It’s a familiar story in the grocery industry: entrepreneurs who have designs to create a new business based on an emerging trend obtain significant venture capital to develop their ideas.
Many of these enterprises are often led by individuals who have little overall business experience and even less knowledge of the fiercely competitive food business. In the past month, two of those entities – Foxtrot Market and Getir – announced that they are folding (Foxtrot) or radically reducing their territorial footprint.
The reasons are similar: underperforming businesses that have seen their ability to gain new capital investment greatly diminish or disappear.
In the case of Chicago-based Foxtrot, which recently merged with another start-up Dom’s Kitchen & Market to form Outfox Hospitality, the owners of the company expanded too quickly and saw their capital run out. The Foxtrot concept, which incorporated elements of a brick-and-mortar convenience store and a local café, operated 33 stores in Chicago, Dallas and Austin and 11 stores in the Washington metro area including eight in the District.
At presstime, the company had not filed a formal bankruptcy petition but a message on its website posted shortly before it abruptly closed its doors on April 23 stated that it had “explored many avenues to continue the business but found no viable option despite good faith and exhaustive efforts.” The company employed approximately 1,000 associates and earlier this year had said it planned to open multiple stores in existing and new markets.
Over the past four years the company reportedly blew through about
$175 million in venture capital funding.
As for Getir, the Turkish-based ultrafast food delivery company that was founded in 2015, is hurting, too. Late last month the company announced it was pulling out of all of its remaining European markets – Germany, the Netherlands and the UK – and leaving the U.S. (except for its recently acquired FreshDirect delivery business) and will concentrate on its business in its home country.
It’s been a mighty fall for what until recently was the most aggressive among all start-ups in the ultrafast (and ultra-risky) delivery business. Over the past nine years, Getir has raised more than $2 billion in investment funding and acquired at least five of its competitors. As little as two years ago, the delivery merchant had a market value of $12 billion. However, the company’s market cap began to shrink (to $2.5 billion) as it pulled out of France, Spain and Portugal last year.
And as for its lone remaining U.S. holding, FreshDirect, trade observers placed little confidence in Getir’s ability to salvage a company that began in 1999 with a unique perishables-oriented delivery model in New York City and high hopes for future expansion. After a 20-year period of ups-and-downs, those hopes increased in 2021 when Ahold Delhaize acquired 80 percent of the Bronx-based enterprise for a reported $327 million. However, the Dutch merchant held on to its dwindling operation for less than two years, reportedly paying Getir to take it off its hands.
When the economic environment is healthy, there seems to be plenty of venture capital funding available, especially for food and beverage start-ups. Pair that with eager entrepreneurs with creative ideas to break into new and emerging silos.
On the grocery delivery front, remember HomeRuns.com, Webvan.com and HomeGrocer.com? Meal kit solutions? How about Chef’d and Freshly. Remember boxed.com, if you were in the market for bulk sized wholesale products? Specialty brick-and-mortar grocers? Lucky’s Market, the original Fairway Market and Earth Fare.
RIP to all those companies. Whether it was the competitive landscape they faced, poor execution of what creators and investors believed to be a sound business model, or just plain poor management, none of those companies remain operational anymore.
Add Foxtrot and possibly Getir (in the U.S.) to that list.