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Daily news and analysis about the food tech revolution

online grocery

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.

Stor.ai Raises $21M for its Grocery Digital Commerce Software

Stor.ai (formerly Self Point), announced today that it has raised $21 million in an extended Series A round of funding. The round was led by Meitav Dash and Mizrahi Tefahot, with participation from Kli Capital.

The Tel Aviv, Israel-based Stor.ai offers a suite of tools that help grocers of any size deploy their own online shopping services. Stor.ai’s software helps manage customer data, inventory, payment and order fulfillment.

Stor.ai’s funding comes amidst a wave of capital being poured into digital grocery-related startups around the world. Since the beginning of the year we’ve seen the following raises:

In addition to startup funding, we’ve also seen increased investment in e-commerce operations from all the major grocery retailers. Walmart is working with three different vendors to add automated fulfillment to dozens of its locations. Albertsons is expanding its own use of automated fulfillment, testing robotic curbside pickup kiosks, and even piloting remote controlled robot delivery. And Stop & Shop is experimenting with its own locker pickup pilot in Boston.

The reason for all of this investment is the pandemic, which spurred record numbers of people into online grocery shopping. In January, grocery delivery and pickup hit $7.1 billion in sales. And while vaccines and warmer months may cause a market correction as people feel more comfortable shopping in-store, online grocery is projected to hit $250 billion in sales and be 21.5 percent of total grocery shopping by 2025.

For its part, Stor.ai says it will use the new funding to build out new features to its core offering, scale up its growth in North America and enter new markets in Latin America and Europe.

Online Grocer Cropswap Launches New Feature to Help Food Insecure Families

“Farm-to-phone” grocery platform Cropswap today announced a partnership with Nourish LA to bring healthier food donations to underserved residents of Los Angeles.

Food insecurity, which the USDA defines as “the limited or uncertain availability of nutritionally adequate and safe foods, or limited or uncertain ability to acquire acceptable foods in socially acceptable ways,” has increased over the last year. Los Angeles county alone estimates that “nearly 1 in 4 residents” in that county has suffered food insecurity since the COVID-19 pandemic started. 

Cropswap, which launched during the pandemic, connects its users with local farmers via an app. In June of last year, the company also launched a subscription service through which customers can get delivery or pickup orders of produce, seeds, and other items on a regular basis. 

For the Nourish LA partnership, Cropswap as added an in-app donation feature that lets users give a seasonal Harvest Box to those in need for $50. The box is filled with organic produce from Sow a Heart Farm, in Fillmore, California, and contains what Cropswap says is enough to sustain a family for one week. Users can simply add the donation to their existing total. Cropswap and Nourish LA handle the actual process of getting the food to its recipients. 

Given that they’re a relatively easy way to encourage giving, in-app donation buttons have surfaced in multiple different areas of the food industry over the last twelve months. Uber Eats last year set up an in-app donation button to help struggling independent restaurants. Also last year, Delivery Hero partnered with the United Nation’s World Food Programme’s Share the Meal program. Users can donate a meal via the regular Delivery Hero app interface.

A $50 box of food is obviously more costly for the giver than, say, donating a few bucks or a single meal. However, online grocery has seen a surge in new users over the last year, and consumer enthusiasm for buying from local farms has also increased. Those two factors working together means there’s a much bigger potential audience for Cropswap’s self-proclaimed “Instacart for local produce.” That in turn means a wider pool of those able to and/or willing to donate a week’s worth of food to those in need.

The Big-Box Ghost Kitchen Is Here

A couple weeks ago, college was the latest potential growth market for ghost kitchens. Today, it’s big-box retailers like Walmart.

Recently an Ontario, Canada-based company called Ghost Kitchens launched its first-ever location inside a Walmart store in the city of St. Catherine’s. It’s not the first-ever ghost kitchen concept from the company, but it is Ghost Kitchens’ first time to operate from within the four walls of a major retailer. And it further blurs the lines between the restaurant, the grocery store, and the convenience mart. 

Ghost Kitchens’ facilities carry a variety of items, all of which are relatively easy to prep and transport to customers. Those include CPG goods like Ben&Jerry’s ice creams, meals from QSRs like Salad Works, and shopping mall standards like Cinnabon. Customers can order these items through certain third-party delivery platforms or pick them up inside at the Walmart in which the facility is located. Additionally, customers can bundle different items from different brands into a single ticket.

And speaking of bundling, the Ghost Kitchens-Walmart deal is another example of a trend brought on by the pandemic but likely to stick around for the long haul: giving customers the option to digitally order multiple different food formats from a single place.

The idea got popular by necessity in 2020, after the pandemic forced restaurants to close dining rooms and businesses resorted to selling their food inventory as groceries to customers as a means of making extra money. 

