In a rapidly expanding instant-needs delivery space where speed is key, there's arguably no company that's moving faster than Gopuff.
In addition to lighting up dozens of new markets in the U.S., this year the company made several acquisitions, including a delivery tech firm, liquor retailer and European quick-commerce players Dija and Fancy; introduced a fresh meals division; partnered up with Uber on a white-label offering; launched an advertising platform; debuted in New York City; brought on new operations management, including a former Amazon leader; and announced two rounds of funding totaling more than $2 billion. It's reportedly adding another $1.5 billion tied to a public offering and a valuation that could go as high as $40 billion.
One reason for Gopuff's urgency is that it's trying to stay ahead of a rapidly expanding list of competitors, including "ultrafast" startups, DoorDash and grocers like Kroger eager to reach young, digital-savvy consumers. Another reason is that, after doing instant-needs delivery for more than eight years — making it the elder statesman of the industry, oddly enough — Gopuff was ready to go big.
The company currently controls nearly three-quarters of the instant needs market in the U.S., according to senior vice president of business Daniel Folkman, citing data from Yipit. In an interview earlier this month, he discussed the thinking behind some of the company's biggest moves in 2021, how it approaches acquisitions and why it doesn't plan to ease off the accelerator in 2022.
This interview has been edited for length and clarity.
GROCERY DIVE: Is there a theme or a main thought that you feel defines the year for Gopuff?
DANIEL FOLKMAN: I would say consumer adoption. We expanded the platform dramatically in terms of assortment we introduced. We saw massive growth in grocery, pet, baby and over-the-counter medicine. We became what we would consider to be authorities on the categories that we carry.
And I'm talking about consumer adoption not just in the form of new customers, but in how they started to shop cross category. The baskets got bigger, the frequency went up. If you look at Gopuff Kitchens, it's very rare to introduce a new category and you see AOV [average order value] and frequency go up.
GROCERY DIVE: Why did Gopuff decide to jump into the very crowded rapid delivery race in New York City recently?
FOLKMAN: It's no secret that our business started in Philadelphia, and we waited eight years to get to cities like New York. Funnily enough, we've launched New York, London, L.A. and we're launching Paris soon, all in a 60-day span. So we kind of waited to do four of the five largest cities in the world all at once.
The reason we waited was because we wanted to make sure that the model was what it needed to look like to properly service New York. Consumers in Manhattan have the highest level of demand and expectation, and rightfully so. We'll have 30 fulfillment centers [in NYC] by early next year. That's a different type of network than people have seen operated. Our average delivery time is around 15 minutes. That experience is key, and we're seeing almost 100% month-over-month growth since we've launched New York. We're seeing some of the most explosive growth of any of our cities. It's growing faster than previous launches.
GROCERY DIVE: Talk about the speed factor here. Where does Gopuff want to be offering 15-minute delivery and where does something more like 30 minutes make sense? How are you thinking about that timing across your network?
FOLKMAN: That's the hot-button topic in the space right now. I think the important thing to note is that speed is important, but it's only as important as it is consistent. We've always focused on building a consistent and reliable delivery experience for customers. When you're in a New York or a London or Paris or cities like that, speed may be slightly more important to the consumer. Networkwide, we're seeing average delivery time of just around 20 minutes. So, it's not like you're looking at a difference between New York at 15 and Chicago or Philadelphia at 35 minutes.
When people order from us, those products need to be in stock and they need to get delivered as they ordered them. And it needs to be delivered fast when we tell them we're delivering it. I know that sounds like I'm oversimplifying the business because on the back end, it's highly complex. But that's how we think about it internally.
GROCERY DIVE: What are the company's plan for expansion in Europe? And do you see opportunities to learn lessons there that you can apply to the U.S. business?
FOLKMAN: If you look at the European [delivery] market, grocery specifically is much more prevalent than it has been historically in the U.S. The Dija and Fancy teams have taught us a lot about what they've seen in the space and so we've started to roll out more grocery. We've always had a light grocery selection, but we've continued to invest in that category in the U.S. based on those learnings.
To answer the question on future expansion, the core tenet to us expanding our business is that we're going to be the No. 1 player in every market that we operate in. And right now that focus is on the U.K. and France, specifically on London and Paris, because we think those are two key markets to winning in Europe. We do have plans to aggressively expand beyond those two markets in Europe; where specifically, we haven't shared yet.
GROCERY DIVE: Why did Gopuff decide to partner with Uber in the spring, and where does that integration stand at this point?
FOLKMAN: A lot of people were surprised when we did that partnership. Most people historically had considered Uber to be a competitor of ours, but we don't look at third party as competition. We just look at it as a different model and a different subset of goods.
We partnered with Uber for a few reasons. One, they have the largest customer base of delivery globally. I think it's almost 100 million users on a global scale and a pretty large subset of that [is] in the U.S. Two, it's the credibility and the awareness with consumers. All of these consumers are using Uber Eats to get things delivered to them. So introducing Gopuff to a lot of them through their platform was a big opportunity. And then on their end, it was a big opportunity to provide these instant needs categories, alcohol and everyday essentials assortment to their consumers faster and more efficiently than they would be doing it through a convenience partnership.
We're not sharing any specifics in terms of numbers, but we're a handful of months in and both teams are really happy. We've spent a lot of time kind of learning from the data and seeing the difference in their shopper and our shopper and how do we then lean in to certain categories we weren't otherwise in so that their shoppers are getting the things they want. On Uber Eats some of the top items are eggs and milk. Those do well on our platform and aren't necessarily the top-selling items. The tickets are also a little bit bigger.
GROCERY DIVE: Gopuff Kitchens rolled out over the summer. Where does that fresh meal piece fit into the company's delivery strategy?
