Issue #26: Wonder Acquires More Legacy Foodtech Companies

Marc Lore has been at the forefront of eCommerce for decades. He founded online baby product retailer Diapers.com in 2005, which was sold to Amazon in 2011, and general eCommerce site Jet.com in 2014, which was sold to Walmart in 2016. In 2018, after stepping down from leading Walmart’s eCommerce efforts post jet.com acquisition, he turned his sights to the prepared food industry. Lore decided to found a food delivery startup, Wonder. The original concept was, using fully custom sprinter vans, a Chef would come to your house and cook you a meal from that van. The meals were mostly developed in collaboration with celebrity chefs, like Bobby Flay, Marcus Samuelsson, and Jose Andres.

However, the economics of that model were not feasible, so the company pivoted to brick-and-mortar storefronts. The concept is like many other modern food courts, with many different restaurants “located” in a single location all from one kitchen. It is also optimized for delivery and still utilizes partnerships with celebrity chefs to develop food concepts. This strategy has allowed Wonder to grow to around 35 locations. Also, because they don’t use gas in the cooking, they are able to take over some unique locations. My favorite part of Wonder though, is its partnership with Walmart, where 3 Wonder stores will be co-located in the Walmart store to add almost a food court. One location is live in Quakertown, PA and the other two will be in Teterboro and Ledgewood, NJ. Given Marc Lore’s ties to Walmart, it is a partnership that really makes sense and could be where the exit comes from. Additionally, Wonder recently opened its first location inside a Cumberland Farms.

Like many other high-growth startups, Wonder has raised a lot of money (around $1.9 Billion) and thus has immense pressure to grow quickly. At the same time, many companies in the foodtech space are struggling (ironically who also raised exorbitant amounts of money but could not keep up with growth expectations) and looking for new strategies or potential acquirers. Given Wonder has all this capital and capacity, they have been on an acquisition spree. This week it was food delivery service Grubhub, but before we dive into that, let’s dive into the two previous acquisitions.

• Blue Apron (November 2023) - NYC-based meal kit subscription, Wonder acquired for ~$100M, the physical assets (Fulfillment Centers) were not included as those were already sold to food manufacturer FreshRealm (who Wonder partners with to produce its food), the sale was mostly customer list and active subscribers

• Relay (April 2024) - NYC-based delivery service that does delivery for restaurants, allows for Wonder to reduce delivery costs by having its own driver force that is also doing delivery for other places

This week, Grubhub was added to the list of Wonder acquisitions:

• Grubhub (November 2024) - food delivery marketplace, US subsidiary for the Dutch food marketplace Just Eat, owns Seamless, previously had a partnership with Amazon to give Amazon Prime members free Grubhub+ membership, plus look at the NYC market share below (over 20% of NYC market)

Based on this new acquisition, the previous acquisitions, and Wonder’s existing strategy, a strategy emerges. Wonder wants to be the preeminent food solution for customers in NYC/tri-state area (and then the rest of the country). At the top of the funnel is Grubhub/Seamless, the marketplace that brings people in. Then, depending if you want to eat out or cook yourself, you order Wonder for food delivery and Blue Apron for meal kits. Finally, Relay delivery is the last-mile fulfillment solution to get the product to you. Here is a pretty graphic to summarize it all:

Wonder has taken a food delivery marketplace, broken it into three core parts, and vertically integrated the process. Overall, a super interesting strategy that I am bullish on. Restaurants already have tight margins, but by controlling the whole process there are efficiencies that can unlock additional margins. However, this is all moot if Wonder cannot improve the food quality. Currently, the food is prepared and par-cooked by Freshrealm, then heated up once the order is placed in a hot water bath, paid cook oven, and/or fryer. Reading through the reviews, it is definitely a mixed bag in terms of people’s views on the quality. I think Wonder has an opportunity to be a nationwide presence, but will struggle as the branding and pricing is very premium and the food quality is not. Ultimately, the food quality and brand positioning alignment will always determine success in CPG and restaurants. If that can be in alignment, I do believe Wonder will be able to scale to hundreds of locations across the country.

