Dive Brief:
- Online grocery Farmstead is moving operations to a larger warehouse in Burlingame, California, according to a company press release. The space, which the company calls a "microhub," is six times larger than its current facility in San Francisco.
- CEO Pradeep Elankumaran said in a statement the new facility will allow Farmstead to quadruple its delivery capacity in the coming months, which translates to serving tens of thousands of households per week in the San Francisco Bay Area.
- Farmstead has seen firsthand the need for expansion during COVID-19. When shelter-in-place orders went into effect in the San Francisco Bay Area, the company’s order volume increased five times and its average basket size doubled.
Dive Insight:
While the response to COVID-19 continues to evolve, consumer interest in online grocery services has skyrocketed, and Farmstead is just one of many services that stand to benefit.
The company has rebounded from a rough patch it encountered early on in the crisis, when deliveries were delayed, texts and emails didn’t get to customers, and the company had to waitlist new shoppers. Since then, delivery times have stabilized and there is no longer a waitlist, Elankumaran told Grocery Dive in a recent interview.
Because Farmstead operates solely in the San Francisco Bay Area, a larger warehouse allows it to serve more people without having to open additional microhub locations. Farmstead has also gone on a hiring spree, according to the press release, which will support greater fulfillment and delivery demand.
Amid the pandemic, Farmstead saw adoption grow from 5% to between 30% and 40% within weeks. Elankumaran said in a statement he expects shoppers to continue their weekly service with Farmstead even after the pandemic. Grocery delivery has passed a tipping point, and the adoption of online grocery among consumers reflects what experts had expected three to four years from now, he said.
There’s more than enough business to go around right now for online grocery providers, but as COVID-19 wears on, the competition could get tougher. Given its San Francisco home base, Farmstead faces both local and national competitors.
National competition will continue from companies including Instacart, Shipt, Walmart and Amazon. Meanwhile, NPR’s San Francisco affiliate said San Francisco-based online grocery provider Good Eggs has also been staffing up and recently moved to a new warehouse to meet increased demand during the pandemic. Imperfect Foods, which operates locally and distributes nationally, said it was able to adapt to demand during the pandemic because of its direct relationships with growers.
Farmstead, however, believes it has an edge because it doesn't charge delivery fees and has proprietary technology that can predict demand, manage order picking, and route orders and deliveries efficiently.
