Author Note: This is the first in a three-part series on the Disruption of the Food Industry.
We’re on the eve of disruption.
We’re surrounded by it. Newspapers fell first. Real Estate, auto dealers and bookstores went next. By failing to defend their positions in corporate America, visionary disruptors carved out a piece of these individual niche markets and changed the way companies and consumers relate. And while we’re at it, let’s not forget Kodak, but think Go-Pro.
Uber and Lyft are travelling different roads on their journey to disruptive success as they gnaw away, one happy passenger at a time, at the taxi industry. In New York City taxi medallions used to be able to fetch $500,000.00, an almost unimaginable sum. Today an Uber App download costs nothing, a driver is signed up in days, while their fares are more fair – a direct consumer benefit – because of that medallion’s price tag. Toss in the fact that dispatcher’s jobs have been replaced with an app and Viola, you have a profitable disruption.
Disruption is the newest food world ingredient.And for grocery stores and restaurants, disruption may be sneaking up on them.
Chefd, Munchery, SpoonRocket, Blue Apron and Sprig are in the midst of a well-funded food fight attempting to disrupt the grocery and restaurant sectors. By biting into their respective customer basses these meal-delivery companies are offering higher quality ingredients, pre-portioned recipes, and the convenience of door step delivery without any of the hassles you face while grocery shopping.
Have you noticed the average age in your neighborhood grocery store? Bingo, the disruptors have. While they are tastefully marketing to millennials, young, aggressive food companies are leading the way for artisan purveyors to launch their products into the marketplace through a variety of channels other than grocery stores. One San Francisco delivery service is pumping out 10,000 meals a day. Consider the loss grocery stores are suffering due to these numbers and add the amount of products artisan purveyors are supplying and suddenly grocery shelves need to compete.
The current focus of food disruption is staggering. In an industry inundated with competition and cursed with low margins, the grocery industry is screaming internally on how to defend their position.
And those screams are being heard by disruptors. One of the hottest pairings in the food sector is venture money and flavorful ideas. The amount of capital being injected into the food industry is mouth-watering for anyone with a concept.
Munchery is valued at 300 million, having recently raised 85 million in VC capital. Blue Apron is valued even higher. Meal delivery although not new in concept is more modern in design than the previous attempts to change the grocery world. The difference is yesterday and today.
Disruption has matured. Today’s disruptors are offering consumers more than just convenience. When it comes to meal delivery concepts some are delivered cooked, some fresh, some boxed as individual ingredients offering a semi-professional chef experience, and all are eating away at the grocery store model. The quality is perceived to be better, the recipes are being crafted and developed with local chefs while many of the products fall under the category of Artisan Purveyor – a category many grocery -buyers sidestep every chance they get.
The reason: Real Estate. If you think the most expensive property is next to the ocean, think again. It is next to the Ketchup, or Salad Dressing or Baking Mixes on your grocer’s shelf. And that space has to pay for itself, through product sales, otherwise the product gets the boot. Let’s not discuss what happens to the buyer. Keep in mind, change of any magnitude is a gamble.
It only makes sense then, in a pre-disruptive world, to not change the product if it is offering a good ROI.
Grocery revenue is based on return on investment. That’s why the gamble on the small batch artisan purveyor products is so risky in the eyes of the grocery buyer. If a product fails, it leaves a bad taste in the mouths of the buyer and his boss, the accountants. And when your tastes favor profits rather than flavor, go figure – the main ingredient isn’t necessarily quality ingredients.
As traditional businesses fall prey to technologically focused entrepreneurs, industries refusing to pivot to the needs of their customers are being juggernauted into states of confusion as they face competition that was merely a thought in some guy’s garage months before.
As the food fight heightens, there is hope for the artisan purveyor.
