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New FreshDirect Funding Shows Potential Of Online Grocery Sector

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Online grocery delivery company FreshDirect has reeled in its greatest funding round yet: $189 million. The funding has to be a positive sign not only for FreshDirect’s business but for the online grocery delivery sector a whole, as it signals the value that financial markets are placing on the business model.

With competition from big players such as AmazonFresh, Google Express, Instacart and Blue Apron lying on the horizon, as well as retailers such as Walmart and Kroger making hefty investments in curbside pickup options, FreshDirect will need all the assistance it can get if it intends to expand operations outside the Northeast. Jason Ackerman, Co-Founder and CEO of FreshDirect, revealed in a statement that the funding will:

  • Fuel expansion outside the New York and Philadelphia metropolitan areas into new markets;

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  • Build new manufacturing and distribution facilities; and

  • Launch new businesses, such as its on-demand, mobile-first urban delivery business FoodKick that debuted earlier in 2016.

Last mile delivery has become a higher priority within retail as consumers continue to up their delivery expectations, but these processes become even more pressing when it comes to delivering fresh foods. An enhanced focus on manufacturing and distribution centers is definitely a good starting point for the funding, particularly if it brings the products closer to consumers.

The online grocery industry now takes in approximately $12 billion in revenue and is projected to grow at an annualized rate of 8.7% to $18.8 billion in 2021, according to data from IBISWorld. With that in mind, FreshDirect and other services are expanding at what appears to be a very appropriate time.

J.P. Morgan Asset Management led the investment, with returning investor W Capital and the AARP Innovation Fund contributing to the round.

As a result of this investment, Larry Unrein, Head of J.P. Morgan Asset Management’s Private Equity Group, will join FreshDirect’s board of directors, alongside managing director Ashmi Mehrotra.

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