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U.S. Online Grocery Expected to Hit $120B by 2028 as Grocers Focus on Building Out First-Party Delivery

According to a new report just published by researcher Bricks Meets Click, U.S. online grocery sales are expected to hit $120 billion by 2028. The report forecasts that the e-grocery segment will grow at a 4.5% clip over the forecast period, three times the growth rate of the in-store grocery segment, which is forecasted to grow 1.3% during the same period.

Total eGrocery sales, which Bricks Meets Click defines as including Delivery, Pickup, and Ship-to-Home, are projected to account for 12.7% of total grocery sales in the U.S., up 170 basis point (bps) versus 2023. The researcher forecasts that online grocery, excluding Ship-to-Home (orders sent via common carriers like FedEx, a service that most grocers do not offer), will represent 10.7% of total grocery sales in five years.

“Two factors are creating significant headwinds that impact our eGrocery forecast,” said David Bishop, partner at Brick Meets Click. “First, the market is maturing. Nearly all of the people interested in online grocery shopping have used it at least once by now. Second, even though inflation has recently fallen faster than expected, its cumulative effect continues to drive a flight-to-value behavior in grocery shopping and that will slow topline sales growth.”

With increased competition in a slower-growing market, retailers are likely to concentrate on enhancing their first-party (1P) platforms to better control costs and improve the customer experience. This strategy aims to counteract the pressures from third-party (3P) platforms, which have traditionally dominated the market but tend to be more expensive for consumers.

According to Bricks Meets Click, pickup sales are expected to grow faster (5.4%) than delivery (4.4%) or Ship-to-Home (2.8%) through the forecast period, and pickup is expected to account for nearly 47% of all online grocery sales at the end of five years. This growth will be fueled by an increasing number of pickup options, particularly in suburban markets where delivery services currently dominate. This shift reflects a strategic expansion by retailers to cover more geographical areas and meet growing consumer demand for convenience.

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.

South Korea: Online Grocer Kurly Raises $200M Series F

Kurly, the South Korean startup behind online grocery service Market Kurly, announced today that it has raised a $200 million Series F round of funding. The Korea JoongAng Daily reports that this latest round was led by existing investors such as Aspex Management, DST Global, Sequoia Capital China, along with new investors like Millennium Management and CJ Logistics. This brings the total amount of money raised by Kurly to $428 million and gives the company a $2.2 billion valuation.

At the same time, Kurly also said that it would no longer seek to go public on U.S. stock exchanges and will instead IPO on a Korean stock exchange. For more on that, The Korea Economic Daily has some good background and context as to why Kurly may have made its stock market switch.

Here at The Spoon, we are more interested in the food tech angle, and Kurly is just the latest example of an online grocery startup raising big money. According to PitchBook data released last week, investors have poured more than $10 billion into grocery startups in 2021. Kurly’s $200M Series F is downright quaint compared to the $3 billion raised by Xingsheng Youxuan, or the $1.5 billion raised by Gopuff, or the $850 million raised by Getir.

Kurly’s business is also a little more traditional than many of the grocery startups raising money right now. Unlike Gopuff and Getir and the raft of smaller companies promising grocery delivery in just 10 minutes, Kurly offers its customers next-day delivery. What it lacks in speed however, it more than makes up for in size as it provides its service across South Korea.

The pandemic has driven a good deal of interest and investment in the online grocery sector. Fears of COVID-19 drove people into online grocery last year. And while online grocery sales have come down (at least in the U.S.) as vaccinations have rolled out, there is some market research showing this new e-grocery behavior will stick with consumers. Now we’ll have to see what post-pandemic reactions to online grocery are around the globe (and if it was worth all the investment).

PitchBook: More than $10B Invested in Grocery Startups This Year

We’ve been saying that investment in grocery startups is downright frothy this year, and now PitchBook has put a number to all this VC activity. CNBC reports that venture-backed grocery startups have raised $10 billion so far in 2021, according to PitchBook’s data, vaulting past the $7 billion raised in the sector last year.

Part of the reason for the big jump is the mega-rounds that some grocery startups around the world raised during the first half of this year:

And that doesn’t even count all the other, smaller fundraises that have happened for companies like Food Rocket and Fridge No More.