Since that time, ghost kitchens have become a kind of norm in the restaurant biz, digital ordering has increased (and will continue to), food producers everywhere have launched direct-to-consumer e-commerce stores, online grocery shopping has grown, and convenience stores have inked deals with delivery companies. All of those factors have converged to underscore a single point: consumers ideally want to find the majority of their food items, whether it’s a burrito or a bunch of kale, in a single place, literally and digitally speaking.

Ghost Kitchens’ Walmart concept is a bit like a real-life illustration of the above factors coming together, but it’s not the only company helping to blur the lines between the restaurant, the convenience store, and the grocery market. ClusterTruck, a virtual-only restaurant company, operates ghost kitchens inside Kroger stores. H-E-B has a food hall for delivery meals. DoorDash has its own “ghost convenience stores” that are basically like 7-Eleven without the storefront.

Sticking a ghost kitchen inside a Walmart makes sense because Walmart does big grocery business, in addition to selling every other physical object imaginable. It seems like only a matter of time before retailers like Target, Sam’s Club, and others follow suite. 

To be clear, this won’t be the territory of high-end, or even sort of high-end meals crafted by chefs. Rather, it’s another example of the ghost kitchen’s ever-evolving role, which will eventually serve much more than the restaurant biz.

Restaurant Tech ‘Round the Web

There are drive-thru lanes, and then there are bike-thru lanes. Dunkin’ unveiled its first-ever version of the latter in Quezon City, Philippines, and has reportedly gotten rave reviews for it. The QSR says it will expand the concept to other Dunkin’ locations in the Philippines.

Yum Brands, parent company of KFC, Taco Bell, and Pizza Hut, acquired AI firm Kvantum for an undisclosed sum. Yum said in a statement the acquisition will allow it to improve its marketing campaigns and data analytics around consumer behaviors.

Many restaurant operators don’t expect to return to “normal business conditions” any time soon, according to new survey data from the National Restaurant Association. Thirty-two percent of operators think it will be 7-12 months, and 29 percent say it will be more than a year. Ten percent say business conditions “will never return to normal for their restaurant.”

Instacart, Crisp, Rohlik, Flink. Online Grocery Gets Funding in the U.S. and Europe

Apparently investors have been shopping for online grocery startups, as there was a spate of funding news in the sector across North America and Europe over the last 12 hours.

Grocery delivery service Instacart raised another $265 million from existing investors including Andreessen Horowitz, Sequoia Capital, D1 Capital Partners, Fidelity Management & Research Company LLC, and T. Rowe Price Associates, Inc. This brings the total amount raised by Instacart to roughly $2.6 billion and values the company at $39 billion.

Over in the Czech Republic, online grocer Rohlik raised €190 million (~$230 million USD) in a round led by Partech with participation from Index Ventures, the EBRD, Quadrille Capital, J&T Bank, R2G, and Enern. According to TechCrunch, Rohlik offers items that it buys itself wholesale, as well as offering goods in concert with existing retailers. The company will use the funds to expand across its existing service areas (the Czech Republic, Hungary and Austria) and into new markets (Germany, Poland, Romania).

In the Netherlands, Dutch grocer Crisp announced that it has raised a €30 million (~$36 million USD) Series B round of funding led by Target Global with participation from Keen Venture Partners and others. EU-Startups reports that Crisp offers fresh seasonal ingredients sourced locally and delivered in one hour across the Netherlands. This brings the total amount raised by Crisp to €46 million (~$55 million USD) since 2018.

And finally, German delivery-only grocer Flink announced that it has raised $52 million in seed funding. TechCrunch writes that Target Global led this funding as well, along with participation from Northzone Cherry Ventures and TriplePoint Capital. This brings the total amount raised by Flink to $64 million, as the company is expanding beyond Germany and into France and the Netherlands.

Investment in the online grocery space has been frothy since the start of the year. In the U.K., Weezy raised $20 million. Here in the U.S., Good Eggs raised $100 million and Imperfect Foods raised $110 million. But all these deals pale next to Chinese grocery app Xingsheng Youxuan, which raised $2 billion.

Why so much money? Partly it’s because the pandemic and limited trips outside our homes pushed people into record amounts of online grocery shopping last year. But as we’re a year into this pandemic, new habits around online grocery have formed. In the month of January, U.S. consumers spent $9.3 billion on grocery e-commerce, and online sales of food and beverages is projected to hit $143 billion by 2025. In other words, the market for online grocery markets is looking pretty super right now.

U.S. Online Grocery Sales Hit $9.3 Billion in January

Total grocery e-commerce sales in the U.S. hit $9.3 billion this past January, with nearly 70 million households placing an average of 2.8 orders across delivery, pickup and ship-to-home categories, according to a new Brick Meets Click/Mercatus Grocery Shopping Survey.

January’s $9.3 billion in sales is up 15 percent over November 2020, and Brick Meets Click credits a large part of this growth to a 16 percent increase in the number of households that buy groceries online.

