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Farmstead sets wagons Southeast

The San Francisco-based online grocer’s first expansion market is far from home.

Farmstead is expanding to the Carolinas after entering a partnership with Southeast grocery company Alex Lee. The partnership between Farmstead and the parent company of grocer Lowes Foods and grocery distributor Merchants Distributors (MDI) enables the companies to expand their reach in complementary markets without the need to open any physical stores.

Farmstead, launched in 2016 as a free online delivery service for fresh, locally-sourced produce, now provides both fresh produce and shelf-stable items. The company maintains a mix of national and local foods for its customers, including partnerships with national brands such as Kraft.

To maximize efficiency while reducing costs, Farmstead leverages proprietary technology and microhubs - delivery-centric warehouses that serve a 50-mile radius. Farmstead plans to use this model to expand nationwide to a primarily mid-market audience.

In its initial expansion market in the Carolinas, the company will open multiple microhubs. As a result, Farmstead hopes to reduce food waste by 3-4x and make fast, affordable delivery available to a wider area, including traditionally underserved “food deserts.”

According to Farmstead, physical supermarkets can cost up to $10 million to build, take 18-24 months to construct, and typically serve a five-mile radius. By contrast, the company says one of its microhubs can be constructed in under eight weeks for $100,000, and can serve a 50-mile delivery radius.

“When we learned about Farmstead’s microhub approach, we recognized it would be a great model for expanding into new geographies where we don’t have physical stores,” said Kimberly George, VP, communications and corporate citizenship, at Alex Lee. “This partnership will help improve the reach of Alex Lee in the Carolinas, and boost revenue with little risk. We’re excited to be the first to partner with Farmstead on this innovative approach to grocery.”

“We built and perfected the microhub model in San Francisco, and showed that it’s possible to leverage technology and build strong supplier relationships in order to make online grocery profitable,” said Pradeep Elankumaran, founder and CEO of Farmstead. “Now we’re ready to expand it to other geographies. This partnership with Alex Lee is the first of many we’re planning with grocery chains and distributors across the country.”
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