Dive Brief:

• Kraft Heinz' $100 million venture capital fund, Evolv Ventures, is backing San Francisco-based GrubMarket as its initial investment. GrubMarket is a farm-to-table food delivery service that sources organic and local food and produce directly from producers and delivers it to businesses and consumers.
• Evolv did not disclose its agreement terms, but Tech Crunch reported the funding round totaled $25 million. It was led by WI Harper Group and Digital Garage, with participation from Evolv and several other investors.
• Steve Sanger, general partner of Evolv Ventures, said in a release that GrubMarket is disrupting the wholesale food market and this investment can help it expand. "GrubMarket plans to grow its presence and product offerings through both geographic and product expansion," he said. 

Dive Insight:

GrubMarket already seems to be doing well with its producer network and economies of scale interacting both on the buyer and supplier end. One of its largest store customers is Whole Foods, and the startup also supplies the BlueApron and HelloFresh meal kit companies. However, GrubMarket currently serves just six counties in the Bay Area. But should its expansion plans succeed — which this $25 million in new funding might significantly enhance — Evolv Ventures and the other funding round participants could see their investment gamble pay off in a number of creative and profitable ways.

GrubMarket, which works with suppliers to sell and deliver products through its online store, hits on consumer trends of wanting more fresh local food and having it delivered straight to their door. Mike Xu, the company's CEO and founder, told TechCrunch that GrubMarket profitable and doesn't need any working capital, and that it plans to use this latest funding round to invest in additional technology and acquisitions.

Aside from the food portion of the business, the company deals in the tech realm. It built its own platform to manage and plan accounts, customer relationship management and suppliers. It's now being offered as its own product for other food industry suppliers and vendors, TechCrunch reported.

On the acquisition side, GrubMarket is consolidating local competitors in Los Angeles and San Diego that have worked with farmers and wholesalers, according to TechCrunch. The company also plans to enhance its business in New York and New Jersey in order to bolster its value before going public.

Such progress undoubtedly intrigued Evolv and other participants in the latest GrubMarket funding round. As startups move forward with new models and ideas to disrupt the wholesale food market, a legacy CPG firm such as Kraft Heinz could benefit by using the venture fund's investments to boost its presence in tech and fresh food — and potentially counter a slide in sales.

As CPG companies struggle to stay ahead of consumer demands, they are turning to startup partnerships and investments to provide insights as well as additional revenue. Kraft Heinz committed $100 million to Evolv Ventures last fall to do just that — and its first investment in GrubMarket seems to fit with the capital fund's goals.

Kraft Heinz CEO Bernardo Hees has said that technological innovations in the food industry create new opportunities to strengthen its business model. The company's VC fund is intended to invest specifically in emerging companies that are working to transform the food industry, hoping to accelerate Kraft Heinz' exposure to them and leverage the company's position in the industry to become "the foremost value-added investor in the space," according to Hees. 

Consumers are increasingly moving away from processed, center-of-the-store foods and more toward healthy, better-for-you items. Kraft Heinz needs to move with them or risk losing market share and being left behind. In the release, the firm said it has hired a team of investors and is "actively working and investing with leading companies in the space."