The trend took another step forward last month with when London-based online grocery platform Farmdrop raised a further £7m from investors led by Atomico, a venture capital firm founded by Skype co-founder Niklas Zennstrom. Explaining his involvement, he says: "They are deploying innovative technology to simplify the food chain and meet the growing demand for more sustainably sourced, local food."
Launched in 2014 as a click-and-collect service (Horticulture Week, 3 October 2014), the company used a previous funding bid to switch to home delivery, explains director of supply chain Philip Eaves. "It allowed us to invest in a fleet of electric vans with which we now deliver seven days a week," he tells HW. "This latest funding allows us to upgrade our service and expand from London to Bristol, where we plan to open in September."
While Farmdrop offers a wide range of foods, fruit and vegetables are the backbone, accounting for around half of sales by value, he says. "80% of our food comes from within 150 miles of London. It's better for the planet but also more convenient. Suppliers need to be geographically close, that's the model, although we do also offer exotic items as it boosts sales of local produce."
Expanding beyond London
As Farmdrop expands beyond the capital, Eaves adds: "We're looking forward to working with some fantastic growers in the Bristol area. We have gone out looking for them but increasingly they are contacting us. Our name is out there and they are hearing about us through the grapevine. What's in it for them is that they get a greater share of the retail price - 75% goes to them, so as much as double what they would see from the supermarkets."
Suppliers "tend to be smaller and not set up to supply on a massive scale", he says, and they are also likely to fit with Farmdrop's sustainability ethos (though not all are organic), which is part of the company's selling point. "Customers are interested in provenance and growing methods, and also packaging and transportation, but for us product quality is the key differentiator over the supermarkets," says Eaves. "Great producers are what make Farmdrop work."
With London vertical farms GrowUp and Growing Underground among its suppliers, he says: "We are open-minded about indoor growing. There's certainly a market for it and more growers are going down that route. But it's a bit more niche - more 'chef-y' - and not necessarily in every shopping basket every week."
Further ahead, he adds: "We plan to expand all over the country, while ensuring London is an ongoing success. We'd love to cover from the south coast to central Scotland, but it will always be city-based, giving suppliers access to these markets. People increasingly care about where there food is from and what they put in their bodies."
Last year, online retail giant Amazon launched its AmazonFresh grocery delivery service, also initially in London, though this is now also available to customers in neighbouring counties. Meanwhile, Berlin-based meal kit supplier HelloFresh has been named Europe's fastest-growing company by the Financial Times. Founded in 2011, the company has grown to 850,000 customers in several countries including the UK and has brought several similar suppliers in its wake.
British Growers chief executive Jack Ward says: "From an industry point of view it's an interesting way to sell food but the opportunities here are still quite niche. The bulk of shopping is done from the 10 big grocery retailers and that isn't going to change any time soon."
He adds: "The cost chains of delivering versus putting things on shelves aren't entirely clear. It's still early and we don't have years and years of data on this. It's probably a bit hit-and-miss. But one has to be aware of the game-changers. Fifteen years ago we didn't pay much attention to Aldi and Lidl, but they have already changed the game. Might this be the next one?"
Currently 7% of all UK grocery shopping is transacted online, according to market analyst Kantar WorldPanel. This is the third highest figure in the world behind South Korea and Japan. In the USA, by comparison, just 1.4% of groceries are bought online.