Lyft Sizzles, Auto Loans Fizzle And The Grocery Wars Heat Up For Summer

Sizzle Of The Week: The Race for Grocery Gold

Much of commerce activity is ruled by tastes, trends and the occasional fad; what we buy is very much dependent on popular mood. The Queen has requested that guests wear hats to this weekend’s royal wedding, as the world eagerly wonders whether large-brimmed hats or elaborate fascinators will win the day.

We imagine the winner will be whatever Princesses Beatrice and Eugenia wear.

But while most purchases are a choice, food remains unique in that it is a necessity. Hats can go in and out of fashion, but human beings will always need to eat – which means they can reliably be counted on to purchase food.

However, as the ongoing and escalating war for grocery dominance over the last two years has demonstrated, the where and how of those food purchases are very much up for reinvention.

And the line to be the leading re-inventor is long and diverse. The biggest names in the game are running the race – but they’re joined by some ambitious, and creative, up-and-comers.

The action has been ongoing for some time, but this week an already hot segment saw its thermostat turned up as it became increasingly apparent that everybody wants to rule the grocery world, by any means necessary.

Amazon and its grocery proxy, Whole Foods, snapped up a good deal of segment-wide attention with the announcement that its Whole Foods Prime loyalty program is officially rolling out.

The much-anticipated program will offer Prime members 10 percent off various items and deals through rotating weekly specials. The program is getting off the ground in Florida, and is on track for expansion to other Whole Foods stores as soon as summer 2018.

As Whole Foods CEO and co-founder John Mackey noted, as the new loyalty push was being announced, the Amazon deal has pushed momentum. At Whole Foods, that has been measured in larger basket sizes and increased foot traffic. Mackey believes the Prime membership pricing advantages will also go a long way toward rehabilitating the “Whole Paycheck” reputation earned by the organic, all-natural grocer’s pricey offerings.

According to calculations by Reuters, Whole Foods will be cheaper than traditional grocery stores for Prime members.

“Whole Foods is going to become more and more and more competitive,” said Mackey, noting that additional price cutting could be coming down the pipe.

And the probable reality of that statement has been driving activity throughout the rest of the space this week.

Kroger, for example, seems to have decided that if Amazon can make a move on brick-and-mortar, then they can make a play for digital grocery sales.

The nation’s largest supermarket operator announced this week that it has officially signed a deal with U.K.-based online grocery firm Ocado, which will see the firm become Kroger’s exclusive partner in the U.S. The move marks Ocado’s first official foray into the American market, and the firm’s fourth international deal overall.

Reuters, citing Ocado’s chief financial officer, Duncan Tatton-Brown, reports that according to the terms of the deal, Ocado’s home delivery platform will be available in the U.S., while Kroger gets a stake in the company worth about 5 percent of existing share capital, valued at $247.5 million.

Ocado will be able to offer delivery in the U.S. by building automated warehouse facilities on 20 or more U.S. sites that Kroger will locate. Tatton-Brown noted that this undertaking will see more facilities built than all of the ones Ocado has built or is gearing up to build for other partnerships.

“The scale of the proposed transaction, and therefore the quantum of its economics, is wholly different from those we’ve already signed,” the executive said, noting that Kroger was in the best position to be successful in the U.S. market, though Ocado plans to have talks with other U.S.-based retailers.

Kroger and Ocado are working together to find the first three sites that will open this year.

And notably, big-name players weren’t the only ones announcing expanded and enhanced moves in the segment.

Grocery delivery service Good Eggs is looking to make a comeback, thanks to $50 million in new funding. Launched in 2011, the company raised around $15 million.

But the firm had operational difficulties, and after a few rounds of layoffs, the firm officially closed down operations everywhere except its home city of San Francisco in 2015. It also hired Bentley Hall, an executive previously from Plum Organics and Clif Bar, as its new CEO.

Now, three years later and chastened by its last experience, the firm says it is ready to get back to growing through “thoughtful, measured expansion.”

