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Daily news and analysis about the food tech revolution

Grocery

Cashierless Checkout Pioneer Grabango Shuts Down After Failing to Secure Additional Funding

Grabango, a grocery-tech startup that raised over $93 million for its cashierless checkout technology, is shutting down, The Spoon has learned. The closure follows the company’s inability to secure the necessary funding to continue operations.

In a statement to The Spoon, Grabango said:

“Grabango announced today it has permanently discontinued operations. Although the company established itself as a leader in checkout-free technology, it was not able to secure the funding it needed to continue providing service to its clients. The company would like to thank its employees, investors, and clients for their hard work and dedication. The decision was an extremely difficult one to make.”

Founded in 2016, Grabango emerged during a surge of investment in grocery checkout technology startups, spurred by Amazon’s launch of Amazon Go. However, the field quickly became crowded with competitors like Shopic, Trigo, Mashgin, and Caper (acquired by Instacart), all of which offered variations of computer vision and AI-powered shopping platforms.

Despite the competition, Grabango secured notable clients, including European grocery giant ALDI, which just six months ago introduced its ALDIgo checkout-free solution, powered by Grabango’s technology. Yet, as seen with Amazon’s recent rollback of its Go platform in Fresh stores, cashierless checkout needs to be carefully deployed because customers can sometimes find their friendly cashiers being replaced by a technology platform offputting.

Grabango’s shutdown is a reminder of the tough climate for startups today. The days of easy venture capital are over, and in highly competitive sectors like grocery tech, startups that can’t extend their financial runway or achieve profitability are vulnerable. It’s likely that Grabango’s assets and intellectual property will soon be scooped up by a competitor.

Tech-Forward Convenience Store Chain Choice Market Closes its Doors

Choice Market, the Denver-based convenience store chain known for blending a focus on fresh and high-quality food with a tech-forward approach to retail, has closed permanently. CEO Mike Fogarty announced via Linkedin that the company will be closing its doors permanently after months of attempting to navigate a reorganization process.

“This is a tough post to write, but after several months of working through a potential reorganization, unfortunately, Choice is closing its doors for good.” Fogarty expressed gratitude to the company’s investors, employees, and partners, and emphasized that despite the challenges, Choice’s mission to innovate and provide convenient, high-quality food for its customers was something he remains proud of.

“I am hopeful that Choice made our industry think differently about what it means to push boundaries and innovate for the next generation who values quality, health, and convenience,” said Fogarty (who was a speaker at Smart Kitchen Summit 2019).

After launching in 2017, Choice Market gained nationwide attention for its tech-forward C-store model. The company differentiated itself by offering fresh, locally sourced food combined with advanced technology to provide a seamless shopping experience. At its peak, Choice operated five stores in the Denver area and began experimenting with automated, small-format Mini Marts, positioning itself as a leader in the urban convenience store trend.

However, like many retail businesses, Choice Market was severely impacted by the COVID-19 pandemic. As sales plummeted during the lockdown period, the company struggled to bounce back. The pandemic was just the beginning of a string of difficulties that plagued the company. Rising inflation, skyrocketing costs of goods, and labor shortages compounded the financial strain, ultimately leading Choice to file for Chapter 11 bankruptcy this summer and finally close down this week.

While the company made efforts to cut costs, such as reducing its executive team and adopting new in-store technologies to boost margins, these measures weren’t enough to save the business. Earlier this year, C Store Dive reported an investor promised to inject $1.5 million into the business, but the deal fell through in April, leaving bankruptcy as the only option.

The AI-powered automated store concept, the first of which the company rolled out in October 2022, was the focus behind a Series A raise around the same time. But with this week’s closure, we won’t get to see a fuller rollout of the concept of the smaller format (400 sf) automates store concept,

Fogarty remains hopeful for the future. He hinted at new beginnings in his parting message, stating, “I plan to take all the learnings and apply [them] to a new chapter. Until then, I just want to express my gratitude and appreciation. Onward.”

Halla’s Spencer Price: Grocers Will Create ‘Unique Grocery Store for Every Shopper’ in The Future

Next up in our Smart Kitchen Summit speaker preview series is Spencer Price, the founder of Halla.

Halla has built an AI personalization and recommendation platform for grocery store providers. According to Price, the turning point for his company and the broader grocery store industry was when Amazon acquired Whole Foods.

“When Amazon acquired Whole Foods in 2017, it sent grocers into this innovation frenzy,” said Price. “I think the main driving force for grocers to want to look at this type of tech back then was that Amazon generates over one-third of all of its product sales revenue from their recommendation with the ‘You may also like’ and ‘customers also bought’ type product suggestions. Grocers do not have a passive piece of AI that drives a third of their sales, and that is what we enable grocers to do. We give them that competitive weapon to fight back in this World War grocery.”

Price thinks that while the grocery industry is lagging behind other industries, such as entertainment, when it comes to personalization, they are looking to AI to make up ground.

“Netflix isn’t just on a one-account basis. Within an account, you have a handful of profiles in your household, and each profile sees a completely different set of suggested categories, titles within those categories, and even different cover art for each one of those titles that’s likely to resonate with you as a specific end user.

