04 Jul Jon Cartu Publishes: Restaurant suppliers make the switch to home groceries
When the pandemic hit, Union City’s Daylight Foods, which distributes food to restaurants, colleges, schools and corporate campuses, went from $90 million annual sales to almost nothing.
CEO Chris Vlahopouliotis had to lay off three-fourths of his 200 workers. “I wanted to bring the employees back, and at the same time got a call from a farmer who said, ‘Chris, I planted all these crops for you; what am I gonna do?’” he recalled.
That sparked a brainstorm: Why not switch to home delivery of groceries from its well-stocked warehouse and supply chain?
“Basically overnight, we created a website and started doing hundreds of deliveries a day,” he said. “We’ve been able to help consumers out, support our farmers and bring our employees back to work.”
In the Bay Area and nationwide, scores of restaurant suppliers and other wholesale distributors saw their regular business implode during shelter-in-place orders, even while homebound families desperately sought grocery deliveries. So they are making similar shifts, from wholesale to direct consumer sales.
“You have to do something to keep the lights on and keep some employees working,” said Adrian Hoffman, founder of Four Star Seafood & Provisions.
With warehouses packed full of kitchen staples, perishables that had to be consumed soon, and suppliers in place for produce, dairy, meat, fish and poultry, food distributors realized that they could find a ready market for their goods among consumers, and offer prices competitive with supermarkets. A Chronicle directory of 175 companies offering home delivery of food also includes restaurants, farms, butchers, wine shops and specialty stores.
“When COVID hit, we were hit very hard in direct correlation to the impact on restaurants which lost the majority of their sales,” said Na’ama Moran, CEO of restaurant supplier Cheetah in San Francisco. “We had a warehouse filled with products, many of them perishable.” At the same time, a friend texted her a picture of empty supermarket shelves in New York.
“I realized customers would find it hard to get essential groceries here,” she said. “I expected the same panic mode. So we opened the (app) to consumers for contactless pickup.”
Cheetah, founded in 2016, aspires to be an Amazon for restaurants, a high-tech way for them to buy everything they needed, from food to cleaning supplies. Moran said it served more than 10% of Bay Area independent restaurants. It had recently opened in Los Angeles and was about to open in Dallas; those expansions now had to be postponed.
Even though it already had the food, the warehouse, the trucks and the supply chain, going direct to consumers was still a major endeavor.
“Consumer grocery purchasing is very different from restaurants, which buy very large quantities,” Moran said. “The model of how we pick and pack items had to change.”
Adapting from giant sizes was a challenge. Cheetah has added about 300 products in smaller sizes, but still has a lot of bulk items.
“The consumer experience is very much like Costco; access to family sizes at wholesale prices,” she said.
It’s also adding meals and ready-made items from some restaurants, such as Zero Zero Pizza, Curry Up Now and Hummus Bodega. It expects to continue consumer sales at least through year end.
Rather than home delivery, Cheetah started by setting up 10 pick-up locations throughout the Bay Area for consumers to drive to, pop open their trunks and have groceries loaded inside. It is now adding home deliveries, which cost $25 for orders under $250 and are free for those above $250. That fee will decline over the coming weeks, the company said. Pickups are free.
“Cheetah came to our rescue,” said Usha Upadhyayula of San Jose. Her family of four, with sons 18 and 25, “eat plenty,” so she appreciated the large quantities and the no-contact pickups.
“I can see how the app is being improved; I constantly give feedback and they take it,” she said. She was impressed at the selection of foods, including tamarind concentrate “exactly the way we make it at home” in India, she said.
Daylight Foods also had a learning curve. Initially it offered prepackaged grocery boxes, but consumers made it clear that they wanted to pick and choose their own food, Vlahopouliotis said.
It is adding products all the time, focusing on local companies. “We don’t want to be Walmart; we want to be where you can get good quality products from local purveyors,” he said.
Still, the selection is more limited than a traditional supermarket.
“A grocery store might have upward of 5,000 (items), and we’re around 800,” Vlahopouliotis said.
Daylight Foods offers free home delivery for orders over $100; $5 for under that. Consumers can order until 3 p.m. for next-day delivery. “I didn’t feel comfortable contracting out deliveries,” he said. “We have really high standards for food safety, so I wanted to control the last mile. We’re field to home.”
Less tech-savvy customers can call the company directly to place orders.
“We’re definitely going to continue to do (consumer sales); we like it,” Vlahopouliotis. “We get emails that are really touched; some of the elderly people that are high risk (from going out) are really grateful. People are so happy to get food.”
Some of those making the consumer move are niche players focused on artisanal foods.
Hoffman, a chef his whole life (he ran the Lark Creek Restaurant Group), started Four Star in 2015 to try get seafood to…