Sprig is shutting down
techcrunch.com
techcrunch.com
By implying restaurant you're still thinking about back of the house and front of the house. That paradigm doesn't exist for the likes of SpoonRocket or Munchery or Sprig.
They operate out of commercial commissary kitchens that produces products that needs to go into a distribution network to people funneled in from marketing. The bet is that function isn't linear, rather it can be scaled up, especially when prodded along by all the state of art and best practices in ecommerce marketing techniques.
These guys were trying to play the Amazon game, but instead of a 2 day shipping window, it's right now or in a few hours. And instead of a shipping hub to your door steps, it's down the street to your doorsteps. And instead of elastic goods that can wait for awhile before you commit to buy it's a need to satisfy.
A successful restaurant feeds your craving. A successful supply chain fulfills your need.
The real challenge is just the fact at the end of the day there's a fixed cost to fulfillment no one can figure out how to shake.
Despite all the twisting in the labor relationship (avoiding W2s or stealing wages), it still costs $15/hr to deliver up to four $10 items that costs $3 to make. Until that goes down (with automated tincans on wheels) then merely sale of food items won't support these bets.
Except weed and alcohol. Those are the only things that have the margins and demand to support an immediate delivery network.
OP is right here that the substitute good for Sprig was ordering delivery from a restaurant. Typically when you think about ordering delivery, you instantly start thinking about your favorites, meaning this industry is hard to scale because it requires building trust.
Weed and alcohol may have monopolistic characteristics brought on by strict licensing requirements, but people typically don't consume these on a daily basis so the lower delivery quantities negate the higher margins.
So Sprig is not a place you go to eat. There is no front of house experience. It's a thing that makes something to deliver to you. That's a fulfillment service.
Here's something to think about, most restaurants don't offer take out or delivery services. Because it undermines their value. They want you to sit down and enjoy in their decor, talking to their staff, eating their food, and most importantly they want exacting control and consistency. That indeed is how you build up trust and repeat visit.
But you're also conflating two behaviors here.
When you think about ordering delivery it's because you're trying to satiate a craving. You want that one thing form that one place. Delivery is an augmented service to the restaurant. It's how DoorDash can exist. But it's also why In 'N Out Burgers sued to not have their food be delivered. And it's also why the bottom half of the DoorDash's platform are not good experiences, it's a restaurant being pulled to be something it's not.
But that's not what Sprig is. They don't offer the same thing every day, they are relying on you to trust the top level branding alone and by browsing the options. It's a production facility with a delivery network.
When you want to your favorite meal delivered and when you want to order from Sprig or SpoonRocket or Munchery are coming from two different places. The former is hacking a restaurant, the latter is purchasing products.
Then lastly, it's not about licensing requirements for weed and alcohol. It's that they're inherently different products whereby immediate fulfillment is possible aside from transporting a human being.
Some restaurants don't have any seating area. Think Dominos Pizza.
>When you think about ordering delivery it's because you're trying to satiate a craving.
Or you just don't feel like cooking. Also you might want anything random - something different you don't dislike. And you don't feel like walking to a restaurant and sitting there alone waiting for food + paying tips etc.
Sprig/SpoonRocket/Munchery/doordash/Grubhub/Eat24/localpizzashop.com/any local place that is walkable distance and offers takeout are effectively direct competitors for me.
90% of pizza joints. Yes, they may have seating area, but it's greasy, uncomfortable, and small. The overwhelming majority of their business is take-out, and delivery.
Every single hole-in-the-wall place. They either deliver, or they get you to pick up your own food.
Food trucks.
Having no front isn't some amazing innovation that will afford you margins that VCs and computer programmers expect.
Yes, optimizing your logistics and supply chain in the restaurant business is a huge problem. It's also a problem that successful restaurants, by necessity, are already really good at solving. You're not going to squeeze much blood out of that rock.
