Despite the copious amounts of venture funding that have flowed to them in recent years, food tech startups haven’t had an easy time of it especially in the food delivery game.
Since 2015, GoodEggs, Zesty and Munchery have shuffled their executive decks, meal kit delivery darlings Blue Apron struggled with worker safety, and logistics providers Postmates struggled to lock in a new round of funding.
By contrast GrubMarket, a younger e-grocery backed by Ashton Kutcher’s Sound Ventures, has reached a $5 million monthly revenue run rate, and hit breakeven on its business overall according to founder and CEO Mike Xu. Could this be the next Whole Foods or Costco? The CEO attributes GrubMarket’s growth and margins to disciplined spending on marketing and merchandising, and a mix of direct-to-consumer and business-to-business customers.
GrubMarket currently offers grocery delivery services around San Francisco and Los Angeles, with plans to expand into the Southern US later this year especially in major metro areas of Texas and Tennessee. Having raised $20 million in its last round of funding, GrubMarket now employs about 70 full-time employees.
Xu tells TechCrunch, “When we raised our Series A we put a lot of money into Facebook ads but found we could not retain all the customers we attracted long-term. So we retrenched. Our new approach is to incentivize our sales people for loyal customers. People get a commission for new sales, and for retaining their customers.”
Like predecessors in the offline and e-grocery world, GrubMarket works directly with farmers to lock in favorable rates on products its customers crave most whenever they are in season. The startup allows users to shop ad hoc for everything from meat and produce to shelf-stable items you’d find in the pantry.
Those who buy a GrubMarket membership get discounts on different items, rack up points for every dollar they spend, and get free deliveries no matter the size of their baskets. Non-members pay a delivery fee unless they hit a certain threshold, usually around $35 an order. In that way, the company is comparable to something like a CostCo or Amazon Prime.
Grubmarket is aiming to go public by late 2018 or early 2019, Xu says. The company is facing stiff completion in its quest to become the go-to grocery online for people seeking farmer’s market-grade foods. It will compete with companies as far-ranging as Door to Door Organics, Peapod, Good Eggs, Google Express and Amazon Fresh, not to mention brick and mortar groceries who offer deliveries often in conjunction with on-demand apps like Instacart or Postmates.
According to market research from 1010 Data, shared by the firm with TechCrunch, grocery delivery sales have grown 55% since 2014. California and New York so far represent the biggest markets for these services in the US.