Various types of Kellogg's cereals are pictured at a Ralphs grocery store in Pasadena
Various types of Kellogg's cereals are pictured at a Ralphs grocery store in Pasadena, California August 3, 2015. REUTERS/Mario Anzuoni - RTX1MWXA Mario Anzuoni — Reuters

This Startup Wants to Deliver You Your Groceries

May 10, 2017

For the past five years, Deliv has focused on handling same-day delivery for big box retailers like Macy's, PetSmart, and Best Buy. Now the Silicon Valley upstart is eyeing food companies and grocers.

On Wednesday, Deliv debuted a new service called Deliv Fresh, a delivery service for grocers, meal startups, and other food companies that want to get their perishable food to customers the same day that it is ordered. The new push is a natural extension of the company's existing logistics network that can quickly get products from a warehouse to a customer's doorstep, explained CEO Daphne Carmeli.

"We're like UPS without the assets," she said.

But delivering perishable food comes with a unique set of requirements that she says Deliv can handle with its existing army of contract workers. Instead of using delivery vehicles with refrigeration, the company is making its corporate clients like grocery stores responsible for packing items with ice, for example, and then return any special packaging to that seller after delivery.

Deliv uses contract drivers, who pick up orders from stores and then drop them off with customers. The company, backed by shipping giant UPS (“ups”), operates in 100 U.S. cities on behalf of 4,000 retail partners. Deliv makes money by charging these retail partners a fee for its services. Carmeli declined to reveal revenue but said that sales have grown at least 300% over the past two years.

The potential market opportunity for Deliv's food service is big. According to the company, consumers spent nearly $675 billion on groceries in 2016. Online grocery sales alone are forecasted to account for as much as 20% of all grocery sales by 2025, according to Deliv.

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Carmeli's sales pitch to grocers is that they outsource logistics to Deliv so they don't have to spend the money creating their own delivery services. Working with Deliv also lets grocers maintain control of their customers because they can continue to do their shopping on those stores' websites.

Deliv's new service competes against Instacart, Amazon.com (“amzn”), and the delivery services operated by the grocery companies themselves such as Safeway.

Companies like Munchery, a San Francisco startup that delivers prepared food, has reportedly burned through $120 million in venture funding and is struggling to stay afloat. Blue Apron, which sends its subscribers a box of ingredients each week to cook at home, is reportedly putting its aspirations for an initial public offering on hold as it tries to figure out how to become profitable.

Even Google's (“goog”) own grocery delivery service, recently eliminated the delivery of perishables, choosing instead to focus on items that don't require costly temperature-controlled warehouses.

Early customers of Deliv Fresh include East Coast-based online grocer FreshDirect, meal service Plated, and flower delivery company BloomThat.

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