“Grocers are a little bit behind these content platforms, but I think in 10 years time, we will see a very similar thing, and it’s going to be even more exciting because if you can give every single shopper their own unique grocery store, that’s going to make for both the fastest and most efficient and of course, most inspiring shopping experience. Grocers want to move quickly.”

Price’s company was acquired by Wynshop in March. Price says the company brought over his entire team and that Halla remains an independent business unit within Wynshop.

The Spoon Talks With Halla's Spencer Price About AI's Impact on the Grocery Business

You can hear Price speak at Smart Kitchen Summit on June 4-5th in Seattle. Get your ticket today!

You can read the full transcript of our conversation below:

Michael Wolf: All right, I have with me Spencer Price, the CEO of Halla, now a part of Wynshop. It’s been a while since we caught up. We wrote a first article about you guys since then, and you guys have changed a lot since then.

Spencer Price: We have changed a lot since then, yes.

Michael Wolf: At that point, you were very much focused on being a personalized recommendation platform based on a lot of different data. I still think that’s a lot of what’s pretty true, but you guys did evolve since then.

Spencer Price: Yeah, so 2018 was a transitional period. We had developed, as you said, a personalized recommendation engine centered on food and beverage products. And we had a mobile app that would recommend restaurants and even specific dishes from those menus to users or groups of users with varying taste preferences, dietary restrictions, et cetera. And that was 2017 to 2018.

When Amazon acquired Whole Foods in 2017, it sent grocers into this innovation frenzy. There was a demand for us to gut the tech from the app, license it B2B, and we ended up sunsetting the mobile app, which feels like a lifetime ago now. And all we’ve done is deploy personalized recommendations, search and substitutions for online grocers ever since.

Michael Wolf: I didn’t know that that had such a big impact. It makes sense, in retrospect, the acquisition of Whole Foods by Amazon. But like you said, there was this frenzy and a wake up call to existing grocers, and that sent you in a completely different direction.

Spencer Price: Exactly. We had some innovative nimble online grocers as well as some legacy retailers that knew they needed to step up. I think the main driving force for grocers to want to look at this type of tech back then was that Amazon generates over one-third of all of its product sales revenue from their recommendation with the ‘You may also like’ and ‘customers also bought’ type product suggestions. Grocers do not have a passive piece of AI that drives a third of their sales, and that is what we enable grocers to do. We give them that competitive weapon to fight back in this World War grocery.

Michael Wolf: I love that; World War grocery sounds like a movie, starring you guys apparently. But I mean, look at the last 18 months, right? I think the world’s woken up to AI. It’s permeated all the press and the pop or consciousness largely due to the exposure of things like ChatGPT and generative AI to everyone. It seemed like like six, seven years ago, a lot of people were building ontologies and had a custom code, to make their AI to get certain outputs. But now, with generative AI, you can basically do prompts and get a lot of the same results. And these large language models just keep getting bigger. Can you talk about how your business has changed by incorporating larger langue models and generative AI?

Spencer Price: Yeah, so the way that generative AI has taken shape thus far has, of course, been through chat bots. One of the things that those, at least from a consumer-facing standpoint, one of the things that chat bot ask technology with LLMs, Gen. AI, et cetera, plays into e-commerce at large and potentially grocery down the line is conversational commerce.

We don’t see that as being a particularly exciting use case, particularly in this category where people are adding usually a couple dozen items to their basket. They’re not saying, you know, I need help finding the right sweater that matches these pants. It’s a household you’re shopping for with different dietary restrictions, taste preferences. And that’s where language models don’t necessarily perform best. That’s where recommender systems have decades of tried and true proven methods.

And so that’s still a foundational component of our science. However, for one of our solutions, search, LLMs allow for a much more robust level of understanding natural language. So we had our own raw sort of NLP models that we developed in -house a few years ago, that we’ve been fine tuning, and now we can incorporate some of these open source transformers and LLMs to take our vertical eyes, rather than a generalist sort of assistant, our vertical eyes recommender systems and layer them with this cutting edge technology that allows for the generation of synonym lists and a better understanding of things like typos. But the risk with using just generative AI to try to develop these highly specialized models in a category that’s clearly so nuanced and personal is the hallucinations. I was recommended a beef and banana soup from chat GPT. And I got to tell you that that feels a ways away. I did not. It was terrifying to be honest.

Michael Wolf: Did you make it?

Spencer Price: I did not. It was terrifying, to be honest.

Michael Wolf: Well, I’ve been talking to a lot of folks who are in this area of food and beverage that are trying to deploy AI centric solutions. And like you said, a lot of the LLMs have this problem with hallucination. They’re oftentimes, they’re ingesting the world of the broader internet, but they don’t necessarily go deep on things like food and beverage. So I’ve heard companies that are building special, small language models that can couple into large language models. They’re doing kind of these transformers that provide the intelligence. Sounds like you guys have your own kind of approach to that. And you’re using LLMs as the conversational smart interface that is just so much more savvy than it would have been in the past. And then diving deep into your knowledge set.

