THE GERMAN GROCERY INVASION
Following in the footsteps of its fellow German discounter, Aldi, grocery chain Lidl is establishing a beachhead in the U.S. this summer. It promises to be a thorn in the side of established grocers, with Lidl promising to offer products up to 50 percent cheaper than competitors. It uses the same model as Aldi - small stores and up to 90% private label products. Lidl has deep pockets and a lot of experience in discounting with over 10,000 stores in 27 countries. They, along with Aldi, have already disrupted the British market, upending large local chains such as Tesco. The first 20 stores will be opening mid-June in North Carolina, South Carolina, and Virginia. They hope to be up to 330 stores by 2020.
BLUE APRON'S BIG DEBUT
Meal-kit company Blue Apron has filed for a $100MM IPO, hoping to raise more cash to expand into other other markets. It has its skeptics. Even though it posted a $3 million profit in the first quarter last year, the company has struggled to make money since it was founded in 2011. Interesting tidbits from their filing papers:
- Topline is increasing at a rapid rate. 2016 revenue of $800MM was more than double from 2015. This year, the first quarter was up $77MM from 2016 first quarter.
- Orders for Q1 2017 were 4.3 million compared to 3.7 million in Q1 2016.
- Average revenue per customer in Q1 is dropping, from $265 in 2016 to $236 this year.
- Average order value per customer is also dropping from $59.28 to $57.23.
- Marketing costs are ballooning - from $25 million in Q1 2016 to $61 million this year.
Bottom-line: It's not cheap to scale a meal-kit company. Focusing on large metro areas is easy. Expanding to lightly populated areas is where it gets real tough.
DEALS/STARTUPS OF NOTE
- Tim Keough's self-funded startup WythMe is taking a unique reverse auction approach to restaurant promotion. Customers use an app to make a bid for specific services and wait for participating restaurants to respond. Keough says he has over 3,000 restaurants in the system already.
- Campbell Soup is making a $10 million bet on meal kit startup Chef'd, hoping not to be left out of the movement to online food marketing channels. The money is a direct investment from the company, not their independent investment arm Acre Venture Partners. "We believe that digital and e-commerce is going to transform [the food] industry," Campbell president Mark Alexander, told Fortune.
Land O’Lakes Inc. has launched a Dairy Accelerator to try and stimulate innovation in dairy products. To be eligible, entrepreneurs must have sales of at least $200,000 over the last 12 months and must have foods with dairy as a primary ingredient including yogurt, cheese, whey or other milk-based proteins or ingredients. The only exception is butter.
Chicken producer Wayne Farms is building a $4.5 million innovation center next to its prepared foods facility in Decatur, Ala. The center will include a USDA-inspected pilot plant where new products can be developed more rapidly and integrated with Wayne’s production of ready-to-eat and ready-to-cook offerings.
Wisconsin-based butchery RJ’s Meats is the first in the country to sell meat from a vending machine. The company is using a German-made Regiomat vending machine to dispense a wide array of refrigerated meats 24/7.
Tips/ideas? Send them to email@example.com