FOLKMAN: We see that 90% of our Kitchen orders include a non-Kitchen item. So this idea of cross-category pollenization for customers is something we've spent a lot of time on. We only have around 60 kitchens live, which is a lot given we started launching this year. That's like 10% of our fulfillment centers that actually have them, so there's a big opportunity to scale them. But you're seeing a larger ticket, a couple of dollars more per basket. You're seeing double-digit increases in frequency. The attach rates are climbing towards becoming one of the higher attach rate categories that we have. We think it becomes a core piece of the business over time.
GROCERY DIVE: Is Gopuff looking to keep increasing its assortment count, or is it more about refreshing the assortment at this point, which is around 4,000 SKUs?
FOLKMAN: I think it's a combination of both. We've continued to expand the assortment, which we think is a massive opportunity. That will continue. I'm not saying necessarily we want to be everything to everybody. We're not talking about hundreds of thousands of SKUs. We're not even necessarily talking about number of SKUs in a grocery store.
But we're going to continuously optimize. One of the benefits of our platform is we don't have annual resets. We can test out inventory. If it's not performing, we can remove it. If it's performing well, we can expand it. If it's in one region and it's great, we can put it national. We have teams focused on the procurement of the goods, the analytics of how they're performing, the velocity, the brand loyalty, customer segmenting, which is performing better and then how do you optimize that by region? I think we have a long way to go. This is an everlasting journey of understanding the consumer, who's constantly evolving.
GROCERY DIVE: Local and premium products seem to be a growing focus for the company. How is Gopuff going about finding and bringing those products onto the platform?
FOLKMAN: We built an entire team around it. We've built a muscle around it, and we've localized our business with regional and metro leaders who have their fingers to the pulse, boots on the ground in each market.
I think a company that does it really well is Whole Foods. And we have modeled some of the stuff that they've done successfully and then adapted it to fit what we do.
GROCERY DIVE: Gopuff has acquired two alcohol retailers — BevMo in California and Liquor Barn in Kentucky. What's the thinking here, and is Gopuff on the hunt for more retailers like this?
FOLKMAN: The way that we've looked at those acquisitions has been, how do we accelerate the growth of the Gopuff delivery business in the most cost-effective, efficient and accelerated ways? With BevMo, you're talking about a company that has a very thoughtful and strategic real estate footprint in terms of proximity to consumers in the largest state in the U.S. You've got four-million-plus loyalty customers in the in the Bev Club program. You've got a brand that has 60% unaided awareness in the state of California. And you've got 161 liquor licenses in a state of California where there's a finite number of liquor licenses. And we had no presence in California at the time.
Less than a year after acquiring them, we have over 100 BevMos that we have integrated with and have enabled delivery. You still can walk in and shop your BevMo experience, but we've also added all the Gopuff assortment in stores, and then all of that can be delivered from that fulfillment center. We're already covering almost 60% of California in less than a year. This would have taken us three or four years to build organically.
"There's going to be a massive investment in marketing our brand. Making Gopuff a household name is a big focus as we head into next year."
Senior vice president of business, Gopuff
It's very similar with Liquor Barn in Kentucky. I think the stat is 90% of people who live in Northern Kentucky, Louisville or Lexington are within a mile of a Liquor Barn. That's probably 60% of the state [population] of Kentucky, roughly. You also have a beloved brand, a couple hundred thousand consumers and liquor license acquisitions. But the other thing that Liquor Barn brought to the table was the allocation and assortment of bourbon and whiskey, which is best in class in the U.S. The ability to take that assortment and scale it across our entire network we thought was unique, and we also got a great team out of the deal. Alcohol has become a very large strategic moat for us.
When we look at M&A, we have three strategic pillars: geographic expansion; vertical, or category expansion; and then the technology and people side of the business. If we can materially accelerate one of those pillars, that's when a deal makes a lot of sense. If you look at all the deals we've done, they very cleanly fit into one of those three buckets, if not more.
GROCERY DIVE: Gopuff has focused on adding new management in its operations and fulfillment divisions, including Tim Collins, who was global vice president of logistics at Amazon. What does that say about the company's needs in those areas right now?
FOLKMAN: We're humbled to be able to bring in this kind of talent. It's an incredible validation of the model. I also think it speaks to the complexity of the operation and how, structurally, we've had to build a lot of advantages that require such a deep level of understanding and expertise to operate at scale. Not only do we feel like we built the technology for that and laid the blueprint, but now we do believe we have the right personnel to help us scale that.
GROCERY DIVE: Anything you can share on retail store development for Gopuff? We recently reported on a store model in San Francisco that relies on ordering kiosks. Is that a model the company is planning to expand?
FOLKMAN: It's not unprecedented to see a digitally native company build physical presence to bring their brand to life. We've seen it with Warby Parker, Allbirds and Bonobos. For us, delivery is the core of our business. But where there are opportunities to accelerate the business through physical infrastructure — that's something we've been doing forever. We have 600 buildings. If you look at what we have in New York City, we have our front-of-house kitchen in SoHo where consumers can come and experience our fresh food. We bought 183 liquor stores we had to learn how to operate.
We're in major test mode across a lot of areas, but more to come is what I would say on that.
GROCERY DIVE: What's coming in 2022 for Gopuff?
FOLKMAN: We look at 2022 as another massive growth year. In terms of geographic expansion, it's continuing to further penetrate North America, Europe, and we'll see if we go beyond Europe next year or not. We're also going to refine the assortment. And the third area is around the brand. There's going to be a massive investment in marketing our brand. Making Gopuff a household name is a big focus as we head into next year. Nothing I can share yet, but there'll be some really exciting campaigns that I think you'll start to see our brand in this slightly different light, in a positive way.