The Fresh Market Inc (TFM)

[Wildbilly]

Tech fuels farm-to-table 2.0

Online grocers are getting fresh food to customers faster.

BY MATTHEW FLAMM
JULY 7, 2014

Benzi Ronen has shifted Farmigo's focus to the suburbs, though the company is headquartered in Brooklyn.

$620B
Sales of groceries nationwide in 2013
-
$56.9B
Sales of organic and natural foods nationwide in 2013

$486M
Amount venture capitalists invested in grocery e-commerce companies in the year ended March 31

Technology has come to the farm-to-table movement, and the market for organic squash blossoms, pastured eggs, artisanal cheese and hormone-free ham may never be the same again.
The ease with which the grocery supply chain can now be managed through software and mobile devices has driven an explosion of investment in food and grocery e-commerce startups—close to $500 million in the past year. That's helped spawn growth in the farm-to-table niche—and in its East Coast epicenter, Brooklyn.
Competition has grown so intense among local-food delivery firms and entrenched players like FreshDirect that one Brooklyn startup, Farmigo, recently switched its focus from the boroughs to the suburbs.
Experts say a historic shift in the formerly sleepy sector is taking place as a result of new technology meeting pent-up demand.
"Distribution has always been the biggest problem for the local-food movement," said Carlotta Mast, senior director of content at New Hope Natural Media, which covers the natural foods industry. The startups bring an Amazon.com-like user experience to the traditional farmers market. "It's like you're virtually browsing the farm stand," she said.
All this startup activity in Brooklyn is one reason Adrienne Lytton, a 39-year-old mother of two in Scarsdale, N.Y., no longer goes to the supermarket for her family's food. In April, she became an "organizer" for Farmigo, rounding up friends and neighbors to order groceries from the online service, which drops them off at her home every Wednesday.
"The only things I buy at a regular supermarket anymore would be paper towels and some random items," she said. "The food [from Farmigo] is so fresh it's crazy."
Farmigo acknowledges it took the path of least resistance in shifting its business development resources to the suburbs. But founder Benzi Ronen believes the company's farm-to-neighborhood approach, in which drop-offs are made to schools, workplaces and organizers' homes—rather than to each customer's door—works best with people who are already in their cars.
Deliverance

Online grocers in the U.S. generated $65 billion in revenue last year. Here are top players.

Company Sales

Peapod $568 million

FreshDirect $374 million

Safeway Inc. $208 million

AmazonFresh $60 million

Source: IbisWorld

Getting out of the city

"Let everyone else fight the urban war," said the chief executive, who moved the company to Dumbo from San Francisco in March 2013 after raising $8 million in financing. "We have a model we think is very well suited to the suburbs."
Having spent the past year putting its infrastructure in place, Farmigo just moved into a 5,000-square-foot headquarters in Gowanus that Mr. Ronen plans to use for food-tech meetups. Based on outside requests for new "communities," he's forecasting rapid growth.
So is Good Eggs, a San Francisco-based "farm-to-fridge" startup that began making home deliveries in Brooklyn in November. The New York offshoot will leave Williamsburg for a 20,000-square-foot location in Bushwick this summer and expand its door-to-door service to Manhattan next year.
Meanwhile, Good Eggs' year-old Williamsburg neighbor, Quinciple, uses cargo tricycles to deliver a weekly, "curated" box of local products to its Manhattan and Brooklyn subscribers. It's in the midst of raising a seed round of financing.
All of these startups compete with Whole Foods and FreshDirect, which has extensive local food offerings and which may soon be joined by Amazon. The Seattle-based giant is rumored to be entering the New York market sometime this year with its AmazonFresh same-day deliveries. That could put pressure on FreshDirect, which already competes against online grocer Peapod and is battling community groups over its plan to build a facility in the South Bronx with nearly $130 million in government subsidies.
Executives at farm-to-table firms say they differ from the major retailers in both model and mission: The startups aim to connect consumers and producers in the most cost-effective ways. And they hold little to no inventory, relying on technology to track the availability of goods from a range of sources and offer them to consumers.
The result, they say, is lower prices for premium products than customers would pay at Whole Foods or FreshDirect, and better prices for the farmers than they would get from wholesale distributors.
"Good Eggs makes it really simple to get our apples pretty much directly to customers with a single delivery, and as a result we're getting very close to a retail price point," said Josh Morgenthau, son of the former longtime district attorney, who manages his family's eco-certified apple farm in Fishkill, N.Y., when he's not running Good Eggs' Brooklyn operation. "We're really cutting out all the middlemen."
The setup is also proving attractive to investors. "We like that reinvention of the grocery store model, as opposed to tacking delivery on top of what is a 200-year-old business model," said Bryan Schreier, a partner at Sequoia Capital, which led an $8.5 million investment round in Good Eggs in September.
Venture capital funding in the grocery e-commerce and delivery sector in the U.S. totaled $486 million in the year ended in March, a 51% jump in spending over the prior year, according to CB Insights.
Though local and organic foods make up a mere morsel of the nation's $620 billion grocery business, it's the fastest-growing segment—and a vast new opportunity for the tech industry, Mr. Schreier said. In 2013, the entire organic- and natural-foods market came to $56.9 billion, up 12% from the prior year, reports Nutrition Business Journal.
'Hard to get right'

For all their innovations, the farm-to-table startups still face the challenge of food delivery.
"Home grocery delivery is just really hard to get right," said Forrester Research analyst Sucharita Mulpuru. She cited temperature-control issues, customers' reluctance to wait through lengthy time windows, and the costs incurred when people are not home at the appointed time.
"I like the economics of [Farmigo]," she added. "But they need to figure out how it scales over time."
Mr. Morgenthau conceded the difficulties of doing home deliveries five days a week—soon to be seven—but said Good Eggs controls costs using insulated, reusable packaging instead of refrigerated trucks and sending customers text and email reminders on delivery days.
Quinciple said it makes sure to get alternate locations in case customers aren't home. The company, making 2,500 deliveries a month, keeps missed connections to a tenth of 1%, said founder Markus Jacobi.
For Mr. Ronen, the challenge is finding organizers like Ms. Lytton as Farmigo extends its network into New Jersey this summer, following its recent expansions into Long Island and Westchester. He is planning to step up grassroots marketing using "a lot of ideas" from the 2012 Obama campaign, he said, and estimates the company will be adding 50 communities a month. Farmigo currently has 100 communities in the New York and San Francisco areas.
He also said there need to be many farm-to-table startups: "If you want to create a new food system that's able to leapfrog supermarkets, no one person or company is going to do it on their own."

http://www.crainsnewyork.com/article/20140707/TECHNOLOGY/307069993/tech-fuels-farm-to-table-2-0#



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