places like Walmart or other physical grocery stores. Amazon was able to eat into that market during the pandemic-triggered shift away from in-person shopping. According to Kristina Herrmann, the company's director of underserved populations, said the program should help to "dramatically increase" access to food for more customers.

And as digital becomes more popular with benefits recipients, the race to serve said recipients digitally is getting new participants. Recent reports indicate that Instacart and ALDI have partnered on a new solution for same-day delivery or pickup orders using EBT.

Another Round of Toilet Paper Hoarding 

With COVID-19 infection rates once again on the rise, and shutdown looming or already in effect in an increasing number of places, consumers’ instincts to buy up all the toilet paper has once again returned, according to a recent report from The Washington Post. But this time, it seems, there is a trace of good news: Experts report that they are ready this time – and they have the TP supplies to meet the surge of demand.

“I’m not going to be a Pollyanna and say things are perfect,” Geoff Freeman, chief executive of the trade group Consumer Brands Association, told the Post. “But we are fundamentally in a different place than we were in March and April. Even retailers' rationing is a demonstration of lessons learned. The psychology of empty shelves causes a vicious cycle.”

This time around, retailers and manufacturers claim they’re less panicked about widespread shortages, as they’ve spent months simplifying their supply chains, adding shelves and workers to fulfillment centers, and taking other measures to counter panic-buying. There might still be hiccups, temporary shortages and even some price increases, noted Nick Green, chief executive of Thrive Market, an online grocer that specializes in organic food and natural products – but the full-scale disruption seen in the spring is far less likely to repeat itself.

“This time around, it’s a little bit of everything: cleaning products, toilet paper, cold and flu medicine, shelf-stable food. There’s less fear than there was at the beginning of the pandemic — people aren’t as worried that stores are going to run out of toilet paper or that grocery stores will be completely empty, but they’re definitely shifting their consumption habits again,” he said.

Shifting – but this time, the retailers have spent the better part of 2020 shifting along with them, and readying themselves to avoid another wave of bottlenecks and panic.

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