The Online Grocery Marketplace is Booming in the Bay Area. Here’s Why

The coronavirus pandemic has transformed grocery shopping. Grocery sales have increased significantly since the onset of the pandemic, and the convenience and safety of online grocery and delivery companies have contributed to a historical boom.

Two Bay Area online grocers in this swift growth are Good Eggs and Imperfect Foods. Each company is carving out a respective corner in the burgeoning marketplace by adding values to their missions around product quality, affordability and above-average compensation that sets them apart from gig-economy fueled tech companies like Instacart and Postmates.

“Online grocery is definitely having its moment,” said Bentley Hall, CEO of Bay Area based online grocery purveyors Good Eggs. “I think the consumer behavior shift is large and fast and here to stay.” Hall explained that even though the company has added more delivery windows than ever before to meet growing demands, they sell out in minutes. “We've more than doubled our revenue in the last two months.”

Growing During a Pandemic

Good Eggs, which buys wholesale produce and prepared foods directly from vendors that’s later re-packaged and sold on its website, has been able to meet the growing demands of its new and existing customers by expanding its workforce and ramping up the volume of orders from suppliers. “What we heard from most of our suppliers as this all happened was that at least half of their business was through restaurant and food service and that had dried up overnight,” Hall said. “Instead of on-boarding a ton of new suppliers, [our] focus shifted to how we serve our existing suppliers so we can have a more resilient supply for our customers in this moment.”

The food system’s resilience has been thoroughly tested by the pandemic and companies that have adapted their supply chains to systemic shocks have seen growth during this pandemic. “In the early phases of the pandemic, when airlines and hotels and restaurants shut down, we saw enormous quantities of food being stuck in the wrong supply chain,” said Phillip Behn, CEO of San Francisco-headquartered Imperfect Foods. Behn’s company focuses on reducing food waste by buying and delivering superficially less than perfect produce, pantry staples and proteins for discounted prices to over 400,000 customers across the country. “We're a small company so we did what we could. But it was quite painful to watch the amount of food that ended up being diverted to less than ideal uses,” he added.

Behn surmises that a major problem that leads to food waste in the country is an inflexible supply chain that is disconnected from growers and farmers. He attributes his company’s ability to adapt during the pandemic to the direct relationship Imperfect Foods has built with over 300 growers, 80% of which he said are family-owned businesses. As Imperfect Foods grows, maintaining that dynamic will be a priority and a challenge for Behn.“When companies grow, systems replace some of those relationships,” Behn admitted. “But I'm happy to report that on the sourcing front, we've kept it very much like it was on day one. We continue to have a direct relationship with farmers [which] has grown in volume but it hasn't changed in nature.”

Scaling Business and Values

Besides their wholesale relationships with growers, Good Eggs and Imperfect Foods also differ from competitors through their workforce as they are predominantly staffed by full-time workers with medical benefits. Besides offering extended paid sick leave in response to COVID-19, Good Eggs and Imperfect Foods also pay above the minimum wage with the former promising living wages and both offering ownership shares for all employees. “It's more costly in the long term to not have a quality workforce in place,” Hall explained. “It's a good business decision and it's the right character move.”

A part of their scaling business, Good Eggs decided to move into a new 115,000-square-foot warehouse in West Oakland.. Like many new residents to West Oakland, Hall explained that the company chose West Oakland for its proximity to San Francisco, the South Bay and the rest of the East Bay. “If you look around like where is the best location that can deliver same day to all of those geographies and also has an open labor pool, [there's] this combo of where our customers are and where our team is coming from,” he said of the company’s new home.

Hall worked closely with the city of Oakland to identify organizations that can connect them with local candidates for the 400 new full-time jobs that the company added in the spring. Of those new hires, Good Eggs stated 61% are Oakland residents. One of them is Myra Burns who is in her third week as a delivery driver for the grocery company and makes $19 an hour. “From my perspective, it's really a good place to work for,” she said citing the safety protocols the company takes and the health benefits she receives. “They try to work with you and whatever [physical limitations] you have going on,” Burns said of her new employer’s flexibility. “And I appreciate that because I'm in my late fifties.”

As for the living wage the company proudly touts, Burns said she fares better because she’s a single person with no dependents. “[Does] it work for me completely? It has its moments. [I] can use the majority of it to pay my bills and then I own a cleaning service and a little handy-woman service on the side so it just goes along with what I'm doing,” she said. Burns’ assessment is echoed by MIT’s Living Wage Calculator which has Oakland’s hourly living wage at $18.25 for single adults with no children. That figure jumps to $36.46 with just one child.

When asked about their ideal customer, Good Eggs’ Hall talked about Marissa, the company’s moniker for its prototypical customer. “Oftentimes, it’s two working parents who have kids under the age of 15 at home,” he said. “They’re the ones who value this pace and quality that we seem to balance pretty well.” According to The Living Wage Calculator, Burns’ wage, when placed in the Marissa scenario and doubled to account for a second income, would fall short of the living wage.

Imperfect Foods, which pays its drivers around the same hourly rate, has resorted to temp agencies to staff some of their positions to meet recent surging demands. “We've had to be flexible. Our plan long term is to go back to 100% company hired associates,” Behn said.

Looking to the Future

As both companies look ahead to the growing online grocery marketplace, they’re both eyeing expansion. For Good Eggs, Southern California is on the horizon for what Hall calls a “thoughtful geographic expansion.” He also wants to double down on the Bay Area market. “There's a roving boundary between groceries and restaurants which this whole scenario has accelerated so we're thinking about which tastemakers and restaurants we can actually work with to get groceries plus other things [out there],” he said adding that those collaborations are underway for the Bay Area.

Behn and Imperfect Foods can leverage renewed awareness around food waste that’s been exposed through the fragile infrastructure of the food system. “The good news is there's so much runway, there's so much more that we can do,” he said, adding his company will have diverted 200 million of the 20 billion pounds of food waste in the country. According to Berkeley based non-profit ReFed, integrating imperfect produce into the market ranks 18 of 27 on shifts that would significantly reduce food waste with consumer education and standardized date labeling coming in first.

But Behn seems up for the challenge: “We can grow into such a large company by continuing to stay 100% focused on our mission.”