Among the survey’s findings:

  • Seventy-seven percent of all online grocery spending went to delivery and pickup.
  • Seventy-eight percent of households engaged with a delivery or pickup service (up from 64 percent in November).
  • Ship-to-home usage rate dropped from 56 percent to 46 percent during the same period.
  • Despite growth in other areas, the overall usage rate in January fell short of the record 76.7 million households that shopped online in April 2020 (at the height of the pandemic’s first wave).

Pickup and delivery’s share of orders grew roughly six percent from November, accounting for 66 percent of all online orders completed during January 2021.

While online grocery saw a lot of gains over the past few months, the overall satisfaction metric (the likelihood of using a specific service again) with online grocery dropped to 56 percent, down 32 percentage point from the record high ratings level in November. Pickup had the biggest drop, losing 35 percentage points.

“Even though many grocers remain capacity constrained – especially with pickup – others are growing market share as they staff up or expand pickup to a larger store base,” David Bishop, partner, Brick Meets Click said in today’s press announcement. “While throwing more labor at the issue isn’t ideal, this, along with improving assembling productivities via enhanced pick and pack practices, is vital to remaining competitive in the near term and not inadvertently giving your customer a reason to shop elsewhere.”

As a grocery industry watcher, it’s always fun when these types of market numbers come out to see if and how people are adopting online grocery. But these numbers are also important because grocer retailers are currently investing a lot of money in systems and infrastructure to fulfill online grocery orders. Ahold Delhaize and Walmart recently announced expanded automated fulfillment centers for their stores, and Kroger will start opening its automated customer fulfillment centers this year.

As vaccines arrive and the pandemic recedes (knocks on wood), the question will be how much people’s habits have changed thanks to COVID, and for how many online grocery shopping will become the new normal.

Report: Chinese Online Grocer App Xingsheng Youxuan Raises $2B

The Chinese online grocery app Xingsheng Youxuan has raised $2 billion in new funding, Reuters reports. According to Reuters’ sources, investors in the round include FountainVest Partners, Primavera Capital Group and KKR & Co. The new funding values Xingsheng Youxuan at $6 billion, but companies involved did not confirm details with Reuters.

Founded three years ago, Xingsheng Youxuan fulfills online bulk orders to grocery stores in or near residential areas. Xingsheng Youxuan operates in 13 provinces and covers more than 6,000 counties and 30,000 towns. The company gets more than 8 million daily orders.

As with the U.S., online grocery shopping in China skyrocketed last year thanks to the pandemic. While there are vaccines being distributed and (hopefully) the pandemic will recede this year, online grocery shopping is expected to remain sticky with consumers. Grocery e-commerce is predicted to hit $250 billion and take up 21.5 percent of all grocery sales in the U.S. by 2025.

While Xingsheng Youxuan’s new round is by far the biggest single funding round into a grocery company we’ve seen, a lot of investor money has poured into the grocery space around the world over the past year:

We are also seeing increased investment by established players to bolster their online ordering and fulfillment infrastructure. Walmart and Ahold Delhaize recently made moves to expand their use of automated fulfillment centers, for example. And Kroger is set to open up the first of their 20 planned automated customer fulfillment centers across the U.S. this year.

All of this is to say that 2021 is shaping up to be a transformational year for grocery all around the globe.

Founders of PeaPod Launch Sifter, a Grocery Site for People with Dietary Restrictions

The founders of one of the earliest online grocery sites, PeaPod, announced this week the launch of a new grocery platform called Sifter (hat tip: Grocery Dive). The new platform is essentially an online shopping cart that allows customers to put together grocery lists based on dietary preferences, allergens, and medical conditions, and send that list on to partner retailers for fulfillment.

On Sifter’s website, shoppers select different “SiftTags,” which allow them to select different dietary and allergen filters. If you are managing a health condition, like IBS or diabetes, for example, the site then populates items that are identified as acceptable for these conditions. The RecipeSifter feature on the site enables a customer to paste in the URL of different recipes, and the site will determine if the recipe is acceptable for your dietary preferences, allergens, medical conditions, etc. Sifter will then show all of the ingredients listed in the recipe, and allow you to add these items to your cart.

Once grocery items are selected on the Sifter’s site, the customer is then directed to the retailer’s site to complete the purchase. As of right now, Sifter has partnered with retailers like Stop & Shop, Giant Foods, Walmart, and Amazon to fulfill the grocery orders. Though, it should be noted, a single retailer might not be able to fulfill all of the items on a particular list.

Since the start of the pandemic in early 2020, the use of online grocery shopping has seen a spike, and it is predicted that by 2024 that online grocery shopping will be adopted by 55% of consumers in the US. Sifted is one of a crop of new companies looking to help people with dietary restrictions get their food. Through Dinner Daily, customers are offered personal meal planning and can shop for ingredients through stores like Kroger, Ralph’s, and Fred Meyers. eMeals partnered with Albertsons and Safeway to fulfill groceries needed for the meal recommendations it provides.

Sifter is available now throughout North America.