One of the oldest online grocers gets a huge cash infusion.
FreshDirect, an online grocer that has a large following in the New York metropolitan area, has secured a $189 investment led by JPMorgan Asset Management. The money will be used to launch its grocery delivery service in more cities, and to expand new business units and incubate others.
A portion of the investment will also go toward buying shares from some early investors, the company’s CEO, Jason Ackerman, confirmed an interview, but he declined to provide more details.
The New York City-based company was founded in 1999, and began delivering groceries to customer’s homes in 2002. Since then, it has focused its efforts on the New York metro area and Philadelphia, and says it has more than $600 million in annual revenue, and has been cash-flow positive since 2010.
The company had positive net income in the first six months of the year, but is not focused on keeping it that way in the near term as it sets out to invest its new money in growth, CEO Jason Ackerman said in an interview.
The investment comes as FreshDirect is facing competition in New York from a host of old and new competitors in grocery delivery, including AmazonFresh, Peapod and Instacart. Like Amazon and Peapod, FreshDirect warehouses its own food. Heavily funded Instacart, on the other hand, delivers goods in as little as an hour, by grabbing groceries from partner grocers like Whole Foods and regional supermarkets.
While all of these companies are competing with each other, they are also simultaneously working together to grow the e-commerce market share of the $600 billion U.S. grocery industry, which some estimates peg at as low as 1 percent.
FreshDirect generates revenue through the traditional buy-at-wholesale-price and sell-at-retail model. It also charges delivery fees on individual orders and offers annual memberships of $119 for unlimited deliveries with no fees. It is known, among other things, for a wide selection of organic produce, meats and fish, as well as prepared meals.
FreshDirect, which has previously raised $90 million according to CrunchBase, will use some of the new funds to open up a distribution center that can support $1.5 billion in annual sales. It also plans to “aggressively expand” a new app-only business called FoodKick that delivers a smaller selection of food and booze in as little as an hour. Other new businesses will follow.
“We’re building more of a platform,” Ackerman said.