The honeymoon didn’t last long. Twenty-two months after it acquired New York City-based online fresh-oriented retailer FreshDirect, Ahold Delhaize has agreed to sell the company. The buyer is Getir, an Istanbul, Turkey-based ultrafast grocery delivery service which operates in several key U.S. markets (New York, Chicago, Boston) as well as in the U.K., Germany, The Netherlands and in its home country. It was founded in 2015. The deal is expected to close later this month, but financial terms have not been released. It is estimated that FreshDirect’s annual sales are in the $800 million range.
Ahold Delhaize acquired 80 percent of Fresh Direct, founded in 2002, from private equity investors in January 2021 (investment firm Centerbridge Partners purchased the remaining 20 percent).
At the time, chief executive Frans Muller said: “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 ecommerce 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 omni-channel evolution. It is a great addition and fit for our portfolio of leading local brands. The deal allows us to reach additional customers in the New York trade area and therefore will add incremental sales to the business. 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.”
The purchase price was reportedly $408 million (the Ahold Delhaize share cost the company approximately $327 million) and the strategy at the time was to bolt on to the Dutch retailer’s growing digital business, which had seen significant growth during the previous 18 months, primarily due to the sales tailwinds from COVID.
However, even after dominating the Manhattan online retail food market for many years, the company found profitability challenging. When it relocated its corporate headquarters from Long Island City in Queens to a new 400,000 square foot automated depot in the Bronx in 2018, it slowly began to make money. Subsequently it expanded beyond the Metro New York City and began delivering to parts of the Philadelphia and Washington DC markets. Both of those marketing areas were eliminated by Ahold Delhaize in August 2022 as was as a distribution center in Capitol Heights, MD.
JJ Fleeman, Ahold Delhaize USA’s chief executive, said the decision to sell the FreshDirect business was to focus investments in its omnichannel businesses. “This was a difficult decision, especially given FreshDirect’s rich history in the New York City area,” said Fleeman, who took the helm of the Dutch retailer’s U.S. operations in April. “However, our strength as a grocery retailer in the U.S. is the true omnichannel experience – a combination of online and in-store – where we have leading brands and market share, strong store density and online presence, and a deep heritage of customer loyalty and relationships. With this decision, we will increase our focus on omnichannel – our biggest growth opportunity.”
“We are proud of the positive impact FreshDirect has had in the online grocery space, raising the bar in offering the best in-season selection of locally sourced goods,” added Fleeman. “In the coming weeks, we are committed to supporting a smooth transition for FreshDirect’s valued employees, customers, partners and communities, who have been loyal to the brand over the past 20 years, so that FreshDirect will be well positioned to continue as an integral part of New York’s food culture under Getir’s ownership.”
FreshDirect currently employs approximately 3,200 associates and ADUSA said there will not be any disruption of service as a result of the sale.
In assessing its focus on its omnichannel investments, it’s curious that a company that considers digital/online to be such an important component of its entire omnichannel experience has closed two large fulfillment centers in the past five months (Jersey City, NJ and Hanover, MD) and now is selling an asset that, less than three years ago, was considered a building block in the retailer’s growth strategy.