“We’ve dramatically transformed our business over the past two years. It began by recognizing we are a food company powered by technology and continued with a laser focus on our business fundamentals,” said Hall. “What hasn’t changed is our commitment to delivering absurdly fresh, high-quality products to our customers and making it effortless to eat well at home.”

These days, Good Eggs offers more than 1,000 products, 70 percent of which are locally sourced – and even those that are not still must clear the firm’s rigorous sourcing standards. The latest infusion of fundraising will go toward quadrupling their capacity in the Bay Area and expanding their delivery geography. By next year, they hope to resume operations in Southern California.

The new funding was led by Benchmark, with Benchmark’s Bill Gurley joining the company’s board of directors.

“Our team was deeply impressed by the operational discipline that Bentley and the team at Good Eggs have implemented to transform this business,” Gurley said in the funding announcement. “We made a study of what Good Eggs has achieved and believe the business is very well-positioned to capture and scale the growing market of people who are passionate about the quality and provenance of the food they consume. It’s a massive opportunity.”

A massive opportunity that draws a massive amount of interest – and generates not an inconsiderable amount of inventiveness.

The team at meal kit firm Chef’d , for example, manages to win the most interesting play in a sizzly week, with grocery innovation that doesn’t just explore the “wheres” and “hows” of grocery buying, but also looks to change the “whos” and “whats.”

As part of its continuing expansion into retail, Chef’d has partnered with Byte Foods to bring its meal kits into 100 of Byte’s unattended retail locations in California. Over the next six months, Chef’d plans to expand to all of Byte’s locations, the company said in an announcement.

“At Chef’d, our goal is to provide a rotating assortment of high-quality meal kits to more consumers in more places,” CEO Kyle Ransford said in the announcement. “By partnering with Byte Foods, we are able to bring our meal kits to a new channel, beyond our current direct-to-consumer and traditional retail distribution, and provide an innovative solution for grabbing dinner just before you leave work.”

The meal kits will be alongside the sandwiches and salads that currently populate the interior of Byte’s smart refrigeration units. Popular in workplaces, hospitals and apartment buildings, the machines allow consumers to use a credit card to buy food 24 hours a day.

With the partnership, Chef’d gains a new sales channel, adding to its distribution strategy of shipping pre-portioned ingredients to consumers’ doors and placing them in supermarket locations.

Grocery as a segment is sizzling – and this week, it seems everyone is looking to make sure their piece is the biggest.

Sizzle

Ant Financial: To paraphrase an old Elvis album cover, 600 million users can’t be wrong. This is the first time the company has said just how far-reaching its business is, with hundreds of millions of users. In the middle of it all, the company is looking to raise $10 billion with an implied valuation of $160 million. Talk about scale.

Lyft: The Uber rival has 35 percent of the U.S. ride-hailing market, up from 20 percent just a year-and-a-half ago. This is an example of going fast and furious in a competitive market, where there’s room for more than one Uber-player, of course.

Gig economy: No tiny sliver of the economy. The latest findings of the Gig Economy Index show that at least 40 percent of the U.S. workforce makes 40 percent of their income through gig work. Most of those (75 percent), say they would not leave freelance work behind for a full-time job. On-demand is now the new full-time.

Fizzle

Cambridge Analytica: Shuttered, yes, and now being investigated by the Justice Department and the FBI. The debate over data privacy is sure to get even more heated. That ties in with Facebook, of course, and just what was done with the data of 87 million users of that social media behemoth.

Auto loans: They now show a delinquency rate of 5.8 percent – a higher rate than seen in the financial crisis of 2008, where the peak was 5 percent. In the meantime, the lending activity is pulling back too, by 10 percent year over year. But maybe it’s too little too late?

Carillion: The collapse of the big U.K. construction firm shows a ripple effect: Government watchdogs were toothless, and as many as 75 percent of construction firms and subcontractors are in financial trouble, as surveyed by the Prompt Payment Directory.