Spencer Price: Precisely. We are using these new state of the art technologies, both as sort of a research platform to understand what we can benefit from and leverage and also where the watch outs are, like the example I just shared. One thing that you’d imagine might be really nice, whether it’s with a small language model specific to what we’re doing, or using the best of these large language models.

One use case that probably strikes you as obvious is groceries have a notoriously dirty data problem. And so maybe there’s a way to clean up these product catalogs and inventories and descriptions and attributes. The challenge is you can’t run the risk of things like health claims, nutrition facts, or marketing descriptions being completely wrong. And we’ve seen a lot of inaccuracies in using it for that.

So everything we do with LLMs has a human in the loop to make sure that none of those inaccuracies end up facing a user. But by and large, what sets us apart is layering in, as you said, our knowledge base, which is an ontology of every single product, but more than that, the essence of each product, knowing that orange, for example, is a distinct flavor. It is a product and it’s also a color. And LLMs are not built to have those nuances at play to the level of sophistication that you need them to be. Does that make sense?

Michael Wolf: Yeah, it does. What are you most excited about if, 10 years down the road, you’re building systems that use technology like AI in terms of the grocery shopping experience? What do you think will change the most?

Spencer Price: So I think that personalization historically took a lot of different shapes, and then they all kind of converged five to 10 years ago by having truly individualized browsing experiences on content platforms. Netflix isn’t just on an account basis, but within an account, you have a handful of profiles in your household, and each profile sees a completely different set of suggested categories, titles within those categories, and even different cover art for each one of those titles that’s likely to resonate with you as a specific end user. Spotify acquired Echonest, and they were able to map out all the different attributes down to subjective metrics like the danceability of every single track in their library, now they have the most robust music recommendation engine in the world, and people love them for that, and I’ve never left as a result.

In online shopping, we’re talking about products now, not content. We’re a little bit behind these content platforms, but I think in 10 years’ time, we will see a very similar thing, and it’s going to be even more exciting because if you can give every single shopper their own unique grocery store, that’s going to make for both the fastest and most efficient and of course, most inspiring shopping experience. And we’re not there yet, but we have all the rails to get there in a lot less than 10 years. Depends how much. Grocers want to move quickly.

Michael Wolf: That’s exciting, getting Mike’s grocery store tailored towards me. That’s perfect. Tell us about the Wynshop deal. You guys got acquired, which is exciting news for you. What does that mean?

Spencer Price: So our biggest channel partner to reach retailers and have our personalization technology directly embedded into an e-commerce platform was with Wynshop. And they’re the leading provider of e com platform technology on a white label basis to grocers all over the continent and a handful of international accounts as well. And we’ve been working with them for a few years. We love the team. We think they have a clearly differentiated product and they got to know us, our team and our tech. And it was just a pretty perfect match, to be honest, to have what we’ve developed baked in as more of a base level set of functionality, as well as being able to offer premium levels of functionality for these grocers that they can opt into if they want.

So yeah, about six weeks ago, we joined the team. They brought on all the day to day, all the personnel, we remain an independent business unit within Wynshop, but obviously it’s not like there’s any walls up. We work with everybody there very well. They put some resources behind us and yeah, the goal is both to service their existing accounts and future customers as well with the tech we’ve built and the new stuff we’re building.

Michael Wolf: All right, well, Spencer, congratulations. You worked hard for years to build the product and then create a opportunity for you. So I’m looking forward to talking more with you in Seattle in June at the Smart Kitchen Summit. How can people find out more about Halla and Wynshop?

Spencer Price: Yeah, well, thank you so much for the opportunity and the congratulations. You can still find us even though we don’t go by holla .io, we’re just holla now, at halla .io and winshop .com, W -Y -N, shop.

Michael Wolf: Cool. Hey, well, Spencer, thanks so much for spending time with me, man.

Spencer Price: Thank you so much, Mike. Look forward to seeing you in June.

Big Tech Set Its Sights on Reinventing Checkout. Consumers Said ‘Not So Fast’

When it comes to technology and grocery shopping, one primary focus for grocery chains and technology providers in recent years has been the checkout experience.

Amazon and various other technology companies have been developing platforms to enable consumers to skip the checkout counter. These platforms aim to transform the shopping experience into something akin to walking into a giant pantry, loading up your cart, and then walking out without going through a checkout line.

Others (including Amazon) pushed technology into the shopping cart, enabling customers to check out products as they walked through the store, get coupons and ads for special deals, and learn more about items via a built-in touchscreen.

And then there’s online grocery shopping. After two decades of slow adoption by both grocers and shoppers, a pandemic forced every major grocery chain to invest heavily in enabling the easiest of all grocery buying options: letting us shop at home and have our groceries delivered to our door.

Meanwhile, everyday consumers continue to do things the way we’ve always done things. It’s a lazy Sunday, and you’re in no hurry? Get in line and chat it up with the cashier and bagger. Are you hurrying to return to work or arrive home in time for dinner? Jump into the self-checkout line and get out as soon as possible. Too busy to head to the grocery store at all? Order online and have stuff delivered to your home.