The pandemic certainly had a hand in driving all this frothiness. Lockdowns, social distancing and general fears around catching COVID-19 pushed record amounts of people into online grocery shopping in 2020. Additionally, there are a wave of startups like Gorillas, and Gopuff and Fridge No More that are creating an entirely new type of on-demand, speedy delivery model. These companies operate dark stores in neighborhoods with a small delivery radius, promising grocery delivery in as few as 10 minutes. This is a new concept for most shoppers, and the allure of tapping a few buttons on your phone and food arriving minutes later could upend the way we buy groceries.

CNBC adds that all of this massive funding is disproportionate to the opportunity in the online grocery category. As such, there could be a wave of consolidation coming soon. This is true whenever money floods a particular sector, and it is especially worth considering given the fluctuating state of the pandemic.

Questions around how much consumers will stick with online grocery shopping once the pandemic recedes remains unclear. Vaccines have helped abate the virus, but they are rolling out at different paces around the world, and viral variants threaten to bring resurgences in case numbers. Brick Meets Click reported that online grocery shopping dropped to $7 billion in sales this past May, down 16 percent year-over-year. But that $7 billion figure is still 3.5 times higher than pre-pandemic online grocery sales.

But none of what might happen can change what’s already been done. That $10 billion has been invested, now we’ll just see which companies can bring bring returns.

Czech Online Grocer Rohlik Raises $119M, Its Second Nine-Digit Round This Year

Czech online grocery startup Rohlik announced today that it has raised a €100 million (~$119M USD) Series C round of funding. TechCrunch was first to report the news, writing that the round was led by existing investor Index Ventures, with participation from Partech and Quadrille Capital, who had also previously invested in Rohlik.

This funding comes just months after Rohlik raised a €190 million (~$230 million USD) Series B round in March of this year. This brings the total amount of funding raised by Rohlik to nearly $380 million, and according to TechCrunch, Rohlik is now valued at €1 billion (~$1.2 billion USD).

That Rohlik is able to raise gobs of money in such quick succession is not a surprise. Investment in the online grocery space has been frothy this year, with players like Weee!, Instacart, Xingsheng Youxuan and many more all hauling in big rounds in the first half of 2021. Driving much of this investment is the pandemic, which pushed droves of people into avoiding public spaces and buying their groceries online for either pickup or delivery.

More recently, funding has been going towards smaller, dark grocer stores that promise grocery delivery in under fifteen minutes. Companies like Gorillas, Getir and Gopuff have also raised tons of cash for rapid expansion this year. Rohlik, however, is more of like a traditional big-box online grocer offering delivery in two hours. This “slower” approach doesn’t seem to have impacted the bottom line. Rohlik told TechCrunch that its revenues in 2020 passed €300 million with more than 750,000 customers, with basket sizes between €60 and €100 per order.

The pandemic remains the big question mark looming over the entire online grocery space. While vaccines are rolling out around the world, many countries in Europe have only a third of their populations fully vaccinated as of now, and the full effect of complications like the Delta variant remain unknown. How potential resurgences in the virus could impact how people shop for groceries remains to be seen.

For its part, Rohlik has already expanded its services to Hungary and Austria, with plans to move into Germany, Romania, Italy, France and Spain.

Hungryroot Raises $40M Series C for its Predictive Grocery Service

Hungryroot, which uses artificial intelligence (AI) to power its personalized online grocery service, announced today that it has raised a $40 million Series C round of funding led by the Growth Fund of L Catterton. This brings the total amount of funding raised by Hungryroot to $75.4 million.

Hungryroot is a little different from other online grocers in that it uses machine learning and predictive modeling to fill a customer’s cart. When customers first use Hungryroot, they take a quiz to tell the service their food and taste preferences. Hungryroot then runs that data through its algorithms to pre-fill the online cart with groceries and recipes it thinks the customer will like. Customers, however are free to remove and add items a la carte. Items are boxed up and shipped to the customer, starting at $59 per delivery.

It’s been a big funding year for grocery related startups, as just about any company related to getting you food has picked up fresh capital this year. Other mail-order grocery services that have received funding this year include Misfits Market ($200M), Imperfect Produce ($110M), and Weee! ($310M).

