Grocery is a big category. There’s brick-and-mortar retail, where competition is so fierce that the media has branded it “the grocery wars.” There’s online food purchasing, whether for delivery or pickup, where Amazon is gunning to be top dog. And there are meal kits, a huge and widely varied subset of the vertical.
It’s not easy to stand out in any one of these subcategories, let alone in grocery as a whole. So, what made Benchmark Capital confident enough to put $50 million behind Good Eggs, a San Francisco-based, curated, on-demand grocery store specializing in “absurdly fresh” local meats and produce? Not only that, but Benchmark’s biggest name, Bill Gurley, will be taking a seat on Good Eggs’ board of directors.
Notably, Gurley was the first investor in Uber; he’s not about to throw millions at anything unless he thinks it’s going to be big. The Silicon Valley legend has an eye for young companies that are out to change their category and works with them to execute their vision.
In a recent interview with Karen Webster, Bentley Hall, CEO at Good Eggs, explained what the grocer is doing differently — both from its contemporaries and from the company’s own past efforts.
Size Does Matter – But Bigger Isn’t Better
Hall was brought on as chief executive in 2015 after Good Eggs’ overly aggressive growth plans forced it to shut down operations outside San Francisco and undergo multiple rounds of layoffs.
Since then, Hall said the company has had to pivot to focus on its core customer: a West Coaster much like himself, who works full-time, has a wife who works full-time and has two children. Good Eggs’ core customer cares deeply about what goes onto his plate and into his stomach, but doesn’t want to sacrifice time with loved ones to prepare dinner every night.
He said that’s why Good Eggs now stocks and bundles a full assortment: curated, on-demand, locally sourced groceries, meal kits, alcohol, lunchbox kits and flowers.
Yet even as Good Eggs’ assortment grows, Hall doesn’t anticipate the number of SKUs in stock exceeding the 6,000 to 8,000 range — nor does he want it to. Instead, he said Good Eggs is focused on three pillars: sourcing “absurdly fresh” ingredients, offering a complete solution and keeping the “heart and soul” in the company by focusing on its community and its core customer before even thinking about growth.
In terms of sourcing, Hall said the company gets more than 70 percent of its food directly from local growers. By cutting out the middleman, providers earn more than they could get from a distributor, yet the company still pays less than it would working with a distributor, said Hall.
In terms of delivery, the CEO said Good Eggs owns the last mile, making 70 percent of deliveries with its own team — which earns a living wage, benefits and equity in the company, he added, a very different approach from what some of the big names in the space are doing.
“We’re not a big corporation,” said Hall. “For most customers, those are compelling reasons to join.”
The Meal Kit Component
The different options for food delivery may look the same from the outside, said Hall, but these models are all vastly different. There are big companies and small ones, mail-order companies and ones that sell their products on the prepared foods shelves of stores, companies that purport to make healthier products and ones that focus on faster subscription services and one-off orders.
And yet, said Hall, many of them share the same strengths and weaknesses. He believes the existing meal kit format falls short in one key way: It’s completely unsustainable.
Shipping all over the country is expensive and wasteful, Hall said, and the packaging aftermath of doing so is a huge flaw. While some meal kit companies are starting to see the value in distributing via grocery stores — which can save on packaging and transport — Hall still felt the format could be improved.
How? By making the meal kit a part of a whole, rather than the company’s entire focus.
“A complete solution across categories is stickier,” Hall said.
What Good Eggs creates is not so much a meal kit as a method of creating healthier meals more easily in the timeframe that’s right for each customer’s family. Whether customers want something that can be cooked in 20 minutes, in a single pot or with components that have been kitchen-prepped and are ready to eat, the idea is to bundle ingredients to solve a problem.
What these “kits” replace isn’t grocery shopping, Hall added, but takeout. Something simple and tasty can be prepared with the same investment of time and effort as ordering from a fast-casual restaurant, he said, but without the unhealthy downsides of doing so.
“In the old world,” said Hall, “you flipped through a cookbook and wrote a shopping list and went to the grocery store and tried to find each thing in each aisle. We’re just saying, ‘You like this recipe? OK, add it to your cart — done.’”
What Growth Will Look Like
Hall said Good Eggs is not about to make the same mistake again regarding growth: The current round of funding will enable Good Eggs to expand throughout California over the next few years. Then, over the next decade, the company hopes to expand along the entire West Coast.
He believes the company is ready to expand in a contiguous geographic way, always keeping its eye on the core customer.
“There’s a difference between growing quickly and growing at all costs,” Hall said. “We’ve learned how to grow thoughtfully and efficiently and how to find and serve the right customers — because not every customer is a good customer. We don’t have to serve every customer; we just have to serve the core one — the one who cares deeply about food — better than anybody else.”