In other words, grocery shoppers are not a monolith. Most of us change our behavior depending on the current situation.

But what about Just Walk Out? It’s a radically tech-forward evolution of checkout, but one in which Amazon appears to have widely overestimated just how many people would use it and how easy it would be to implement. As I said in last week’s Food Tech News Show (FTNS), self-checkout fits most shoppers’ needs when they are in a hurry, and there aren’t that many situations where consumers feel they need to skip checkout altogether.

As for self-checkout, it definitely isn’t perfect and could be made a much better experience. As Scott Heimendinger said on the FTNS, self-checkout can sometimes be unnecessarily difficult, almost like plugging in a USB. Amazon and others should probably spend their time using technology to make self-checkout work better.

We love robots - FTNS

Target is doing something about self-checkout, changes which it claims will allow shoppers to get out quicker. According to the company, self-checkout lines with cameras were able to check out twice as fast as self-checkout lines without a camera. Of course, their motivation is mostly somewhat self-motivated, driven by the retailer’s desire to limit theft, so my guess is there’s a good chance they can bungle the rollout if it doesn’t deliver clear benefits and customers are feeling spied on.

All that said, while some shoppers may not like it, the combination of computer vision and self-checkout might be the future, particularly if it makes the self-checkout experience less painful than it currently is. Because of this, Amazon should look at repurposing its Just Walk Out into a self-checkout accelerator, not a platform for making shoppers feel like they are shoplifting. For now, however, they’re emphasizing the rollout of their Dash shopping carts, a solution that is unclear if shoppers are asking for. Others, like Instacart, are also betting big on as well. The company had a blog post touting their progress today, saying they plan to have ‘thousands’ of shopping carts deployed by the end of 2024.

Just Walk Out and other light-touch self-checkout will thrive in the near term in shopping contexts where a consumer needs one or two items and is in a hurry, such as airports and stadiums. One of the smartest implementations I’ve seen with self-checkout is at Costa Coffee at SeaTac airport, where they had a Mashgin AI-powered self-checkout station with a dedicated line for customers who just wanted drip coffee. In other words, a quick and low-touch checkout solution for a product with a high degree of certainty where customers are often in a hurry.

The bottom line is that everyday shoppers will continue to shop the way they’ve become accustomed to, choosing between three primary methods: full-service checkout, self-checkout, and delivery. More advanced technology should primarily focus on improving these existing modes. New technology that allows (or forces) consumers to change their behavior should only be used in scenarios that make sense.

Otherwise, consumers will reject it, and retailers will be forced to retrench, just like we saw last week with Amazon’s pullback of Just Walk Out.

As Online Grocery Sales Flatten Post-Pandemic, Shoppers Lock In on Pick-Up as Preferred Method

As the world continues to normalize and behaviors regress to the mean post-pandemic, online grocery shopping is no different. According to a new report from online grocery research firm Bricks Meets Click, online grocery shopping in the U.S. dropped 3.1% in September vs last year, going from $7.8 billion in September 2022 to $7.5 billion this year.

According to the firm, a decline in order frequency and total dollars spent per order were the main culprits for the drop in online grocery revenue. The average number of orders per monthly active user (MAU) fell 8% year-over-year, finishing at 2.31 this year compared to 2.52 for September 2022. For recurring online grocery customers (shoppers who have used e-grocery four or more times), the average order value dropped from $104.39 in September 2022 to $100.49 this September.

This suggests that as most folks are comfortable returning to the world again, there is likely a natural adoption ceiling for online grocery shopping even as more grocers offer the service. Those who are either too busy with their lives to grocery shop or who can’t or don’t want to shop in the physical world likely will continue to be the most devoted users of online grocery shopping, while others will likely continue to mix in-person shopping with the occasional use of online grocery shopping.

One bright spot for online grocery is pickup. This shopping format, where shoppers order online and have their bags run out to them at a designated parking lot area, continues to eat into home delivery. According to Brick Meets Click, pickup was used by 58.7% of monthly active online grocery shoppers, compared to 53% of orders in September of 2022. First-party delivery (delivery by grocer or third-party service like DoorDash) dropped from 40.4% to 38.8%, and ship-to-home (delivery by common/contract carriers like FedEx) fell from 42.4% last year to 39.9% this September.

Robomart Debuts Fully Autonomous Mobile Grocery Store Concept As It Announces $2M Seed Round

Robomart, the company that introduced the store-hailing concept at CES in 2019 and started rolling out its first pilot store last year, announced a new model for its mobile store concept this week with the Robomart Haven. The Haven, which will join the first-generation Robomart (now named Oasis), will be available for retail partners starting in 2025.

Unlike the Oasis, which targets ice cream purveyors, restaurants, and cafes, the Haven resembles a convenience store on wheels. According to CEO Ali Ahmed, the Haven can stock over 300 separate SKUs and hold thousands of individual products for sale. The Haven will also act as a small walk-in mobile store, allowing customers to walk inside and shop.

