Ahold Delhaize USA announced this morning that it is selling the FreshDirect e-grocery business in which it acquired an 80 percent stake less than three years ago.
The buyer is Getir, a Turkish e-commerce company that largely operates in Europe, but does have so-called instant delivery operations in Chicago, New York and Boston, where it says it can deliver from a list of 1,500 SKUs "in minutes," with "no time slots, no substitutions."
Terms of the deal were not disclosed, though TechCrunch did offer this analysis:
"FreshDirect, when it was in startup mode itself, raised as much as $517 million (per PitchBook) from investors that included JP Morgan, the UK grocery chain Morrison’s, AIG and Maverick Capital, but when it was sold to the mega-grocery giant Ahold Delhaize and Centerbridge in November 2020, it changed hands for $300 million. Founded in 1999, New York-based company is one of the oldest online-only grocery delivery players. We did not get a comment back from Getir when we asked if the acquisition will see Ahold Delhaize (which held 80% of FreshDirect as of the 2020 deal), or Centerbridge, take stakes in Getir."
In announcing the deal, JJ Fleeman, CEO, Ahold Delhaize USA, said, “This was a difficult decision, especially given FreshDirect’s rich history in the New York City area. However, our strength as a grocery retailer in the U.S. is the true omnichannel experience – a combination of online and in-store – where we have leading brands and market share, strong store density and online presence, and a deep heritage of customer loyalty and relationships. With this decision, we will increase our focus on omnichannel – our biggest growth opportunity.”
The announcement also says that "there are no changes for FreshDirect customers as a result of the transaction. All customers will continue to be served by their local delivery teams. In addition, there are no changes to DeliveryPass subscriptions or other services."
- KC's View:
I can't really judge the ability of Getir to do anything with the FreshDirect business, except to note that it does not seem to have moved the needle very much in Chicago, New York and Boston. The company does seem to have some financial resources, though, so maybe it'll be able to breathe some life into what has become a moribund brand.
Though, financial resources don't always add up to success. Ahold Delhaize has resources, but it does not seem to have been a good run for FreshDirect under the Ahold Delhaize ownership. A little over a year ago, it pulled out of the Philadelphia and Washington, DC, markets, leaving it serving only its core - and original - New York City market, plus parts of Long Island and the Jersey shore.
Ahold Delhaize bought the brand in the early days of the pandemic, a time when it actually could have grown its footprint and business without really trying - e-grocery, after all, was growing in leaps and bounds. At the same time, FreshDirect was a known e-grocery brand name - not wildly successful, but with some equity.
Instead, Ahold Delhaize almost seems to have turned it into a distressed asset. They could've integrated the brand into the whole, creating FreshDirect sections in stores that could've built on the company's reputation for quality prepared foods and organically built the e-commerce segment of the business. But it seemed to do none of that. At no time, best I can tell, did Ahold Delhaize treat or view FreshDirect as being additive to the business, which is sort of weird considering how management likes to talk about "omnichannel."
I think some might view this as retailing malpractice.