Farmstead, the San Francisco-based online grocer offering low prices and free delivery, is partnering with Alex Lee, parent company of Lowes Foods and Merchants Distributors Inc. (MDI), on its first expansion outside of the Bay Area, which was announced at Groceryshop this week. The move will expand Lowes Foods' reach without building more physical stores.
In the Carolinas, Farmstead will employ its propriety technology and microhub model—delivery-centric warehouses that serve a 50-mile radius—to help reduce food waste by three to four times and attempt to eliminate food deserts by making fast, inexpensive delivery available to a wider area. Customers will be able to get high-quality local brands, national brands and fresh foods such as meat, dairy and produce from one place with no out-of-stocks, delivery fees or markups.
“When we learned about Farmstead’s microhub approach, we recognized it would be a great model for expanding into new geographies where we don’t have physical stores,” said Kimberly George, VP of communications and corporate citizenship for Hickory, N.C.-based Alex Lee. “This partnership will help improve the reach of Alex Lee in the Carolinas, and boost revenue with little risk. We’re excited to be the first to partner with Farmstead on this innovative approach to grocery.”
While expansion through physical stores are costly and take a long time to serve a fairly small radius of customers, Farmstead’s microhubs can be constructed in eight weeks for $100,000, the company noted.
“We built and perfected the microhub model in San Francisco, and showed that it’s possible to leverage technology and build strong supplier relationships in order to make online grocery profitable,” said Pradeep Elankumaran, founder and CEO of Farmstead. “Now we’re ready to expand it to other geographies. This partnership with Alex Lee is the first of many we’re planning with grocery chains and distributors across the country.”