And unlike the Oasis – which are retrofitted vans with drivers to pilot them – Ahmed says that the Havens will be fully autonomous. Spoon readers might remember that the Oasis (then just called Robomart) was initially intended to be a fully autonomous vehicle, but at some point, the company realized building a fully autonomous vehicle to carry its retail storefront was a lot to bite off for a first product. So instead, they chose to use drivers for their first version of the mobile store and create a fully app-controlled shopping experience (the drivers don’t interact with the customers, according to Ahmed).

But with the Haven, the plan is to make it fully autonomous, according to Ahmed.

“The Haven will not be a retrofitted van with a driver cabin,” Ahmed told The Spoon. “It will be a fully driverless offering that gives us the ability to retrofit the entire space inside to serve our customers.

Ahmed says that the company still doesn’t plan to be “an automobile company,” – meaning they still have no plans to make their own car – but instead plan to work with various automakers to convert an automobile into a Robomart Haven.

With a bigger footprint, Ahmed says future partners will be able to entirely white label and customize their Haven and will be able to have multiple types of food storage (ambient temperature, frozen, cold, or heated) within the vehicle. This differs from the Oasis, which only offers one kind of food storage (such as frozen for its ice cream partner Ben & Jerry’s).

The news of the Haven comes alongside the announcement of the company’s seed funding round of $2 million led by W Ventures with Wasabi Ventures, SOSV, HAX, and Hustle Fund, among others participating. The funding is a vote of confidence for a company that has shown significant traction over the past year, inking deals with seven partners and having a total commitment as of this week for 106 Oasis mobile storefronts.

So far, those storefronts have only been pilots, but Ahmed says they will soon be fully commercial rollouts. While he wouldn’t commit to giving a specific date, Ahmed says that the post-pilot Oasis machines will be out this year, and they will start taking orders for new ones next year. The Haven, which will roll out sometime in 2025, is also open for orders.

Walmart Gains Share in Online Grocery as Shoppers Look for Ways to Combat Inflation

While online grocery shopping continued to grow last year, where people shopped shifted significantly according to a new report from grocery researcher Brick Meets Click.

The new report, which details the egrocery performance for different retail formats, said Walmart was the big winner in 2022 as more and more customers looked for ways to save a buck. According to the report, which broke down the four major formats as supermarkets, Walmart, Target, and Hard Discount (i.e. Aldi and Lidl), Walmart saw its share of online grocery shoppers grow in both low-income and high-income households.

According to Brick Meets Click, households making less than $50 thousand per year were 25% more likely to shop at Walmart than a supermarket, and Walmart’s total share of online grocery in this household category grew by 2.1% vs. a contraction of 1.5% for supermarket’s share. On the high end of the spectrum, Walmart gained ground in households making over $200 thousand annually, expanding its reach into this segment by 2.1%. In contrast, supermarkets saw their reach shrink by 1.2% in 2022 vs. the previous year.

The reason for the shift towards Walmart for both segments was persistent inflation. Lower-income households were driven by what the researcher terms “flight to value,” where they buy products priced via an “everyday low price” pricing model employed at Walmart and hard discounters such as Aldi. And while high-end income households are three times more likely to shop online at a supermarket, the format lost share to Walmart in 2022 as upper-income earners also looked for ways to save on groceries.

As for Target, the retailer also saw its share of high-income households expand in 2022, which also contributed slightly to the decline of overall online share for the supermarket segment. In addition, the Minnesota-based retailer also continued to attract younger shoppers relative to the supermarket segment, as young households (18-29 years old) are 36% more likely to shop online at Target vs. a supermarket.

The report does not detail where Amazon fits in all of this. According to The Street, Amazon’s total share of physical store grocery spend was about 2% of total grocery sales at about $17.5 billion in 2021. That compares with Target’s $20.3 billion in food and beverage sales in the same year.

As for how households are getting their groceries, over half of the monthly active online shoppers (52.2%) picked up groceries via curbside or in-store pickup in March of this year, according to a separate report by the researcher. Ship to home, which usually means dry goods and shelf-stable products, dropped from 47.5% of monthly online grocery shoppers in March 2022 to 40.9% in March 2023, while grocery delivery (which usually includes fresh produce, dairy, and meat) grew from 40.8% in March of last year to 41.5% this March.

Despite the growth of the online grocery category, the researcher says that in-store is still the dominant form of grocery shopping. In a report released earlier this year, the total share of online grocery shopping accounted for just over a tenth (11.2%) of all grocery spending at the end of last year and is expected to grow to 13.6% by the end of 2027.

Verneek Launches Generative AI Platform to Assist Food Shoppers

Today Verneek, a New York-based generative AI startup, came out of stealth with the debut of its first product, Quin Shopping AI. The product is the first to utilize the company’s proprietary AI platform called One Quin.

The company, which was co-founded by the husband and wife team of Omid Bakhshandeh and Nasrin Mostafazadeh, spent the last two years developing the One Quin AI engine, which Mostafazadeh describes as a ‘consumer experience AI platform.’

“What we’ve done is that we’ve built a system which has many orchestrated modules of different transformer technology or non-transformer technology that has been trained to answer incoming questions,” said Mostafazadeh.

