Ahold Delhaize to buy online grocer FreshDirect

Ahold Delhaize plans to acquire online grocery pioneer FreshDirect in tandem with private equity firm Centerbridge Partners.

Under the deal, announced late yesterday, Zaandam, Netherlands-based Ahold Delhaize will be FreshDirect’s majority owner, with Centerbridge holding a 20% stake. Financial terms of the agreement weren’t disclosed.

Plans call for FreshDirect to keep its brand name and operate independently out of its 400,000-square-foot automated fulfillment center and campus in the New York City borough of the Bronx. The online grocer will report to a seven-person board.

FreshDirect moved its headquarters from Queens, N.Y., to a new 400,000-square-foot campus and automated fulfillment center in the Bronx, N.Y., in 2018.

“FreshDirect is a leading local brand in the fast-growing online grocery sector in the New York City metro area, one of the most important e-commerce food markets in the United States. With its unparalleled quality of fresh food, exceptional brand recognition and dedicated people, it has generated remarkable customer loyalty. This acquisition further propels our omnichannel evolution. It is a great addition and fit for our portfolio of leading local brands,” Ahold Delhaize CEO Frans Muller said in a statement.

“The deal allows us to reach additional customers in the New York trade area and, therefore, will add incremental sales to the business,” he explained. “It further enables us to address customers’ growing preference for convenient ways to shop. Finally, we are excited to have Centerbridge alongside of us in this venture and believe our combined focus, expertise and scale will help us maximize the success of FreshDirect going forward.”

Related:FreshDirect bolsters delivery capacity in New York tri-state area

The companies said the transaction is expected to close in the first quarter of 2021, pending regulatory approval and customary closing conditions.

FreshDirect has provided online grocery shopping and delivery services, primarily in the metropolitan New York area, for more than 20 years. The company was founded in 1999 by Joe Fedele, Jason Ackerman and current CEO David McInerney, who will continue to lead the company.

“We are strong believers that the future of grocery retail involves getting customers the best-quality food, exactly when they want it, with the best customer service,” McInerney commented. “We have built FreshDirect into a reliable and recognizable business to serve this purpose. This transaction marks an important milestone in the continued growth of FreshDirect. I believe Ahold Delhaize’s global scale, focus on strong, leading local brands, and ability to utilize cost-of-goods synergies, will allow FreshDirect to achieve its full potential.”

Related:FreshDirect shifts focus to expansion

FreshDirect's fulfillment center has robotic pick towers, smart routing and nine miles of conveyor belts and is temperature-controlled for categories such as meat, deli and bakery, including a freezer room for premium ice cream.

Ahold Delhaize and Centerbridge noted FreshDirect’s focus on fresh food, which accounts for more than 60% of its sales, as well as its relationships with local farmers, meal solution capabilities and supply chain that allows “faster and more direct delivery of fresh food than most other conventional grocery services.” They added that FreshDirect’s fulfillment center and e-commerce platform enable customer ordering “from picking through packing” to last-mile delivery, including same-day and rush delivery.

“We are excited to partner with Ahold Delhaize, a leading player in global food retail, and believe this is an outstanding combination,” stated Adam Burinescu, senior managing director at New York-based Centerbridge. “As a partner, we believe that Centerbridge brings deep experience in the interplay between logistics facilities and e-commerce fulfillment that can assist FreshDirect in reaching its next level of growth.”

Like other grocery retailers, FreshDirect has seen rising demand for online delivery since the COVID-19 outbreak and responded by stepping up its service capabilities.

In late June, the e-grocer launched FreshDirect Express, a two-hour, on-demand delivery service, in parts of New York City. That service was introduced about a month later in metro Washington, D.C., via a partnership with on-demand fulfillment provider Fabric, which marked FreshDirect’s foray into automated micro-fulfillment. Then in August, FreshDirect boosted its delivery capacity in New Jersey, Connecticut and New York’s Westchester County and Long Island. The company said the capacity expansion reflected a 100% growth surge in its suburban footprint, including an extension of delivery to the Hamptons, a leisure and social hotspot on Long Island. 

Overall, FreshDirect delivers directly to customers in selected markets in seven states, including New York, New Jersey, Connecticut, Pennsylvania, Delaware, Maryland and Virginia, plus the District of Columbia.

Ahold Delhaize’s U.S. business, Ahold Delhaize USA, operated another one of the nation’s pioneering online grocers — Peapod — but shut down the Chicago-based operation in mid-February as the company accelerated the shift of e-commerce services to its local supermarket brands, which include Stop & Shop, Giant Food, Giant/Martin’s, Food Lion and Hannaford. A new unit, Peapod Digital Labs, was formed in mid-2018 to support online grocery and other digital services and drive omnichannel innovation for the retail grocery banners, which operate nearly 2,000 stores on the East Coast.

Metro New York, served by the Stop & Shop brand, represents a key market for Ahold Delhaize USA as it drives e-commerce expansion. U.S. online sales jumped 114.7% in the fiscal 2020 third quarter, and Muller said the company aims to boost its online capacity by nearly 100% in 2020 and 2021, including doubling the number of pickup locations to about 1,400. The U.S. business reaches about 90% of households in its markets with home delivery and click-and-collect and roughly 70% with same-day delivery, including Instacart.