By Jaewon Kang
The owner of supermarkets including Giant and Stop & Shop said it would acquire a majority stake in grocery delivery company Fresh Direct LLC, expanding its U.S. presence as online ordering booms during the coronavirus pandemic.
Netherlands-based Koninklijke Ahold Delhaize NV said Wednesday that the deal will accelerate its growth online and around New York, where FreshDirect mainly operates.
"Delivery, to me, is here to stay," said Farhan Siddiqi, Ahold Delhaize's chief digital officer. He added that New York is among the most important regions for e-commerce because of its huge population and high rates of online shopping.
Private-equity firm Centerbridge Partners will become a minority investor in FreshDirect, with a 20% stake. The companies didn't disclose financial terms.
FreshDirect's sales have risen as the pandemic has pushed more consumers to shop for groceries online and eat most of their meals at home. Many people are visiting stores less frequently, augmenting those trips with online purchases from companies including FreshDirect, Amazon.com Inc.,'s Whole Foods Market chain or Instacart Inc.
FreshDirect is profitable today, said CEO David McInerney. San Francisco-based Instacart, one of the biggest grocery delivery companies, last month raised $200 million, giving it a valuation of $17.7 billion. The venture capital-backed company said its valuation has more than doubled since the start of the year, and that its order volume and workforce have increased.
Many grocers are relying on Instacart and other outside companies to pack and deliver orders. Some supermarkets are building small, automated warehouses near their stores to prepare online orders.
But making delivery profitable remains challenging. Retailers have said online purchases tend to be less profitable than those in stores because of the extra expenses associated with filling, packaging and delivering orders. Some are prioritizing pickup of orders placed online at their stores rather than delivery.
FreshDirect, which opened in New York 18 years ago, raised $189 million from investors led by J.P. Morgan Asset Management in 2016. The deal with Ahold Delhaize and Centerbridge Partners is expected to close in the first quarter of 2021, the companies said.
(END) Dow Jones Newswires