According to Mostafazadeh, the Shopping AI was trained with anonymously aggregated consumer query data gathered through the company’s initial partners (which she says she can’t reveal at this time) and synthetically-generated data sets based on these consumer queries.

Mostafazadeh said that the One Quin Shopping AI differs from other generative AI systems, such as ChatGPT, because it is vertically targeted around the specific use case of the consumer shopping experience.

“One Quin is AI plus curated knowledge in a box, whereas likes of ChatGPT is a general AI where knowledge is not curated.”

One benefit of this vertical focus is that, according to Mostafazadeh, their product will not suffer from the hallucination problems that plague general generative AI systems. General-purpose generative AIs like ChatGPT will sometimes produce answers that, while seemingly plausible, can be factually wrong or non-sensical. In contrast, One Quin is anchored by specific parameters within a confined topic set and is architected in a way in which it produces reliable answers.

“We’ve literally spent the last two years to mitigate that (hallucination),” said Mostafazadeh. “What is very unique about what we’ve created One Quin to sit on top of data. So it doesn’t generate off the wild. Instead, through very sophisticated inner machinery, it points to data that it sits on top of.”

Mostafazadeh said that because the One Quin engine is pointed to specific data, it can respond to specific questions tailored around parameters consumers use when searching for a product. For example, suppose a customer has a question about a food or nutrition product that fits a specific price range. In that case, One Quin can access this data and produce a tailored response specific to a retailer’s product inventory.

“What Quin can do, for example, is answer a question like ‘what is the healthiest snack I can buy for my kids that costs under $5?'” said Mostafazadeh.

I asked Mostafazadeh how her AI can determine whether a product fits criteria like healthiness, which can sometimes be arbitrary. She told me they had created something akin to a “health score” based on nutritional research. For other more arbitrary criteria, she told me the system is designed to anchor the answers with data points they believe act as a good proxy.

“For tastiness, Quin is basing it on the rating that the items have,” said Mostafazadeh.

Over time, however, Mostafazadeh says they could develop criteria to score a product for something like tastiness more accurately. However, one challenge with that, for now at least, is that the system is currently architected to answer questions without knowledge about the shopper.

“Right now, we have decided to make the barrier to entry basically zero. We don’t even ask the shoppers to log in. We don’t track them, and hence it’s a blank slate.”

That could change, said Mostafazadeh, who admits adding personal shopper contextualization would be very powerful.

“We would love to know that you are vegan without you telling me you’re vegan in your query. I would love to know that you hate cilantro because it tastes soapy, and by default, I will show you all recipes that don’t have cilantro in them.”

Mostafazadeh said that another advantage of Open Quin is that it can sit on top of any compute engine, whether it’s Microsoft Azure, AWS, Google Cloud, or in-store edge computing architecture. She said this makes it more affordable than other generative AI systems and gives retailers – who can be very specific about what cloud or computer system infrastructure they tie into – more flexibility.

“You probably know that retailers don’t like AWS (Amazon’s cloud). They don’t want anything of their world that touches anything of Amazon’s world.”

Mostafazadeh said that Quin Shopping AI could be deployed using various user interfaces. For example, she said retailers could deploy it in an app, on a website, via a chatbot, or on a consumer kiosk.

The company has raised a $4.2 million pre-seed funding round, and its website went live today.

Introducing One Quin, Consumer Experience AI Platform

Food Rocket Comes Down To Earth As Yet Another Speedy Grocery Startup Closes Its Doors

It seems almost a lifetime ago when, in 2021, a gaggle of ultra-fast grocery store startups with interesting names like GoPuff and Gorillas raised gonzo amounts of cash.

We all know what happened since the go-go funding days of the quick grocery boom. While I wouldn’t call last year’s pullback a canary in the coal mine, it was one of the first segments in the broader food tech market to send a signal that the era of easy money ended.

And so last week, amid a simmering systemic financial crisis, we got the news that Food Rocket, a fast-grocery startup that launched service in San Francisco in 2021, has closed its doors.

Here’s the entirety of the statement sent out from the company:

Food Rocket, a rapid grocery delivery startup, ceased operations in March 2023 after exhausting its funding. In spite of overall profitability, Food Rocket ran out of capital while struggling to raise additional funding. The recent downturn in the capital market made it difficult to get a bridge from its investor retail company Alimentation Couche-Tard, and the founding team made the difficult decision to shut down its operations in the United States.  

“We believe that the rapid delivery industry has disrupted the retail market and changed consumer behaviours. Unfortunately, current economic conditions reshuffled the tech market and presented significant challenges in the venture capital market. The decision to cease operations was incredibly hard, and we put in 100% up until the very last day, trying to stay afloat for our customers and team members.,” said Vitaly Alexandrov, CEO and founder of Food Rocket. 

At this point, no one is probably surprised about the shutdown of one of the smaller players in this segment. Fast grocery’s well-publicized struggles amidst a downturn in funding and broader questioning of the segment’s business case were the writing on the wall for a company like Food Rocket. Combine that with the fact that the company closed during a week in which everyone’s attention was elsewhere, and the sound of the company’s doors closing barely made a whisper.

Ironically, Food Rocket’s shutdown comes just about the time when company founder Vitaly Alexandrov predicted fast grocery would be commonplace.