I think this was the most insightful part of your comment. When cars are self-driving, there's no reason they'll look like cars any more. There will be people-carriers, but they won't be the only vehicles on the road when they don't have to carry people any more.
Instead, what about small cargo carriers, like bike messengers without the bike? Imagine basically coolers on wheels, zipping along with cars. Why have a full-blown car or motorcycle when you can have a tin can on wheels deliver stuff?
[edit] Here's a brief video that shows what they look like.
http://www.cnbc.com/2017/04/21/robots-are-now-deliving-food-...
For one reason, to prevent people from stealing the goods. I used to deliver pizza. It was pretty much a given in certain areas that if I was not very careful about locking my car that I'd get pizzas stolen out of it while I was parked making a delivery.
A self-driving igloo cooler is just going to get kicked over and emptied.
It seems like Sprig should have had a major advantage over delivery restaurants though - they didn't have to travel back and forth to the restaurant. With a fixed menu of a few non-heated items, they (presumably) loaded the truck with enough to satisfy the demands of the day and then their only problem is Traveling Salesman.
I don't understand why this isn't a killer model. Delivery restaurants make a living, right?
I'm inclined to believe that the parent comment is right, that the expectations were just too great. Even if the food delivery business was much more profitable than the average restaurant, they still had to support a very expensive VC-built technology team.
Also, I just wasn't that excited about the food. I ordered from Sprig a few times; it was just sandwiches and salads. You can get those within about 50 yards from any office downtown. I'm guessing that delivery restaurants make a living because their food is compelling enough that people are willing to wait an hour. Maybe remarkable food doesn't keep all day on a truck?
Having to return to a fixed point every 3rd or 4th delivery seems like it would add up.
You're finding the optimal solution for two problems: making food and delivering food. For making food, along with recipes and process, having great technology allows you to reduce cost and improve customer LTV by:
* Reducing wasted ingredients and spoiled items by predicting demand and tracking your production line
* Identify which meals get people to come back
* Optimize for pricing, similar to website conversion
For delivering food, having great technology allows you to improve delivery speed and reduce delivery cost.
Yes, at the end of the day Sprig competes with any restaurant that delivers in the same way that Warby Parker competes with any eyeglass brand / store (obvious difference being the better margins in the eyeglass industry). However if you can get really good at using technology to optimize your production production and distribution, your advantage is your profit margin and your ability to deploy growth capital efficiently.
Final point -- VCs are ok not making money for a few years. In fact, they HAVE to be ok not making money for 7-10 years. That's the whole point of venture capital.
Here is my Vision (Comprehensive thought process) on the UNIT Economics of Food delivery, how this will manifest by the year 2025 .
Pre-requisites:
a) Massively centralized, highly Automated Kitchens : can prepare 10,000 meals/hour
b) offer quality Meals at $4/meal with delivery ( with Self driving fleet starting year 2022 )
c) Monthly meals plan : a family will buy pre-paid 60 meals/month plan, USE it or LOSE it in a month.
Here are the Plan details.
1. If we take avg. family size as 3 people in US, a family consumes 2 meals/day X 30 days X 3 people = 180 meals/month for family of 3 people
2. for family of 3 grocery bill is say $540/month, that give s Raw material cost as $3 per meal
3. Meal preparation + Cleaning dishes etc.. takes about 1.5 hours/meal that is 3 hours/day for two meals a day for a family
4. If massive Centralized Kitchens ( like the Amazon Robot handling warehouses) can offer meals at $4 per meal ,people hook on to on REGULAR basis.