Walmart Adds Better For You Soda Section

While on the subject of Walmart, in addition to adding healthy-ish food via the Wonder partnership, it is trying to become a better-for-you destination. This week, Walmart announced a new merchandising strategy in the soda section, dubbed “Modern Soda.” As illustrated in the image above, you can see some of the top Performers, like Poppi and Ollipop. I am curious to understand the reasoning behind breaking it out into a separate section versus grouping the Colas together, the lemon-lime sodas together, etc. It will be interesting to see the result based on this new merchandising strategy. Additionally, as part of this new push, more better for you sodas will be available in more locations. Other retailers will soon follow in Walmart’s wake, but it is always exciting to see emerging CPG brands being utilized as growth drivers for retail.

Louis Vuitton Turns Scaffolding into Free Marketing

In my mind, the symbol of construction in NYC is the green wood walls surrounding the construction site, and metal scaffolding surrounding the locations. This eye sore is engrained into the fabric of NYC, just like pizza and rats. However, Louis Vuitton decided to be different as they are redoing their flagship location on Fifth Ave. As seen in the video below (from a user-generated tweet with over 200k impressions), they built a giant suitcase adorned with Louis Vuitton’s iconic patterns. Talk about turning an eyesore into a mega-marketing opportunity. In a world that is increasingly harder to attract eyeballs, even for Louis Vuitton, there are always ways to stand out. Also, hopefully, the new store will be open in time for the revamped Fifth Ave covered in Issue #22.

Vuori Raises $825M to Fuel Growth & Grow Retail

Athleisure clothing in the United States popularity is skyrocketing. One estimate has a projected growth of 7% per year in annual growth. At the forefront of this movement has been Lululemon, but right behind it has been Vuori and Alo Yoga. Vuori has been working to differentiate through design, marketing, distribution, and targeting a more comfort-focused customer. That value proposition has landed with customers, allowing Vuori to raise $825 at a $5.5B valuation from Softbank, General Atlantic, and Stripes. While originating in D2C, from a retail perspective, it is exciting to see the focus on retail growth both wholesale and company-owned stores. Currently, there are over 40 brick and mortar stores, with the goal of reaching 100 by 2026. Additionally, the focus is global, with a focus outside the US on Europe and Asia. The athleisure market is a huge opportunity to watch and Vuori is certainly at the forefront of it.

• Summary: Happier Grocery is a grocery store selling upscale prepared foods, beverages, and CPG grocery items (think small format Erewhon)

• My Take: Grocery will always be a core part of retail, despite the rise in eCommerce. Customers are wanting to try new items and get more prepared foods from Grocery too. Combine these factors and you get a grocery store of the next generation. It will be really hard to succeed, but I do think there is room for an upstart grocery chain in NYC.

• Founder(s): Wells Stellberger

• Funding: No funding publically announced

• Number of Locations: 1 in Tribeca/Soho

• Social Media Following: 28.5k on Instagram and 200 on TikTok (but lots of UGC on them)

Additional Links:

1. DoorDash is focusing on expanding to more local and regional grocers (read more here)

2. Restaurants are a big part of gobbling up the empty space in NYC, although vacancy rates are still higher than pre-pandemic numbers (read more here)

3. Tapestry and Capri agree to terminate the merger agreement after losing their lawsuit against the FTC (read more here)

4. On the heels of partnering with Grubhub in the US, Doordash is now partnering with Amazon Prime to offer Australian subscribers a DashPass membership (read more here)

5. Amazon launches ultra-cheap section to compete with Temu and Shein (read more here)

6. Retail sales were up in October, but eCommerce sales slowed down compared to previous months (read more here)

7. Cava released earnings and they did not disappoint (read more here)

8. Starbucks app is now utilizing DoorDash Drive to power local delivery (read more here)

9. Amazon Fresh opens 8 new stores across 5 states and plans to expand further (read more here)

10. Bojangles is launching kiosks across stores after a successful trial (read more here)

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