Albertsons, VC firm team up to develop grocery tech

With e-commerce rapidly becoming a pillar of the supermarket business, Albertsons Cos. has partnered with venture capital firm Greycroft to help grow emerging companies and technology in the grocery sector.

To that end, Albertsons and Greycroft have created a fund—expected to reach up to $50 million over time—to invest in and develop grocery-related tech innovators, the Boise, Idaho-based retailer said earlier this month.

The fund will leverage Greycroft’s investment expertise and connections with the early-stage tech industry and Albertsons’ grocery know-how and coast-to-coast footprint, the companies said. They noted that Albertsons already has a leading online grocery delivery presence in eight of the top 10 U.S. metropolitan statistical areas.

For Albertsons, the fund is expected to further a wider tech strategy that will identify potential partners and opportunities to help the company capitalize on innovation in retail grocery. The goal is to serve customers “wherever and however they like to shop,” according to Shane Sampson, chief marketing and merchandising officer.

“Part of that is being at the forefront of the tremendous innovation our industry has seen over the last five years,” Sampson said. “As we saw with our recent acquisition of Plated, Albertsons Cos. has the capital, scale and expertise to power future growth of the most promising, emerging businesses and technologies across the food and grocery space. We are thrilled to be partnering with Greycroft, whose investment acumen and relationships are positioned to be key drivers of our success.”

Albertsons operates about 2,300 supermarkets and 1,760 pharmacies across 38 states and the District of Columbia under 20 retail banners, including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Sav-On, Jewel-Osco and more.

Citing findings from Coresight Research, Albertsons and Greycroft said investment in the food and beverage sector has more than tripled since 2013 amid ongoing industry disruption from startups and incubators. Coresight projects U.S. online retail sales of food and beverages to top $20 billion in 2018.

A physical presence has become increasingly important to a retail e-commerce strategy, according to Ian Sigalow, co-founder and partner of New York-based Greycroft. The 150-plus investments by the VC firm, which manages more than $1 billion in funding, include such companies as meal kit provider Plated (acquired by Albertsons in September), online bulk-goods retailer Boxed, e-delivery service Shipt (bought by Target Corp. in December) and online shopping club Thrive Market.

“As our e-commerce companies scale, they often incorporate a brick-and-mortar strategy to reach the entire U.S. market. This partnership with Albertsons Cos. will enable our companies to tap into their 34 million weekly customers across a wide range of industries, including consumer products, health care, wellness, pharmaceuticals and grocery,” Sigalow said. “We believe that consumers should be able to get access to these high-quality products and services whenever they want, wherever they want, and that requires a coast-to-coast footprint.”

Online grocery purchases account for 5.5 percent of total U.S. grocery spending, according to a study by Brick Meets Click. The most active online shoppers raised their weekly online spending to 46 percent of their total weekly grocery spending in 2018 from 28 percent in 2017, said the strategic advisory firm. The findings are based on a survey of nearly 5,000 online consumers.

“If supermarkets make the right decisions and investments to compete well in this space, they are in the leadership position to meet shoppers needs relative to food purchasing and consumption patterns,” said Bill Bishop, chief architect at Brick Meets Click.

Near-term spending growth likely will be fueled by the roughly 30 percent of U.S. households who already shop for groceries online, the study reported. Their average order size rose to $69 dollars this year from $62 in 2017.

Going forward, supermarkets will increasingly tangle with Amazon, as the e-commerce giant aggressively leverages its Prime program with Whole Foods to boost its share of spending with those shoppers, Brick Meets Click noted.

“Overall, Amazon has 77 percent household penetration, but it sold groceries to just 11 percent of households in the last month,” said Steve Bishop, managing partner of Brick Meets Click. “That’s a lot of headroom for Amazon to grow in grocery. Amazon’s smaller average transaction size compared to supermarket retailers underscores why online grocery is basically supermarket’s business to lose as online shoppers increasingly shift to full basket trips.” 

This piece originally appeared on Supermarket News, a New Hope Network sister website. Visit the site for more grocery trends and insights.