A big reason for this rash of funding, of course, is that the pandemic pushed people into online grocery shopping and that behavior appears to be sticking with consumers. Coresight Research reported that more than one-third of online grocery shoppers don’t plan on changing up their online grocery shopping habits once the pandemic ends. And according to Brick Meets Click, U.S. online grocery sales in April of this year were $8.4 billion, up from $7.2 billion year-over-year.

In its press announcement today, Hungryroot said that it has been profitable since the beginning of 2020 and is on track to reach $175 million in revenue this year. The company also forecasts more than $300 million in revenue in 2022. The company said that it will use its new funding to increase the number of groceries it carries, recipes offered and will invest in automation technology.

Survey: Online Grocery Had $8.4B in Sales in April, Down 10 Percent from March

Some of the stats we’re watching closely as our nation slowly comes out of the pandemic are those for online grocery sales. Namely, will the e-commerce curbside pickup and delivery habits consumers were pushed into during lockdowns stay now that we can literally breathe easier back in stores?

Thankfully the Brick Meets Click/Mercatus Grocery Shopping Survey is keeping track, and according to the numbers released yesterday, U.S. online grocery sales were $8.4 billion in April. This is down 10 percent from March’s $9.3 billion, but up 16 percent from April 2020.

Brick Meets Click/Mercatus found that 67.8 million U.S. households bought groceries online in April, which is down 12 percent from a year ago. While there were fewer households, those that purchased groceries online bought more. Monthly active users placed an average of 2.73 online orders in April 2021, up a tick from 2.68 orders a year ago. Of these orders, 78 percent were for delivery and pickup, which were up 6 percent and 3 percent year-over-year, respectively. The ship-to-home category, however, dropped 9 percent year-over-year.

The survey also showed that more households are using two or more online grocery shopping methods (curbside pickup, delivery, ship-to-home), with 35 percent of monthly active users receiving orders through two or three different methods in April 2021, up nearly 3 percent year-over-year (and 20 percent from pre-pandemic August 2019).

“Online shopping has remained an attractive way to buy groceries for a sizable segment of the U.S.,” said David Bishop, partner, Brick Meets Click in the April survey press announcement. “Last year, retailers were in a race to meet the dramatic surge in demand. This year, it’s about executing a sound and sustainable strategy, with the imperative squarely on improving integration and implementation.”

The last part of Bishop’s statement is key. Grocery retailers have been investing heavily over the past year in systems to encourage and improve curbside pickup and delivery. Walmart is adding automated fulfillment and pickup kiosks, Albertsons is expanding the use of pickup lockers and testing delivery robots, while Amazon is expanding delivery inside your garage while you’re out. All of this investment, however, is predicated on the notion that people will continue to shop for groceries online after the pandemic recedes. It’s still too early to tell, but we’re eager to see what Brick Meets Click/Mercatus reveals throughout the year.

Misfits Market Raises $200M Series C, Will Expand into Proteins

Misfits Market, an online marketplace that sells imperfect foods at a discount, announced today that it has raised a $200 million Series C round of funding. According to a press release shared with The Spoon, the round was co-led by Accel and D1 Capital, with participation by existing investors including Valor Equity Partners, Greenoaks Capital, Sound Ventures, and Third Kind Ventures. This brings the total amount raised by Misfits to $301.5 million.

Misfits Market started out selling subscriptions to boxes of “ugly” produce back in 2018. This allowed customers to buy misshapen but perfectly edible fruits and vegetables at a discount while rescuing food from going to waste. Since then, Misfits has expanded to offer a wide range of other imperfect pantry and packaged items that might otherwise be discarded. These include products with misprinted labels and products that are shipped to the wrong location.

The global pandemic actually created a number of new opportunities for Misftits Market last year. With stadiums, schools, restaurants and more shut down, existing supply chains needed to re-direct their products to new customers. For example, with movie theaters closed, there was a glut of corn for popcorn that Misfits could purchase and sell at a discount to its customers.

Additionally, Misfits has benefited from the pandemic-induced boom in online grocery shopping as customers limited their trips to physical stores. Abhi Ramesh, Founder & CEO of Misfits Market told me by phone last week that his company grew 5x in scale last year.

