- Sprig, a San Francisco-based meal delivery company, has shut down operations, according to the Wall Street Journal.
- Gagan Biyani, Sprig’s CEO, said despite recent efforts to expand its platform, including upping its menu items and opening retail space, it couldn’t compete in the complex food delivery market.
- The startup raised more than $56 million in funding, with some of its investors being Accel, Social Capital and Greylock Partners.
Although Sprig was able to hold on longer than another San Francisco-based meal delivery service, Spoonrocket, the company soon found it could not compete with some of the big players in the industry and was forced to close down.
The meal delivery business has exploded over the last year. While Blue Apron and Hello Fresh have done well making a name for themselves, some of the smaller startups are finding they are not able to grow as fast as they would like and are too aggressive in their expansion strategy. These problems often result in massive cash losses that eventually lead to shut downs as investors are unwilling to contribute more money to the operation.
Meal kit services are also seeing increasing competition from grocery retailers who are trying to capitalize on the growing market, including Kroger and Publix, who have both recently entered the business. Several food companies such as Hershey, Conagra and Campbell Soup have entered the space as well, and many manufacturers are starting to partner with grocers on meal kits.
A Harris Poll from earlier this year showed that 25% of adults purchased a meal kit in 2016 and 70% of meal kit purchasers have continued to buy them, so there’s money to be made when done right.
With so many companies participating in meal kits it's not surprising to see businesses such as Sprig struggle against far more established and deep-pocketed competitors. It would not be surprising to see more startups close their doors in the coming month and years, especially if the meal delivery business slows or bigger players gain a stronger foothold in the ultra-competitive space.