Online grocer Goodfood Market, which has seen rapid growth during the COVID-19 pandemic, is expanding its footprint by opening what will be its largest fulfillment centre in the country.
The 200,000-square-foot facility in Mississauga is under construction and should be open by late summer 2021. With 36-foot clearance, it will have multiple temperature zones to cater to different products and will be heavily automated to provide portioning and pick-and-pack services.
Goodfood (FOOD-T) will have 550,000 square feet of fulfillment centre space across Canada once the new facility is operational, with two in Montreal (Saint-Laurent and LaSalle), two in Mississauga and one each in suburban Vancouver and Calgary.
“We’ve grown so much in the five years we’ve been around,” says Roslane Aouameur, director of investor relations at Montreal-based Goodfood. “We’ve grown from one of our co-founder’s apartments to six facilities.”
Established under the name Culiniste in 2014, the company rebranded as Goodfood in 2016 and became publicly traded on the Toronto Stock Exchange in 2017. It now has an estimated 40 to 45 per cent of the home meal kit market in Canada.
Second Goodfood site in Mississauga
The new Mississauga site is near the QEW and not far from Hwy. 427. Aouameur declined to provide the address “to avoid getting a little too much competitive curiosity.
Goodfood leases all of its sites and is leasing the new Mississauga site from developer Michael Moldenhauer.
“Our view is that leasing provides us with the same ability to provide a great product and buildings as we like them, without the complexity of being a real estate owner,” Aouameur says.
There are no plans to own real estate in the foreseeable future.
Goodfood closed $30 million in financing in February, $10 million of which will finance the GTA facility. Another tranche of the financing will be used to increase automation in its facilities.
In late April, Goodfood opened its first GTA site, by signing a short-term lease for a 42,000-square-foot facility in Mississauga.
During the pandemic, “growth has been so significant that we wanted to have something available in the GTA to be able to respond to demand and be closest to our largest market.”
Aouameur says the 42,000-square foot facility represented “quite an opportunistic move” given that it already had the refrigeration and production line equipment Goodfood uses. “It was up and running in just over two weeks.”
Goodfood has not decided whether it will keep that facility, or move everything into the new Mississauga facility when it opens.
Goodfood thrives during pandemic
A stock market darling during the coronavirus pandemic, Goodfood has seen its share price increase by 42 per cent this year.
Desjardins analyst Frederic Tremblay, who lists the stock as a buy, noted in a report consumer habits will likely change permanently as a result of the pandemic.
“Overall, we expect that COVID-19 will accelerate the adoption of online grocery,” Tremblay noted.
Online stock analysis site The Motley Fool noted in May Goodfood has seen demand skyrocket during the pandemic because people are looking for healthy food options without having to leave their homes.
As well, its new distribution centres in Vancouver and Toronto give Goodfood broader economies of scale to help fuel future growth and operational efficiencies, the site said.
Goodfood had 246,000 subscribers as of the end of February, a 55 per cent increase in a year. Revenue in its latest quarter rose 61 per cent to $58.8 million as of Feb. 29. The company is not yet profitable.
Goodfood is expanding into grocery delivery alongside its meal kits and ready-to-eat options, and aims to sell as many as 4,000 items, including private-label products. Each item will be available in only one size and one brand.
“We’ve always seen meal kits as an entry to groceries,” says Aouameur, noting when Canadians shop for groceries they typically meal-plan for a few days or a week.
Low wastage, competitive on price
Aouameur says Goodfood has been surprised by the lack of online options in the Canadian grocery industry and that the company has advantages over traditional grocers.
Goodfood operates at about one per cent waste compared with 15 to 30 per cent for traditional grocery stores.
“That creates a big advantage from an environmental perspective and from a cost perspective because you’re not losing a lot of product.”
In addition, having no bricks-and-mortar stores helps Goodfood to compete on price.
As of a few years ago, less than one per cent of sales in Canada’s estimated $124 billion grocery industry came from online sales, Aouameur says.
However, given people’s preference to avoid grocery stores during the pandemic, studies have shown online now represents five or six per cent of sales.
“Our view is that this is anywhere from a $5-to-$7-billion industry currently” and it’s forecast to be at $12 to $15 billion in five years. “There’s definitely a good shift that’s happening. It made a lot of sense for us to go there.”