5. For this massive centralized Kitchens in order offer at at these low $4/meal, they need 'Commitment of minimum number of meals per month' from a family. I would say 60 meals/month
6. Basically this 60 meals/month minimum for $4/meal is like pre-paid PLAN, it is USE it or LOSE it in a month.
7. With the Mobile phone app, you set your Default Delivery place, if any thing change, you change Delivery location 2 hours in advance, your meal will be delivered to that place. ( with self driving fleet that should not be a problem)
8. These Centralized Kitchens Offer all Kinds of meals: Chinese, Japanese, Thai, American fastfood etc..
9. When you have these economy of scale where each family Order their food 1/3 of total meals in a Month, and it is offered almost same price as your Grocery Bill to prepare those meals ( with out 3 hours/day preparing meals /Cleaning dishes) , This MODEL will be successful
> These Centralized Kitchens Offer all Kinds of meals: Chinese, Japanese, Thai, American fastfood etc..
Easy to say, much much harder to implement, specially accounting for personal preferences( extra tomatoes, less/more spicy etc.
That said, there is definitely a huge market opportunity here. A slightly easier approach, I've often thought about, is starting off with a single kitchen where the food is cooked, selling it in high density areas (subway/bus station) via kiosks and vendors. You can do quality control and build your brand. Eventually, you could go after this monthly meal option.
An even bigger opportunity could lie in the logistics space (Transporting the food from cooking location to destination).
This might also be interesting: 1) https://en.wikipedia.org/wiki/Dabbawala 2) https://www.youtube.com/watch?v=sxW9sUnodM8
200 years ago, when every family is making their own tomato Ketchup, I am sure there must be 5000 very little variations of ketchup in USA. fast forward to today there are only 57 and all this is done by one company with couple of centralized locations and People who are used to those 5000 varieties confirmed to 57 varieties .
https://en.wikipedia.org/wiki/Heinz_57
When you consolidate and aggregate EACH of the food dish we eat will be consolidate into only 5 different variations. These centralized kitchens can handle 5 different variants ( Chinese Orange Chicken for example) and prepare 200 meals of each variety ( of total 1000 meals of Orange Chicken )
I have given an detailed answer on this issue in this thread, please search with following text.
Once the above AGGREGATION happens, It is not hard to have a sushi, Pizza, Thai, Chinese etc.. all under same roof Centralized Kitchen because the kitchen will be serving on a given day serving 1000 Pizza, 1000 Thai, 1000 Sushi, 1000 Subs etc.. for 30,000 population city
I assume we use chilled meals(which you reheat at home. can taste great), which last for 2-3 days - so let's say you need to delivery 2-3 times a week, and you delivery meals for the whole family. That's a lot of meals per delivery. Certainly helps the economics.
Now if as a requirement for delivery you would need to install a smart lock[1] on the trunk of your car(that the delivery guy can have the right access to), and a cooling box(maybe one that includes something like ice packets or similar passive temp. regulation tech), and the delivery guy will just drop the food there - this will be really helpful, because it shift delivery to the middle class from suburbs to somewhere near their work, which means much higher route density(deliveries per hour).
So i kind of think the technology part of cheap deliveries is solvable. But it all depends on the marketing part, and changing habits isn't that easy. And that previous plan requires a lot of interlocking parts together. hard.
So maybe a good way to do this is offering delivery for businesses(good delivery economics). Get people used to that. Get commercial kitchens offering great and cheap food based on that. That's what Amazon is doing.
And than, some commercial kitchen will start easy, with an offer of chilled meals for your home(for offices that already get deliveries). They will delivery to your office, you'll put in a cooling-box in office, and take it to your car at the end of the day.
And on top of that, you get a smart lock, or discounts for plans like you mention, or maybe discounts for group plans, etc.
[1]This of course would be a great help to e-commerce in general.
Of course final prep happens on a more local site, but that makes sense - hot food doesn't travel well, which is the main limit on delivery, not time or cost - the buyer could always pay more, but they'll be getting an increasingly overcooked or tepid meal.
Breakfast and lunch also seem less amenable to delivery as they're often eaten "on a schedule" with little room for screwups or delays.
I agree that delivery has a place; I'm not so sure it's going to be from a centralized location/coordinated kitchens. That central location is unlikely to be experts at sushi, Vietnamese, pizza, subs, have the fries I love, Thai, etc.
