When Hungryroot, the grocery delivery-healthy meal planning hybrid, launched in 2015, the e-tailer sold just six items.
Those handful of sauces and veggie-based noodles “recreated frozen dinner in a fresh, healthy format,” CEO and founder Ben McKean told WGB. But six SKUs does not a scaleable company make, Hungryroot soon discovered.
So, from 2015 to 2019, the New York City-based brand expanded to 60 health-focused food products.
But that still wasn’t enough. Being a direct-to-consumer purveyor of a bespoke set of packaged foods wasn’t going to be the secret to Hungryroot’s success.
“What we realized was, even at 60 SKUs, the online shopping experience that consumers want is a grocery experience,” McKean said.
In 2019, New York City-based Hungryroot pivoted to thinking of itself as a grocery service. The company grew from doing $25 million in sales that year to nearly 10 times that much, $237 million, today—and it still only sells 500 grocery items. The e-tailer declined to say how many active users it has.
Even with a limited product selection, 80% of Hungryroot customers consider the delivery service to be their primary grocer, McKean said, noting that people are forced to shop elsewhere for some items his company doesn’t carry like toilet paper, paper towels and gallons of milk.
We really think of ourselves as a grocery service first and foremost. What we sell are groceries. You’re not getting meal kits or packaged ingredients. That being said, the core premise is that we are going to go handle your grocery shopping. The recipes are essentially a requirement of filling someone’s grocery cart for them. People don’t have to meal plan. — Hungryroot CEO and founder Ben McKean
Growing that offering, though, is a major focus going forward. McKean said Hungryroot should offer 1,000 products by the end of this year and about 1,500 items in the next several years.
He sees his business as a combination of a Trader Joe’s and a Whole Foods, with the former’s innovative owned brands and the latter’s meticulous sourcing standards.
Using machine learning to build shopping lists
Unlike membership fee-based e-commerce grocery companies like Thrive Market, Hungryroot relies on a subscription model.
New customers must first take a quiz to suss out their grocery preferences: Are you pescatarian or tree nut-free? Do you like a big breakfast? How many eaters are in your house?
With that information, Hungryroot figures out how many servings of meals and snacks shoppers will like and what types of items the basket should contain.
“We get explicit data points at sign-up and then more data,” McKean said. “What we do that no one else does is we use machine learning to get to know you and to fill your cart with healthy groceries and simple recipes.”
Those recipes are key, he said. Hungryroot works to decrease food waste by telling customers exactly how all of the food they order should be used.
“We really think of ourselves as a grocery service first and foremost. What we sell are groceries,” he said. “You’re not getting meal kits or packaged ingredients. That being said, the core premise is that we are going to go handle your grocery shopping. The recipes are essentially a requirement of filling someone’s grocery cart for them. People don’t have to meal plan.”
Artificial intelligence also helps Hungryroot forecast demand and better manage inventory, reducing food waste in warehouses. It reported a food-loss level of less-than 2%.
The customer data gathered by Hungryroot goes beyond simply suggesting an individual’s next grocery order, he said. It is used to craft the grocer’s branded items.
Forty percent of Hungryroot’s revenue comes from its private-label foods, such as legume-based cookie doughs (“They’re some of our customer favorites,” McKean said.) and 25 types of clean-ingredient sauces.
“We’ve used customer data to create innovative food products you can’t find anywhere else,” he said.
The rest of Hungryroot’s products are made up of “modern, healthy food brands” such as Banza and Kite Hill, he noted. All food items must meet the company’s Root Standard, which means products must be made from trusted ingredients, thoroughly vetted, easy to prepare, tasty and free from ingredients such as partially hydrogenated oils, artificial sweeteners, high-fructose corn syrup, artificial colors and artificial preservatives.
The average Hungryroot customer spends $125 per basket, McKean said, citing an industry average basket size of $70.
“You can’t build a large, profitable business shipping $70 of perishable food,” he said.
Is another pivot in Hungryroot’s future?
In 2021, Hungryroot secured $40 million in financing, led by the L Catterton Growth Fund. At the time, the e-tailer said it would use the cash infusion to increase its product offerings, grow its employee base, invest in technology and expand its marketing reach.
The company assembles its grocery boxes in three fulfillment centers around the country, including a newly opened, semi-automated warehouse in Indianapolis. McKean said Hungryroot is considering adding a fourth fulfillment center in 2024.
“With our model, we can do so out of a consolidated warehouse footprint,” he said. “We have built a Hungryroot grocery store. People stand in a location with a conveyor belt, it lights up the product categories for the person. It’s very efficient and high-quality.”
Going forward, Hungryroot’s growth is centered on launching new product categories, such as smoothies, shakes, juices, kids’ meals and heat-and-eat offerings.
“It’s a continuation of the story of the last eight years,” he said, adding that building out those SKUs takes lots of time. “We have to be very thoughtful about which ones we go source.”
So, is another big pivot in Hungryroot’s future?
“I hope not,” he said. “The great thing about Hungryroot today is that we are delivering on that promise for our customers. I’m proud of that. We’re growing tremendously, and that momentum has continued.”