“In a year or two, it will be like a commodity,” Alexandrov told The Spoon in 2021. “Everyone will deliver in ten minutes.”

While his prediction didn’t quite come true – mainly because most things do not need to be delivered with that level of urgency and same-day delivery suffices for the bulk of our needs – I think larger players like Amazon and Walmart have made progress in building out their capabilities for fast delivery. Longer term, the rollout of new delivery and micro-manufacturing technologies will almost certainly speed up the pace at which consumers can satiate their needs nearly instantly.

Unfortunately for Food Rocket and many of its peers, they won’t be around to see the day when nearly-instant delivery becomes ubiquitous.

Drive-Thru Grocer JackBe Opens First Location in Oklahoma City

JackBe, which claims to be the country’s first curbside drive-thru grocer, opened its first location this week in Oklahoma City, Oklahoma, according to a release sent to The Spoon. The store will allow customers to place orders via the JackBe app and pick up their groceries at a drive-thru bay, where a JackBe employee will deliver the groceries right to their car.

The new 17,000-square-foot location carries in-demand products across a number of categories, including produce, meat, bakery, deli, and consumables. JackBe is also planning to roll out prepared meals and local brands in the future.

While JackBe claims to be the first drive-thru grocery, another startup named Opie actually beat them to it when it launched its first location in South Caroline in 2021. To be fair to JackBe, at three thousand square feet, Opie’s is something more akin to a drive-thru convenience store than a grocery store. Before Opie, Amazon opened a drive-thru pickup location in the Ballard neighborhood of Seattle for customers who ordered groceries through its website. Interestingly, Amazon announced this week they are closing that location (the e-commerce giant only has one other drive-thru location).

According to Supermarket News, JackBe closed a $3.5 million seed round in April of last year and plans to raise an additional $3.5 million in pre-Series A funding to fund the building of two more stores in the Oklahoma City area in early 2023.

Afresh Rolls Out Its AI-Powered Fresh Food Management System to 2,200 Albertsons

Afresh Technologies, a fresh food management technology company, has announced the rollout of its predictive ordering and inventory management platform to more than 2,200 Albertsons Companies stores in the United States, including Safeway, Jewel-Osco, Shaw’s, Vons and ACME. The platform, which helps store teams to better order and plan fresh produce inventory, reducing food waste and achieving superior freshness in their stores, was implemented within seven months, making it one of the fastest in-store technology rollouts in the grocery industry.

The Afresh platform also provides department managers with easy-to-use ordering tools that leverage real-time insights. The company’s CEO and co-founder, Matt Schwartz, said that “supply chain and store technology implementations typically require a multi-year transformation and radical overhauls,” but that Afresh and Albertsons Companies were able to complete the roll out of the system in just months.

Suzanne Long, Chief Sustainability and Transformation Officer at Albertsons Companies, said that “driving sustainability practices across Albertsons Cos. is essential to our business and the communities we serve. Our partnership with Afresh helps us improve ordering and better manage our inventory of fresh fruits and vegetables so our customers have access to fresher products, and we’re able to make meaningful progress toward achieving our goal to have zero food waste going to landfill by 2030.”

Afresh, which raised a $115 million series B in August (bringing their total funding to $148 million), has been gaining momentum over the past year. The company currently has its software in 3,000 stores in the US, including Heinen’s, Save Mart, Bashas, Cub Foods, and Albertsons.

The Case for 15-Minute Grocery Delivery is Questionable. So Why Did It Raise So Much Capital?

For about as long as I’ve been seriously watching the Internet industry, companies have been trying to make a business of home grocery delivery.

It started back in the late nineties when companies like Webvan and Homegrocer raised massive amounts of capital after convincing investors that food shopping would be largely done online in the future.

Webvan would raise almost $400 million in venture investing and another $375 million through an IPO. HomeGrocer raised $440 million in venture capital and almost $288 million going public.

None of it was enough. The two companies would eventually merge and went bankrupt less than a year later.

Of course, some online grocers survived, including some originating in the early days of the Internet. Ocado, conceived in the year 2000, continues to this day and is one of the biggest online grocers (and grocery automation technology companies).

But despite the occasional success story like Ocado, the reality is online grocery shopping is a tough business, one that seems to possibly work as part of a broader omnichannel market approach where grocers like Walmart, Kroger and now, yes, Amazon offer both in-person and online shopping experiences for the consumer. And even Ocado.com is essentially an omnichannel model, partnering in the early days with Waitrose.

Which brings us to the 15-minute grocery category, a model built around hyper-local delivery with distributed micro-fulfillment centers placed in dense urban markets like NYC, Philadelphia, and other locations. Startups in this space focus on convenience, offering a limited set of items, not unlike you might find in a convenience store like 7-Eleven (but usually with a little more fresh food sprinkled into the mix).

