With demand for online grocery shopping accelerating during the pandemic, the online grocery service FreshDirect is to be acquired by Ahold Delhaize which is a Netherlands-based firm that owns the United States based supermarket chains Stop & Shop as well as other grocery chains of Giant and Food Lion.
The terms of the deal such as its worth was not announced by the two companies while announcing the deal. The companies expect to close the deal next year. Apart from retaining the brand name, FreshDirect will still be operating with its headquarters in New York City. The company was launched in 2002.
Formed in 2016 by the merger of Ahold and Delhaize Group, Ahold Delhaize is currently one of the largest grocery chains in the United States. FreshDirect will drive sales in the lucrative New York market and will help the company to reach new customers, Ahold Delhaize said.
FreshDirect will also grow by gaining access to the Dutch company’s size and scale, the company said.
“Ahold is determined to get bigger to compete with the heavyweights like Amazon (AMZN) and Walmart (WMT),” Jon Springer, executive editor of Winsight Grocery Business, an industry trade publication, wrote in an email. “FreshDirect gets a parent with real buying power and the means to further expand in East Coast markets.”
This deal assumes importance because the grocery industry has been reshaped by the Covid-19 pandemic.
With consumers eating more food at home because of closure and restrictions imposed on restaurants and many consumers concerned about going out for dinner over fears of contacting Covid-19, sales have boomed at physical stores as well as online sale channels of leading grocers such as Kroger, Albertsons, Publix and others.
During its most recent quarter, there was a 12.4 per cent growth in Ahold’s US sales at stores that had been open for at least one year compared to the same period a year ago, the company had announced earlier this month. The company also reported a 114.7 per cent jump in its online sale in the same period.
The growth was “due largely to the COVID-19 outbreak”, the company said.
In the US, online sale of electronics, clothing and other goods has grown faster compared to consumers shopping for groceries online. But there has been a surge of new customers online during the pandemic as consumers tried to reduce the number of times they go to physical stores for shopping.
“Covid was kind of a wake-up call for us,” Ahold chief financial officer Natalie Knight told The Wall Street Journal in August.
There was a shortage of staff at FreshDirect for handling of the surge in orders from its existing consumers and shoppers during the early weeks of the pandemic, said David McInerney, CEO of the company.
“The barriers to online grocery got absolutely obliterated” in March, he said. “We couldn’t take” the surge in demand. The company’s systems were overwhelmed because people were buying two and three times as much per order as they typically did, buying for a longer period of time than usual and ordering for friends and relatives.”
(Adapted from CNN.com)