Entrepreneur Insight

GrubMarket: Leveraging Technology Innovation for a Farm-to-Table Experience

Here’s how one company is shaking up the food industry with grocery delivery and SaaS for farmers.

Agriculture is not typically associated with cutting-edge technology, but that may soon change thanks to companies such as GrubMarket. Founded in San Francisco in 2014 by software engineering executive Mike Xu, GrubMarket has scaled quickly by building digital platforms to help local farmers and producers connect directly with buyers, with a mission of providing access to fresh food at lower prices.

“In a traditional agricultural supply chain business model, you have the farmers initially selling their products to rural wholesalers, who then sell it to regional distributors, who would then sell it to city wholesalers,” says Holly Wu, chief investor relations officer at GrubMarket. “What we aim to do is try collapsing the layers in the middle and create a direct model where we source from the growers themselves and sell directly to customers, whether they’re grocery stores, meal kit companies, restaurants or individual consumers.”

GrubMarket’s approach is two-pronged. The first digital platform centers on a B2C app where consumers can order fresh produce directly from farmers, and the second digital platform centers on a B2B model, which supplies grocery stores, meal-kit companies and other food-based businesses. Additionally, the company also provides vertical software as a service (SaaS) to resolve any inefficiencies in the food supply chain.

“We’re a pioneer to embrace this business model,” says Wu. “The food industry is massive and yet there is a need for digital transformation, so that’s where we saw an opportunity.”

“The food industry is massive and yet there is a need for digital transformation, so that’s where we saw an opportunity.”

-Holly Wu

GrubMarket’s fresh produce delivery. Image courtesy of GrubMarket

GrubMarket today is valued between $400 million to $500 million and the company recently finished its Series D funding round in October, raising $60 million. Their customers include over 500 grocery stores, 8,000 restaurants and 2,000 corporate offices, from Whole Foods to Hello Fresh. Through multiple acquisitions from California to New York, the company continues to expand at a rapid pace.

“GrubMarket is able to take on proven business models as spokes on a wheel,” says Kevin Lu, vice president and relationship manager for commercial banking at East West Bank. “GrubMarket at the center of it all enables them to grow faster & better with their technology/innovation at the heart of their company.”

A digital farm-to-table experience that cuts out the middle man

As grocery delivery becomes increasingly popular with consumers, GrubMarket has leveraged this momentum to create an app that helps producers and farmers connect directly with these consumers. With a presence in most major cities, the company today is a player in the food industry and its technology supports several hundred million dollars of sales annually.

GrubMarket also uses their SaaS technology to support and transform the food supply chain into something more efficient. The approach is similar to larger e-commerce sites like Amazon and even the streaming site Netflix.

“We allow businesses to use our own IP to house everything under one roof,” says Wu. “Our internal software provides an end-to-end vertical solution that basically encompasses everything from the customer relationship management module, to accounting integration, HR, and everything in between.”

While traditional wholesalers who typically work offline have had to rely on phone calls, emails and even handwritten notes, this new SaaS technology will allow them to receive an enterprise-grade system to help manage their business. “This in turn also helps improve their overall operations continuity and minimize any disruption to their business due to, say, a person leaving, because all of the institutional knowledge is built into the software,” says Wu.

COVID-19 impact

Overall, the pandemic has allowed the food delivery industry and the gig economy to grow. By June 2020, a study showed that 35% of U.S. consumers were using online grocery delivery services, which is almost three times the number of consumers in August 2019. Not only has household penetration been high, the average order size in June has risen to $84.

“Our business continues to grow steadily despite the pandemic,” says Wu. “And our system was designed to handle any shift in demand, from eating out to dining in.” During the initial lockdowns in March and April, GrubMarket was flooded with food delivery demand; according to TechCrunch, the company’s B2C sector grew as much as 500%. Thanks to its robust digital systems, GrubMarket’s organic growth has skyrocketed, with new membership requests coming from consumers and producers alike.

“There are multiple ways of reaching us, and if you’re a consumer, it’s as easy as downloading an app. If you’re a producer, there is an application form that you can fill out,” says Wu. “We encourage you to reach out to our team of buyers, and if you’re unable to do that, perhaps send a few samples of your products.”

(Photo credit): Gettyimages.com/erhui1979

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The future of food

GrubMarket foresees a food market that is readily available and accessible to the general population. In an increasingly interconnected society where the internet and smartphones are ubiquitous, GrubMarket hopes that the industry’s push to embrace digital progress will help eliminate issues such as food deserts. In fact, an analysis by Yale University showed that online grocery delivery systems already cover roughly 90% of food deserts in eight key states from the study.

To build awareness of healthy eating in a younger demographic, GrubMarket also rolled out an educational video game for iOS devices. Aptly named FarmBox, the game lets players manage a virtual farm and earn points that can be spent on virtual goods or tools within the game, or even real fruits, vegetables and other healthy food options from the actual GrubMarket site. The game can be downloaded for free from the Apple App Store.

“The industry has a lot of challenges, but it presents a huge opportunity,” says Wu. “It will continue to reinvent itself and meet the challenges of the time. Based on our track record and how quickly we’ve grown, we’ve proven our value to the overall ecosystem, where we can serve both the producers as well as our customers.”

Read more about GrubMarket and other clients in East West Bank’s Annual Report.