Dive Brief:

• FreshDirect, the online grocer that serves New York City as well as Washington D.C., Philadelphia and parts of Delaware, has become a hot target for acquisition, according to the New York Post.
• The company’s popular home delivery service has been coveted by numerous retailers who have approached FreshDirect about selling. But the online grocer has always preferred to focus on growing its business rather than cashing out.
• FreshDirect’s attitude could change, however, following Amazon’s offer to buy Whole Foods. FreshDirect doesn’t have the technology or the resources to compete with Amazon, sources told the Post, and could struggle against the grocery retailer, which operates numerous stores in the markets where it operates.  

Dive Insight:

Anyone who lives in New York or has spent any significant amount of time there knows the familiar sight of FreshDirect’s delivery trucks zipping along the city’s streets. In the 17 years since the online grocer began delivering groceries across New York’s five boroughs, it’s become a favorite of the Big Apple’s notoriously hard-to-please residents by offering consistently fresh product and top-notch customer service.

FreshDirect is also quite popular with brick-and-mortar retailers, who have approached the e-grocer in the past about selling. They’re enticed by the company’s $600 million in annual revenue, and by the fact that it has a strong foothold in a very dense, profitable city.

FreshDirect has been slow to grow, underscoring just how complex and expensive home grocery delivery can be. But it’s made significant moves of late. Earlier this year, the company expanded to Washington, D.C. following a $189 million round of funding in late 2016. The company also delivers to parts of New Jersey, Pennsylvania, Connecticut and Delaware.

Also this year, FreshDirect rolled out a one-hour delivery service called FoodKick. In interviews, company founder and CEO Jason Ackerman has said the service caters to fill-in trips, though FreshDirect was no doubt felt the need to compete directly with Amazon Prime Now and Instacart, which have recently made inroads in New York City. In addition to these grocery delivery rivals, FreshDirect now also competes with specialty services like Drizly, which delivers alcohol, and Urban Fetch, which delivers consumables.

Amazon’s potential acquisition of Whole Foods changes the competitive landscape for FreshDirect. The natural and organic retailer operates stores throughout the online grocer’s service area, but so far its partnership with Instacart hasn’t been too disruptive for the online grocer. However, Amazon could prove to be very troublesome to FreshDirect once it gets its hands on Whole Foods’ grocery products and systems. It’s too early to get wrapped up in the details, but it’s not hard to imagine the deep-pocketed Amazon offering faster, cheaper delivery, customer perks and other enticements to lure away FreshDirect customers. If the online grocer doesn’t seek a buyer, it needs to steel itself for a long and costly battle ahead.