There aren’t many true “hybrid” companies in the U.S. – ones with business models that straddle the line between B2B and B2C delivery. Credit card companies come to mind. Some tech companies like Microsoft and IBM fit the bill. But in the food distribution business, a hybrid is rare. A company either delivers family-oriented meal kits like Blue Apron or they’re filling supermarket shelves like Sysco or US Foods. Not many do both.
Meet GrubMarket. It is a name that will become more widely used later this year, when and if the company follows through on its plans to go public. No, it does not complete with Grubhub or any other door-to-door delivery services. GrubMarket has blended organic food delivery to businesses like supermarkets and restaurants with a burgeoning consumer-based eCommerce operation that capitalizes on the farm-to-table movement. It has also been on an acquisition tear that may have no parallel in this year of contagion.
“We feel it’s a good way to grow the company,” said CEO Mike Xu of his year-long acquisition spree. “We like to add companies that have earned 20 or even 40 years in their local areas. These companies are connected closely to their ecosystems, their customers and their supply chains. They’re trying to grow just as we are. Even still, we’re just a speck in this market. I like to say we’re a small fish in a big ocean.”
During the last six months, GrubMarket has made no less than four major acquisitions of strong regional farms, distribution companies and organic food logistics firms. Most recently, on April 1, it acquired Boston Organics, an online farm-to-table grocery delivery service for homes and offices in Massachusetts. In February, it snagged Organic Harvest Network, a West Coast firm that handles the crop planning, sales, marketing, logistics and accounting for the growers it represents in Northern California. Organic Harvest also brings a proprietary internet software platform that is designed to assist growers with crop planning, accounting, pricing and supply chain. Add to this the acquisition of Michigan-based Doorganics in late November and San Francisco-based Eating With The Seasons in January, and Xu and his team have assembled a nationwide company.
All of the acquisitions share the hybrid model, and put GrubMarket in a position to tap into unprecedented demand for organic food and online grocery delivery. The B2B business, according to Xu, was profitable almost immediately. Since GrubMarket’s founding in 2014, it has clocked three- to five-time growth on a year-to-year basis. Online grocery was a limited but growing area of the business before the COVID-19 crisis.
“Our online grocery business is up 30 to 40 percent since the crisis started,” he says. “We have been completely overwhelmed, and actually had to stop taking new customers in the Northwest. We felt that was the best move, because it is our mission to be a reliable food delivery company, not just the biggest.”
Although Xu is modest about GrubMarket’s prospects, by his own admission, he is “the fastest-growing farm-to-table company.” According to market research company Technavio, the organic food market is currently at $62.2 billion per year and will grow at a 15 percent clip over the next three years. North America will take 35 percent of that growth.
Xu is hesitant to talk financials, as GrubMarket is considering an IPO. According to the Silicon Valley Business Journal, the company has raised $112 million in venture capital funding as of April.
“The list of investors that GrubMarket is attracting speaks to some of the opportunities for it in the years ahead. Evolv is a $100 million fund backed by none other than food giant Kraft Heinz that invests [in] interesting food startups,” reported TechCrunch. Xu told TechCrunch that “having Digital Garage – the Japanese marketing, payment and internet services holding company co-founded by MIT’s Joi Ito – in the round is the startup’s first step to working on expanding GrubMarket into Asia.”
“Digital Garage has access to most of the restaurants in Japan through its business there,” Xu said, “and ours is a model that could be populated there.”
According to Xu, he will “disrupt the food industry with a chance of once in several hundreds of years.”
Previously, Xu was vice president of engineering at Brightidea, a global leader in cloud-based innovation management software. Before that, he was head of engineering at Rocket Lawyer. Although his restaurant business has fallen off due to the crisis, he is bullish on its long-term prospects.
“I think that when the virus is finally contained, restaurants will come back quickly,” he said. “And I think when this is all over, consumers will become very conscious of where their food comes from, how it is grown and how it is delivered. We will see very clearly that the move toward organic food is here to stay.”