Monday’s announcement that King Soopers and parent company Kroger are partnering with a tech-powered, delivery-only restaurant chain to bring fresh-cooked meals to customers in Denver and three other cities raised some questions — and eyebrows.
“It’s kind of like when you pass by an Italian-Indian restaurant,” Ana Babic Rosario, an assistant professor with University of Denver’s Daniels College of Business, said. “You’re not quite sure what you’ll get when you go inside.”
Rosario, who has a Ph.D. in marketing and studies the intersection of technology and consumer behavior, feels the pilot program pairing Kroger, the world’s largest grocery chain, with ClusterTruck, a startup seeking to upend the food delivery business, could lead to “confused positioning.” It’s a situation where consumers aren’t entirely sure what the product is or does.
“If there is confusion about what exactly ClusterTruck is and means in conjunction with Kroger that might pose a challenge for their branding,” she said. “Logistically, how it going to work?”
For ClusterTruck co-founder and CEO Chris Baggott, it’s pretty simple. At this stage, not much is changing for ClusterTruck in three of the four launch markets, Denver, its home base of Indianapolis, and Columbus, Ohio.
In those cities, ClusterTruck will continue to source its own ingredients, prepare orders in its own kitchens and use its proprietary technology to get the food out to customers fast — within 30 minutes of an order being placed on average. The two differences will be that instead of ordering through the ClusterTruck website, customers will come to the company through KrogerDeliveryKitchen.com or KingSoopersDeliveryKitchen.com, and instead of needing to order at least $12 worth of food for free delivery, all orders will be delivered for free. In the fourth market, the Indianapolis suburb of Carmel, Ind., Kroger and ClusterTruck are operating out of a joint kitchen.
The benefits the partnership represents are easy to see. ClusterTruck gets access to customers base fed by Kroger’s roughly 2,800 locations across the country. Baggott said his company is about technology first and is “agnostic about who cooks our food.” With Kroger (and many of its competitors) investing more and more square footage in hot bars and the kitchens needed to make ready-to-serve food, the partnership presents ClusterTruck with a massive opportunity to scale if it takes off, the CEO says.
Kroger meanwhile gets access to ClusterTruck expertise as a vertically integrated food delivery company and its software that powers its efficient deliveries.
“We’re really excited about it as you can imagine, and so is Kroger.” said Baggott, a startup veteran. “I think a lot of people in the (restaurant) industry think it’s game over, they have to use a third-party delivery service. We’re both saying, ‘We don’t think so. There is a more disruptive path that we can follow.’ ”
Kroger also sells cook-at-home meal kits and delivers groceries to customers through Instacart. “] The partnership with ClusterTruck is another spoke in the company’s wheel.
“King Soopers continues to build its seamless customer experience model (stores, pickup, delivery and ship), and the King Soopers Delivery Kitchen is just one more way our customers can access fresh, affordable food,” King Soopers spokeswoman Jessica Trowbridge said in an email Wednesday.
Data shows there is an opportunity in the food delivery industry, Babic Rosario said. Citing information provided through Statista, she said that as of February 2018, 55% of people ages 18 to 25 had used food delivery services like Grubhub and Postmates, as had 50% of people ages 25 to 34, key demographics for growing industries.
There’s also evidence that no one brand has asserted dominance in the market. As of the summer of 2017, Postmates was the most dominant service in Los Angeles, capturing almost 40% of the market share, but in New York City, Grubhub dominated with 86%. Meanwhile, in San Francisco, lesser know company Caviar was the top delivery service with 24% of the market.
“It still seems to be a not-yet saturated market because new competitors continue to come in and take market share,” Babic Rosario said.
Updated Dec. 5, 2019, at 9:10 a.m. Because of an error by a reporter, the name of ClusterTruck’s co-founder and CEO was misspelled in an earlier version of this story.