Funding for Grove Collaborative, IQBAR; Retail-focused VC launches
On this week's Dealboard: Acquisition news from Digital Brands Group, Stor.ai and John B. Sanfilippo & Son.
On this week's Dealboard: Acquisition news from Digital Brands Group, Stor.ai and John B. Sanfilippo & Son.
Welcome to Dealboard. In this weekly feature, The Current is providing a look at the mergers, acquisitions and venture capital deals making waves in ecommerce, CPG and retail.
This week, a new investment fund for retail startups launches, while the corporate venture arm of a CPG giant leads a brand’s Series B. On the M&A front, Digital Brands Group closes the acquisition of Sundry, while grocery tech platforms join forces to usher in iCommerce.
Let's kick off the funding news for 2023:
Vijen Patel, founding partner of The 81 Collective. (Courtesy photo)
The 81 Collection, an early-stage venture fund focused on startups building for “hard” industries like manufacturing, real estate, retail and construction, launched its inaugural $41 million fund.
The firm will invest in startups applying automation, AI and smart hardware to “hard” industries that historically have low margins. It will participate in pre-seed and seed rounds, with initial checks ranging from $500,000 to $1.5 million. It has made eight investment to date, including pet services operating system Goose and home maintenance automation startup Mezo.
It is led by founding partner Vijen Patel, who previously founded fabric care company Tide Cleaners. Formerly known as Pressbox, that company was acquired by Procter and Gamble in 2018.
Founding members of The 81 Collection also include: Grubhub cofounder and Fixer founder Mike Evans, Industrious Chief Commercial Officer Anna Levine, Protege CEO Jackson Jhin, Farmer’s Fridge CEO Luke Saunders, Tovala CEO David Rabie, CarmaCare CEO Jamie Ahern, ShipBob cofounders Dhruv Saxena and Divey Gulati, Alex Kirshenbaum, and Cubii cofounders Amav Dalmia and Shivani Jain.
IQBAR, a maker of plant-based nutrition bars, received a minority investment from FF2032, the corporate venture arm of Lotus Bakeries, which owns snack and biscuit brands including Biscoff, Trek and Bear.
FF2032 led IQBar’s Series B round. Further details were not disclosed.
Founded by Will Nitze, the Boston-based, digitally native brand’s bar has six brain nutrients and is available in seven flavors. After gaining traction through DTC and ecommerce platforms, the bar is now sold in 8,000 stores nationwide.
“So far, Iqbar has already shown good traction with consumers and we have strong belief the brand will continue to perform strong. We believe in the team and we especially admire Will’s hyper-focus on business fundamentals, meticulous execution and solid capital efficiency,” said Lotus Bakeries CEO Jan Boone, in a statement.
Grove Collaborative, the sustainable consumer products brand and marketplace, announced an agreement to refinance existing debt. The four-year, $72 million loan was financed by Structural Capital and Avenue Sustainable Solutions.
“This transaction better positions Grove for long-term success, enabling us to execute against our strategic value creation plan with the goal of achieving profitability in 2024,” said Stuart Landesberg, cofounder and CEO of Grove, in a statement.
Grove sells its own beauty and home products and those of others, with channels including its own website, Target and CVS. The company went public in 2022 through a deal with the SPAC Virgin Group Acquisition Corp. II that valued the Grove at $1.5 billion. Results from its latest quarter indicate that, like many DTC brands, it has struggled since. From The Current’s recent overview:
Home and personal care goods marketplace Grove Collaborative said net revenue declined 18% year-over-year in the third quarter, while total orders were down 26% year-over-year, and active customers were down 15% year-over-year. The brand is in the midst of executing a plan to overhaul itself, which included a reduction of 18% of its corporate workforce as it sought to reduce operating expenses.
In December, the brand announced that it received notice from the New York Stock Exchange that its average per share trading price was below the $1 minimum for a 30-day period. With that, it had six months to regain compliance. Yet it has also made moves to grow. In November, Grove received an investment of up to $100 million from HumanCo that is geared toward finding M&A opportunities.
Ecommerce giant Amazon secured an $8 billion loan. Financing was completed by DBS Bank, Mizuho Bank and multiple others. A filing stated that the purpose of the debt facility is "general corporate purchases."
It comes at a time when the company has been tightening its belt at a time of economic uncertainty.
The loan will mature in 364 days, and carries an option to extend another period of the same length.
Beni, which bills itself as “the easy button for secondhand shopping,” raised $4 million in a seed round.
The financing was led by Buoyant Ventures, with participation from Better Ventures and pre-seed investors XYZ Venture Capital, Chingona Ventures and Starting Line Ventures.
Founded by CEO Sarah Pinner and CTO Celine Mol, Beni makes a browser extension that surfaces listings from resale sites for online shoppers. It has partnered with over 30 resale sites, including The RealReal, Rent the Runway, Vestiaire Collective, eBay and Kidizen. Following the funding round, the company will expand its team and accelerate technology development.
Inside Sundry. (Photo via Sundry)
Digital Brands Group completed the acquisition of apparel brand Sundry. With the closing of the deal, 11-year-old Sundry will become a wholly owned subsidiary of DBG, and it will be added to multi-brand ecommerce site Bailey Shop. DBG also sees opportunity to expand the brand into other verticals.
"The Sundry acquisition is expected to contribute significant revenue scale and operating leverage," said Hil Davis, CEO of DBG, in a statement. “We believe that the opportunity to cross merchandise Sundry and their customers to our other brands, add additional product categories and leverage synergies to reduce expenses will be accretive."
Originally announced in January 2022, the acquisition was valued at $14 million in cash and equity under the most recently announced terms. The deal was funded in part through a $2.5 million debt financing and a $10 million public offering by DBG, which owns a collection of digitally-native lifestyle brands.
