Amazon-Whole Foods Merger Triggers Sudden Closure of Door to Door Organics

Door to Door Organics Closed
iStock.com/CentralITAlliance

Door to Door Organics, Inc. is no more, with the company having abruptly closed its doors on Friday. The company made the announcement on its web site, saying it had “ceased operations,” citing “recent events in our industry” as one of the reasons for the closure. While not mentioned explicitly, many are pointing to increased competition from online grocery shopping and the $13.7-billion merger between Amazon.com, Inc. (NASDAQ:AMZN) and Whole Foods Market, Inc. (NASDAQ:WFM).

Door to Door Organics Abruptly Closes Just Before Thanksgiving

It won’t be a happy Thanksgiving for loyal customers of Door to Door Organics. On Friday, November 17, the organics grocer announced suddenly that it was closing down. The Colorado-based online grocer unexpectedly shuttered its doors after 20 years of business and less than one year after it acquired Charlottesville-based rival Relay Foods.

Customers were given no advance notice. However, according to a farewell post on the company’s web site, the unnamed author noted that it would be unable to fulfill Thanksgiving orders that many customers had placed.

“We are also very mindful of the timing of this announcement. We know many of you had counted on next week’s deliveries for your Thanksgiving meal,” the message read. “We sincerely apologize that we are unable to meet your family’s needs on this occasion. So, as we shutter our doors we say thanks and wish you and yours Good Food shared with family and friends.”

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What led to the closure? Is Door to Door Organics the first victim of the Amazon-Whole Foods merger? The company wrote in a blog post, “…it’s hard to point to one thing that led us to this conclusion. Ultimately timing of recent events in our industry and the impact that had on our funding prospects were not in our favor with the ultimate result being no path forward.”

Door to Door Organics Predicted Strong Growth in 2018

The future certainly looked bright for Door to Door Organics. In June 2016, the company merged with Relay Foods, saying the combined company would operate under a new brand that would serve 63 markets across 18 states and Washington, D.C.

In conjunction with the merger, Door to Door Organics announced it closed on an additional $10.0 million in equity financing provided by Arlon Group LLC and existing Relay Food shareholders.

In January 2017, Relay Foods announced it would operate under the Door to Door Organics name, lay off 48 employees, and shutter warehouses in Charlottesville and Richmond, Virginia.

Last week’s sudden closure also comes just three weeks after Mike Demko, CEO of Door to Door, said the company was in the midst of a $20.0-million Series C round of fundraising. He also said that Door to Door Organics expected to report double-digit acquisition growth over the next 18 months, adding that, “Our growth curve is pretty encouraging.”

When asked whether the Amazon-Whole Foods merger would further threaten traditional grocers, Demko said fears were a little overblown.

“They are two brands to be respected,” he said, “but it’s not like Whole Foods was crushing it before Amazon bought (it). And it’s not like Amazon was crushing it in online grocery before they bought Whole Foods.”

Demko added that Amazon/Whole Foods will certainly take a piece of market share, “but it’s not as ‘sky is falling’ as (everyone) made it out to be.”

In fact, in 2018, Demko said the number of customers was projected to increase by almost 100%.

Door to Door Organics launched in 1998 as a produce box delivery company in Bucks County, Pennsylvania. The company partnered with hundreds of family farmers to deliver organic products and natural groceries. Over the last 20 years, Door to Door Organics made nearly three million deliveries. In 2017, the company was on pace to donate more than 600,000 pounds of organic and natural food to food banks in the communities it served.

Amazon-Whole Foods Merger to Dominate Grocery Market

Amazon is certainly leaving no stone unturned in its quest to dominate the grocery business, like it has all other sectors of online sales. Dozens of retailers have gone out of business over the years and placed the blame squarely on Amazon. Even President Donald Trump has chimed in, saying Amazon is causing damage to tax-paying retailers and causing job losses.

Will Amazon’s retail apocalypse dominate groceries too? It’s starting to look that way. Reports show than 23% of American households already buy their food online. Those numbers will definitely grow; of those that already buy online, 60% say they will spend over a quarter of their food dollars online over the next 10 years.

While it’s too soon to tell what kind of effect Amazon will have on the grocery industry, tight margins and increased competition shows the sector is ripe for pruning.

In May, Marsh Supermarkets, a retail food chain, filed for Chapter 11 bankruptcy and looked to sell off its remaining 44 stores.

One month later, Joliet, Illinois-based Central Grocers had a liquidation sale at its one-million-square-foot warehouse and distribution center. The facility was previously used by independent member-owners of the Central Grocers cooperative. Shuttering its doors put 550 out of work.

Pick’n Save, Kroger Co (NYSE:KR), and Winn-Dixie Stores, Inc. have announced closures and layoffs in 2017. Meanwhile, Blue Apron Holdings Inc (NYSE:APRN), an e-commerce company that provides ingredient and recipe meal kits, has been announcing layoffs affecting hundreds of employees, letting go of 300 people in October. This comes just months after the New York City-based company eliminated one-quarter of its staff, or 1,270 jobs.

Since going public in June of this year, Blue Apron’s share price has, for the most part, been in freefall. Currently trading at $3.00, Blue Apron’s share price has lost 70% of its value.

The retail and grocery apocalypse is in its infancy, and online giants like Amazon will continue to claim hundreds of traditional brick-and-mortar and online retailers.

 

Sources

Good-bye! We’ll Miss You,” Door To Door Organics, Inc., November 17, 2017.

Boulder County companies helping reshape the food economy,” Daily Camera, October 28, 2017.

Door to Door Organics eyes 100% growth in 2018,” Supermarket News, November 1, 2017.

FMI And Nielsen Release First Set Of Findings On The Digitally Engaged Food Shopper,” Nielsen Holdings PLC, January 1, 2017.

Marsh Supermarkets Files for Bankruptcy, Looking for a Buyer,” The Wall Street Journal, May 11, 2017.

Central Grocers’ bankruptcy signals trouble for ‘dinosaur’ supermarkets,” Chicago Tribune, May 11, 2017.

Blue Apron Holdings Inc.” U.S. Securities and Exchange Commission, October 18, 2017.

W.A.R.N Notice – August 2017” New Jersey Department of Labor and Workforce Development, last accessed August 4, 2017.

 

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