The market, which in some ways kicked off with GoPuff’s founding a decade ago, witnessed a whole bunch of new entrants enter the market over the past couple of years, including companies with similarly weird names like Gorillas, JOKR, Fridge No More, Weezy to name a few. These companies feasted on a downright frothy venture capital market, raising a breathtaking $4 billion last year alone:

However, with the worldwide economic climate facing significant uncertainty in the face of decades-high inflation, rising interest rates, and a war in eastern Europe, the easy money spigot has been shut off. As a result, some of these companies are either falling into the deadpool, getting scooped up by other competitors, or like JOKR and Gorillas, attempting to cut costs through layoffs and market pullouts to preserve capital runway as they try to survive what looks to be a long economic winter.

Of course, all of this begs the question: Why did all these startups get so much funding in the first place? As the early online grocers demonstrated, building out a network of stores and warehouses and a delivery infrastructure to get a basket of goods to consumers is an extremely expensive business.

Don’t believe me? This chart from a recent McKinsey report on online grocery shows just how tough the margins are for a standard online grocery business before we even consider the extra costs of accelerated delivery.

For a typical e-grocery business, COGS (cost of goods – i.e. groceries – sold) are the biggest expense, around 70% of a total order. The leftover 30% is eaten up by in-store and pick-and-pack labor, last-mile delivery expenses, and associated e-commerce fees. When it’s all said and done, a typical online grocery order has a negative 13% margin.

Of course, fast-grocery startups might offer slight markups in pricing and also make money through delivery fees (which range from $1.80 to $5 per order) and membership subscriptions, but what’s somewhat surprising in retrospect is that fast-grocery companies don’t have drastically different pricing or fee structures compared to that of traditional e-grocery prices.

Beyond the negative marginal profit of each order, the biggest expense driver for these companies and what likely ate the lion’s share of the billions of dollars in the collective capital runways is the buildout of their fulfillment centers and dark store networks. Being fast requires lots of points of presence to be within a 15-minute delivery window (or shorter, since fulfillment and delivery driver load-in takes at least a few minutes once the order comes through), which means lots of construction, equipment and technology costs.

Indeed, the venture community must have seen something here in a business – online grocery delivery – that has shown itself to be historically unprofitable. My guess is the rationalizations for writing these large checks fell in the following categories:

Customers will pay for convenience: We’re living busy lives and sometimes we just want what we want. If someone can get me a six-pack of beer, a steak, and a bag of chips to my house in 15 minutes, I’ll choose that option.

The pandemic changed the game and converted us into an e-grocery nation: In the early days of the pandemic and throughout 2020, we saw unprecedented conversion rates to online grocery as many consumers were forced to use it for the first time. Surely once they went e-grocery, customers wouldn’t return to the old way of doing things.

The siren song of the giant TAM: Food is a huge industry. I’m sure pitch-deck-making founders convinced investors they could convert a large enough percentage of food shopping customers to their business to take home a healthy percentage of the total available market (TAM) in the long run.

Long-term, technology & automation would drive costs down: I am sure many fast-grocery startup founders thought if they could just amass a large and loyal user-base, they could apply technology and automation to bring down the costs and increase margins as they moved past the large-scale infrastructure buildout of the early years.

These rationales for the fast-grocery business may make sense in a vacuum, and I am sure the impressive growth of early-growth pioneers like GoPuff helped convince many startup founders and eager investors there was some long-term gold to be found in those fast-grocery hills. But therein lies the problem: a closer look at these prospective businesses and anticipation of changing environmental factors – both in the form of the global macro-economic situation and the rise of competitors with built-in cost advantages – should have been enough to turn away some of the investors who jumped into this space.

Consider the e-grocery boom of 2020. While many of us thought that the rapid adoption of e-grocery would likely have some staying power even as the pandemic faded, it was never clear how just how much an average e-grocery shopping consumer would buy online once they had the opportunity to head down to their corner grocery store or load-up on staples at their warehouse store. From the looks of it, many consumers are returning to their local stores.

As for the promise of convenience, even if we assume sub-hour delivery time does offer some value to consumers, that value is reduced if there is a convenience store on the corner where one could just go pick up the goods instead.

And, say, a customer did occasionally use these services, was there any reason to assume they would continue to be that impatient? Amazon and Walmart often can usually deliver within an hour or two. Customers who want something quicker can always use a DoorDash or another food delivery app to get something to you quicker.

In reality, these adjacent competitors should have been the most significant reason investors stayed away from this space. These companies are all logistics-optimized, well-capitalized businesses that are eyeing the same TAM of the newer entrants. They also have legacy businesses with which they’ve built customer lists in the tens of millions in some cases.

We’ll see more consolidation of this market, and my guess is one or two of these startups have a chance to emerge on the other end as long-term survivors. With its early start and a warehouse network that’s largely built out, GoPuff looks like it could have enough of a customer base and capital in the bank to weather the storm. Gorillas, having just raised $1 billion late last year, may have sufficient runway if they can manage their burn rate through the downturn.

But no matter how this market shakes out, investors will be much more hesitant to sink capital in this market, particularly for companies with no discernible differentiation. Long-term, my guess is we might be talking about the fast-grocery boom of the early 20s for the next decade or more as a cautionary tale of a venture-capital fever investing, at least until the next boom cycle causes us to forget the lessons of the past once again.