If you take a two month window,120 meals (2 meals X 60 days) , 90 meals that is 75% consists repeats from a group of 20 different food dishes .
Let us assume, you are living in typical US city where the population is 30,000 people. There may be 10 different categories of people BASED on their 'food preferences'.
When you combine this 10 different category groups with the above '20 different food dishes repeat' combine this with pre-paid Monthly plan and Centralized Kitchens, you have a quality food at close to GROCERY price bill .
Once the above AGGREGATION happens, It is not hard to have a sushi, Pizza, Thai, Chinese etc.. all under same roof Centralized Kitchen because the kitchen will be serving on a given day serving 1000 Pizza, 1000 Thai, 1000 Sushi, 1000 Subs etc.. for 30,000 population city .
Hi Billy,
The problem with Sprig is price. A normal lunch costs $9-10, while Sprig’s lunch with all fees is $17.
Thanks
xxx.
From: xxxx [mailto:xxxx@sprig.com] Sent: Thursday, February 18, 2016 12:08 PM To: undisclosed-recipients: Subject: Introducing Myself and $20 from Sprig
Hey there -
I wanted to reach out and introduce myself. My name is Billy Blaustein and I'm acting as the new Manager of Sprig here in San Francisco. I'm a Bay Area native that cares deeply about healthy accessible eating.
I'm reaching out now because I know that used to be a big fan of Sprig, but for some reason we haven't had you order from us in the past few months.
We've done an amazing amount of work at Sprig rebuilding our app, rebuilding our menu, and trying to build a great brand for busy San Franciscans. I can personally attest that a lot of our food is completely redone.
I've put $20 of Sprig credit into your account that you can use through February. I'd love to hear from you about your experience.
I apologize for emailing, but this is a personal outreach from my personal account.
Looking forward to hearing from you - BB
Please, at least write something that isn't from the same template as every other unsolicited email I get about <random> online service.
It was new and cool a few years ago, and maybe non-technical users find it more trustworthy, personal touch, whatever. But when you get this crap daily, it's just a bit silly. There's nothing personal about spam and I don't even know if the "James from FoobarSaaS" person actually exists (probably not).
YC-backed SpoonRocket had just announced their shutdown, and Gagan was put on the defensive. Touting unit economics, an optimized menu, and food delivery innovation, the reality was, as others have mentioned, the company was a glorified restaurant with delivery. Ultimately I do think these companies made an impact but may have been a few years to early (pre self-driving). High-quality, healthy, on demand food is an inevitability but the labor costs are still prohibitive. I'm genuinely excited for the day I can get a delivered grilled, free-range chicken breast and seasonal veggies for $6!
Are people really willing to pay a premium delivery fee, only to have to carry the heavy or hot packages themselves into the house, elevator, appartement? In the rain, cold or snow? In the dark?
Self driving food delivery has a 'last mile' problem. Sure you can transport the food to my sidewalk that way, but how do you get it to or over my doorstep without ruining the whole convenience experience, in a sustainable and profitable way?
There were the dark days of Sprig where, with limited options, it was mostly $13+ airplane food (pre fees, tax, tip etc.) - they literally hired a guy who led mass food production for airlines, and another bigwig from the cafeteria industry - and at that point I and others I know mercilessly bashed Sprig, and they deserved it.
Then one day I checked on them and they had greatly expanded their menu, brought in great partners like Dosa, Blue Bottle, Stumptown, and I then became a regular user (why not have Chicken Tikka Masala from Dosa, a kale-Avocado salad, and New Orleans style iced coffee brought to my door while I work). Still pricey but it's actually worth it now.
I get that their "dark days" were tied to financial desperation, but IMO from the view on the ground it did irreparable damage to their company once it got out they brought in airline and cafeteria people, and still had the audacity to charge a crap ton for it. Funnily I didn't even know they brought in airline people until I had a small, $14 crappy barbecue sandwich that I swore I had on an airplane once and lo and behold after a second of Googling it all made sense. This could all make for an interesting case study on critical strategy mistakes and failed brand management.