With its new funding, Ramesh is hitting the gas to accelerate Misfits’ growth. The company opened a new 250,000 sq. ft. headquarters in New Jersey and was able to double its order capacity. And while Misfits is predominantly available in the Eastern U.S. right now, it will be expanding to the West Coast with a new facility in Utah. One in the Pacific Northwest will follow after that.

Misfits is also expanding its grocery categories with the addition of protein. Most customers might blanche at the thought of “imperfect meat,” but Ramesh explained to me that there is a lot of excess in the protein supply chain as well. With something like salmon, for instance, there are often 3 oz portions leftover from trimming fillets. Misfits can bundle those leftovers and sell them at a discount.

Misfits Market’s funding is also coming during a time of big investment in grocery related startups that are aiming to upend our traditional notions of food retail. A number of smaller, delivery-only grocery stores like Fridge no More and Gorillas are popping up around the world, making groceries something more akin to a utility. Online grocer Weee! is leading the way by focusing on selling Asian and Hispanic foods. And retail infrastructure startups like Shelf Engine and Trax are developing tech to re-invent how store inventory is managed.

Most relevant to Misfits, however, is its main rival, Imperfect Foods, which has also expanded from ugly produce to become more of a full online grocer that taps into existing supply chain deficiencies. Imperfect raised a $110 million Series D round in February, which means we can probably expect a marketing blitz from both companies this year.

The question over both Misfits and Imperfect at this point however is what happens post-pandemic? Will people still want to order groceries online when they can just go to their local store? Ramesh said he isn’t too concerned about that. “Yes, there will be some sort of reversion to the mean,” Ramesh told me. But because his company is offering discounts and value on products people already buy, his customers will continue to shop with Misfits.

Survey: Online Grocery Sales Back up to $9.3B in March, Pickup Remains Dominant

Online grocery sales were back up in March, following a drop in February, according to new data released today by Brick Meets Click/Mercatus. Grocery e-commerce in the U.S. hit $9.3 billion in sales (the same as January), with more than 69 million households placing an average of 2.8 orders in March.

Brick Meets Click also highlighted the continued dominance of curbside pickup as the main preference for online grocery shoppers. From the Brick Meets Click press announcement:

“Over the last 12 months, consumers’ dramatic shift to online grocery shopping has solidified, with curbside pickup attracting the largest share of monthly shoppers at 53% compared to ship-to-home and delivery,” said Sylvain Perrier, president and CEO, Mercatus. “In fact, pickup continues to have stronger consumer demand across all market types compared to delivery. Those brick-and-mortar chains that have invested in optimizing pickup services likely will continue to benefit from the high repeat intent rate as indicated in the data.”

The dominance of curbside pickup can be partly attributed to the fact that big retailers have invested so much in it. From expanded drive-up options to smart lockers to automated curbside pickup kiosks, retailers have increased the availability and convenience of curbside options.

One area of online grocery shopping that saw a drop from the same time last year was the ship-to-home category, which lost 27 percent of its monthly users. In addition to local retailer pickup and delivery options becoming more robust, the first wave of the pandemic last year saw a lot of panic buying and inventory outages. As such, people turned to whatever outlet they could find to get food delivered to their homes including CSAs and online meat providers.

Of course, the question we’ve been asking for a few months now is what does the future look like for online grocery? More people are fully vaccinated and able to return to a (relatively) normal life outside of their homes. Have their pandemic-induced behaviors changed for good when it comes to grocery shopping? Or do they miss roaming the aisles. The real numbers to watch will probably be the stats from May when the two week wait times after being vaccinated really start to kick in.

Food Tech Show Live: Online Grocery & Massive Alt-Protein Funding

This week the Spoon editor team (joined by special guest Tom Mastrobuoni of Big Idea Ventures) jumped on Clubhouse to talk about some of the biggest stories of the week.

Here are the stories discussed on this week’s show:

If you’d like to join us for the live recording of our food tech news weekly review, make sure to follow us our club, Food Tech Live, on Clubhouse.

And, as always, you can listen to the recording of the wrapup via our podcast feed on Apple Podcasts, Spotify or wherever you get your podcasts or just click play below. If you are a regular listener of the show, make sure to give us a review on Apple Podcasts!