Stor.ai, a commerce platform serving regional grocers, was acquired by chain-focused digital engagement platform Relationshop.
The combined company will be called Stor.ai, a Relationshop company. It will be led by Relationshop developer Galen Waters as CEO and former Stor.ai CEO Mendel Gniwisch as president.
“This acquisition gives retailers the ability to advance beyond ecommerce to iCommerce,” said Galen Waters, CEO of Relationshop, in a statement. “The ‘i’ represents the tenets of our enterprise solution: intelligent data, individual engagement and integrated shopping…By merging the Relationshop shopper engagement and personalization suite with the ecommerce and fulfillment platform of Stor.ai, our clients will be able to provide a transformational and frictionless digital shopping experience to their customers, that drives both online and in store activity.”
Founded in 2014, Stor.ai serves top grocery chains in Israel, as well as 200 grocery stores globally. Relationshop clients include Albertsons, United Supermarkets & Big Y Foods and 11 regional grocery brands in the US.
Terms were not disclosed.
Nut and dried fruit product company John B. Sanfilippo & Son acquired the assets of baked cheese snack brand Just the Cheese from Specialty Cheese Company. Just the Cheese makes snack bars and cheese crisps in a category that is estimated to be valued at $100 million, according to JBSS.
“The acquisition of Just the Cheese, which currently will not have a significant impact on our financial results, will provide us a product that expands our portfolio into new snacking categories. Additionally, the assets and capabilities acquired will be complimentary to our existing product portfolio and are expected to lead to exciting innovation opportunities” said CEO Jeffery T. Sanfilippo, in a statement.
Terms were not disclosed.
The retailer's marketplace is expanding quickly.
When it comes to ecommerce growth, was the pandemic a blip or a new trendsetter?
As we move further from the height of COVID-related closures, it’s a question that will start to be answered through the lens of history.
So far, the narrative of ecommerce growth in the U.S. from 2019-2022 has gone like this: Ecommerce’s share of overall retail saw a huge spike at the height of the pandemic in 2020-21, when goods in general were in demand and online shopping was necessary to preserve health and safety. Experts looked out and saw a permanent exponential change in the penetration of ecommerce as a share of retail that would last beyond the pandemic. Then, in 2022, everyone went back to stores and the trendline came back to 2019 levels. Growth was no longer exponential. There was still growth, but it was not happening as fast as during the pandemic period.
With this in mind, it’s worth pointing out that 2023 is the first year that there likely won’t be a pandemic-influenced swing to influence ecommerce growth. It is also a year where demand has suffered challenges amid inflation and interest rate hikes.
So as we seek to determine the importance of ecommerce to overall retail, it’s worth it to continue taking a close look at what growth trends retailers are seeing now, whether ecommerce is remaining resilient amid consumer pullback and how retailers are preparing for the future.
The latest example arrived this week from Macy’s. It’s a fitting one for the times. Overall, Macy’s is seeing a slowdown as consumers pull back on discretionary purchases, with sales declining 7% in the first quarter versus the same quarter of 2022. Digital sales were down 8%.
Macy’s is particularly susceptible to the macroeconomic headwinds that many brands and retailers are facing, as spending among the middle-income consumers it counts as a primary customer base is particularly softening, said GlobalData Managing Director Neil Saunders.
But while ecommerce is slowing overall, the importance it gained to Macy’s business during the pandemic is remaining in place.
In 2019, ecommerce made up 25% of Macy’s revenue, CEO Jeff Gennette told analysts on the company’s earnings call. That jumped to a high of 44% in 2020. By 2022, digital reached 33% of sales after the pandemic boom. In the first quarter of 2023, it remained at 33%. So, while the trend line dipped after shoppers returned to stores, ecommerce share still settled in at a higher post-lockdown point than it was before the pandemic.
This came in a quarter in which traffic was “relatively good” across both online and in-store, Macy’s CEO Jeff Gennette said. It was “flattish” online, and slightly up in stores.
“We do expect that this is the reset year with the penetration between them,” Gennette said. “But we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be foisted by a lot of ideas and strategies.
Over the last year, the retailer has made investments in boosting ecommerce, even as shoppers returned to stores. In a bid to boost the assortment of goods available online, Macy’s launched a marketplace in September 2022 that welcomes goods from third-party sellers.
The marketplace had an “outstanding” first quarter, said Macy’s President Tony Spring, who is poised to succeed Gennette as CEO next year. Gross merchandise value increased over 50% when compared to the fourth quarter of 2022, while the average order value and units per order for marketplace customers was 50% above those not shopping at the marketplace.
Macy’s is continuing to build the marketplace even as it racks up sales. The retailer added 450 brands, ending the quarter with 950 brands.
This is helping to draw in new customers, as well as younger existing customers who are buying more items, resulting in increased basket size.
“We're very excited as to how marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past,” Gennette said.
In the end, Gennette said a strong digital and social presence is key to attracting younger consumers. That's a different type of shopper than other age groups.
“We know the younger customer starts first online,” Gennette said. That behavior will still be in place as the generation gets older, and gains more buying power in the process.
Going forward, Macy’s is seeking to expand the model to other retail banners in its portfolio. Bloomingdale’s will open a marketplace in the early fall.
The Macy’s ecommerce trajectory isn’t that different from the wider U.S. ecommerce narrative detailed above. With one quarter of 2023 data, there is evidence that ecommerce share settled out at a higher point after the pandemic than where it started before COVID arrived. There is flattening now, but the retailer is taking it not as a sign of a slowdown, or a signal to change course. Rather, it sees changing consumer behavior as a reason to build for the future.