Know in plain language as a restaurant that delivers.
Restaurants are a big contributor to that statistic. Sprig was, essentially, a restaurant. Calling it a tough environment to operate in is an understatement.
Near the end of the company's life they switched from fully compostable packaging and utensils (wherever possible) to the standard array of plastic containers and utensils you'd expect from any restaurant, while keeping their price just as high.
I have used a couple of them in Kansas City over the last 5 years. Before this was even a craze. Success Meals and Healthy Meals. Both were fantastic and neither needed to raise $50 million dollars to do it.
- Meals would be sold out by noon
- You had a limit. You could order only 1 meal.
- The drink prices were ridiculous. Like $6 for a juice.
So because I could never get a meal, I canceled my subscription and started using other services.
In all seriousness, there's a service in Washington, DC called HighSpeed which will deliver to you a bottle of $55 freshly squeeze juice. Except they include a free gift of marijuana.
... Like Dominos?
Who's next? Blue Apron?
Online grocery delivery that several nearby grocery stores with a healthy sustaining underlying core business probably already do, and probably for cheaper, or alternately, with call-in ordering if I prefer a lower delivery fee?
Oh.. but it has an 'app',
right.
Blue Apron's model of delivering just ingredients has a big advantage that they don't have to cook food nor deliver quickly, and they probably charge around as much for a meal as Sprig did. Much more promising business model in theory...and one that's working great.
Instead of $15 meals, they need to go up to $30 meals and have real waiters bring the food and serve it to them.
Margins are what you need to be able to survive.
and what other people are saying is at least in some markets somewhat of an illusion based on investment subsidies..
I mean, sure, if you're willing to eat losses for years and years you can compete on price.
Personally better/fancier food delivered sounds strange. I cook at home when i like good food or i go out and enjoy it outside.
Anyone know of any similar services?
I think there is a business that can be made with this model, as restaurant delivery does work, and the margins are improved nicely if you have roving delivery units with all the required deliverables (since you cut out half of the round-trip delivery time).
There was a pizza company (I've been unable to quickly google which one) that learned they could take a good deal more orders by sending out drivers with extra unordered pepperoni pizzas. When an order came in for a pepperoni pizza, they'd just relay it to a driver already on a delivery and have them make an extra stop. 2x deliveries for maybe 1.1x delivery distance.
Sprig, Bento, Spoonrocket, Presto Pizza, and all these other startups were trying to capture this market, but the problem is that demand is not consistent and slight mistakes in supply are onerously expensive. Too much food, and you've got spoilage; too little and you've lost a customer because of your 'Sold Out' message.
Additionally, the question of quality and variety is a difficult one to tackle. The pizza place that found success only had to carry pepperoni or cheese pizzas; Spoonrocket failed because it cheapened its product to try to increase the margin wiggle-room and lost customers; Bento failed because it couldn't offer much intraday variety.
Sprig was at least hopeful, in my eyes -- they managed to keep their meals at a higher standard than Spoonrocket. I was fine paying extra for it (although I admit that is subjective). The achilles heel is that if you want startup growth, then managing to keep your supply within the margins of profitability is a very difficult task. The only solutions are to grow a lot slower (and learn your demand) or to double-down DEEP on your datascience team and hope they can divine a line of best fit.
Unfortunately, that latter would likely need to be a Psychohistorian and those won't be around for another 10k years.
I love and miss them!
Thinking of the demand side, would a company rolled up into one, being able to claim a large slice of this nascent market for itself, have been able to survive and grow?
It comes down to the basic issue, I think, that Uber made everyone worldwide excited about the idea of "software eating the world" but you can't wish away the issue of margins and unit costs.
From TC's wording it sounds like they obtained and published this email before it was sent. Maybe just incorrect choice of words; if not then that's pretty bold from TC and unprofessional IMO.
Italics mine.