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The Food Institute Blog

The Food Institute Blog

Online Food Startups Face Massive Competition, Three More Shut Down
Posted on July 26, 2016 by Jennette Zitelli

It's been a rough few weeks for online food businesses. E-commerce presents a huge opportunity for retailers and foodservice establishments, but it's not always so simple to implement. Even the most promising ideas can have trouble getting off the ground in the super saturated online food space.

Three separate online food companies shut down in the past few weeks, mainly due to cash flow issues. Online farmers market Farmigo ceased its retail operations, saying it can no longer operate sustainably, reported Supermarket News. Farmigo offered online ordering and delivery of fresh food and groceries from small suppliers, much like a CSA (community supported agriculture) program. It operated in New York, New Jersey, Seattle-Tacoma and San Francisco.

The company does plan to continue to operate as a provider of software for farmers participating in CSAs while seeking partners to take over its logistics and delivery operations. It also posted a list of the manufacturers and farmers it worked with to encourage shoppers to continue supporting them.

It raised $26 million in funding since its founding and was operating in 350 neighborhoods with more than 150 producers. Its sales increased by 500% in 2015 and it was projected to triple again within six months, but obviously that never came to fruition.

Gourmet meal delivery service The Fresh Diet also shut down its business, somewhat abruptly, without informing most employees and clients, reported Miami Herald. The company was sold back to its founder Zalmi Duchman in March 2016, but, according to his general counsel Daniel Gielchinsky, it was too late to turn the business around. Gielchinsky noted that the previous owner, Innovative Food Holdings, took on too many employees and grew the company too quickly without a set expansion plan. The company is now filing for an assignment for benefit of creditors, the equivalent of a bankruptcy within Florida.

Lastly, restaurant delivery company Take Eat Easy ceased its operations and plans to file for "juridical restructuring" after it failed to raise a Series C round and has run out of money, reported TechCrunch. The Brussels-based company could still find a buyer, but funding did not come soon enough in an incredibly crowded restaurant delivery market. It began its Series C round in October 2015, but by March 2016 it had already been turned down by a whopping 114 VC funds.

A "French, state-owned, logistics group," thought to be GeoPost, the delivery subsidiary of Le Groupe La Poste, was in talks to invest $33 million in Take Eat Easy, but that deal fell through and CEO Adrien Roose noted, "there was no plan B."

Over the past year, Take Eat Easy reached 30% monthly growth and scaled its customer base from 30,000 to 350,000. Its service was strongest in France, as well as its home country of Belgium.

Innovative food startups may still be considered a popular investment for venture capital firms, but with the sheer enormity of the online food market today, every single business can't possibly get the funding they need. A unique idea and a good business plan is sometimes just not enough to compete in the uber-saturated industry, and companies may have to get a little more financially creative to come out on top.

 

About the Author

Jennette Rowan
Product Manager
The Food Institute

Jennette writes and edits the Food Institute’s annual publications, such as Food Business Mergers & Acquisitions, The Food Industry Review and The Almanac of the Canning, Freezing, Preserving Industries.  She also handles marketing and promotions for books, seminars and the monthly webinar series. Additionally, she writes for the daily news update, Today in Food, and periodically contributes to the weekly Food Institute Report. She has a background in non-profit and environmental marketing, programming and writing, and joined the Food Institute in 2013 with a degree in Communication Studies from Rowan University.

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