Online Grocery Weee! Raises $315M Series D Round

Weee!, an online grocer with a focus on Asian and Hispanic communities, announced today that it has raised a $315 million Series D round of funding. The round was led by existing investor DST Global, with participation from new investors including funds managed by Blackstone, Arena Holdings, and Tiger Global. Weee! has raised more than $415 million in funding in total.

Founded in 2015, Weee! initially offered products for the Asian community, but the company recently added Hispanic foods to its roster. In its press announcement today, the company referred to itself as an “Ethinic Grocer,” and said it serves 14 key regions across the country. According to Weee! website, the company offers more than 3,500 products and has fulfilled more than 8.8 million orders.

Weee!’s funding comes during what appears to be salad days for investment in grocery-related startups. A raft of startups in the space have raised big funding amounts just since the start of the year. Part of the reason for all of this frothiness, of course, is the pandemic. With restaurants closed, and various lockdowns, record numbers of people turned to buying food online last year and retailers of all sizes scrambled to keep up.

What’s worth noting with Wee!’s funding is how the online grocery market is starting to segment. In addition to more general grocery startups like Instacart and Good Eggs getting funded, we are starting to see more focused startups raise lots of money too. Weezy and Fridge No More create hyperlocal stores that offer fifteen minute delivery, Imperfect Foods focuses on food surplus and rescue, and Weee! focuses on specific demographic audiences.

The question now is whether that is all money well spent. We’ve already seen a drop in the use of grocery e-commerce between January and February of this year. As more people get vaccinated and feel free to move about more, will they stop their online food buying habits in favor of getting out of the house and back into the store?

Wee!’s focus on serving Asian and Hispanic communities could actually help it weather any potential downturn in the grocery e-commerce market. By offering delivery of items that may not be stocked at general grocery stores in suburbs across the country, Weee! could become a go-to resource for Asian and Hispanic communities looking for particular types of food, but unable to get it at their local retailer.

With its new funding, Weee! says it will continue to add products and features and expand nationwide, with plans to reach 30 cities across North America by 2024.

Fridge No More Raises $15.4M for 15-Minute Grocery Delivery in NYC

Fifteen minutes is the new hour, or so it seems in the grocery delivery game. New York City startup Fridge No More announced today that it has closed a $15.4 million Series A round of funding. The round was led by Insight Partners with participation from existing investors including Altair Capital.

Fridge No More operates small, hyperlocal delivery-only grocery stores and currently serves the Williamsburg, Park Slope and Gowanus neighborhoods in Brooklyn. Typical Fridge No More stores are roughly 2,000 – 3,000 sq. ft. and house just 2,000 SKUs. The delivery radius for each store is approximately one mile, and done on scooter or bike by actual store employees. Orders are placed via iOS or Android app and are manually picked, packed and delivered to the customer within fifteen minutes.

In addition to providing super fast service, there are no minimum orders and no delivery fees. Fridge No More is able to do this because they don’t spend a lot of money on the stores themselves. Since dark stores don’t service in-person customers, they can be tucked away in cheaper locations like basements or other odd spaces, there is no checkout that needs to be set up and there are no cashiers to pay.

Another benefit of creating these smaller stores is that they can tailor the inventory to that particular neighborhood. Fridge No More doesn’t need to stock everything, it can figure out which items sell the most and stock those.

Fridge No More’s approach is similar to that of both Weezy in the U.K. and Gorillas over in Germany, both of which also raised significant funding this year.

As we’ve covered previously, the online grocery sector has been getting a lot of love from investors this year. Online grocery related startups around the world are raising lots of money. In fact, this is our second grocery e-commerce related funding announcement today (Stor.ai raised $21 million).

As we’ve also covered before, the big reason for this is the pandemic, which forced a lot of people to shift from in-person shopping to more contactless online grocery shopping. And with online grocery sales projected to reach $250 billion by 2025, I’m sure we’ll be covering a lot more announcements over the rest of this year.

One aspect worth noting is Fridge No More’s name. Obviously its hyperbole, but if these types of super-fast grocery services catch on, how will they change grocery shopping (at least in dense urban areas where a one-mile delivery radius contains a ton of business). Will people stock up on less and just have speedy delivery on speed dial? Will they just make multiple orders throughout the day if they forgot or suddenly need something?

More New Yorkers will find out soon enough as Fridge No More will use its new funding to scale up operations in that city, before moving into more locations on the East Coast.