Grubmarket: A Hybrid Marketplace
Are manufacturers creating acquisition targets for big tech?
Hello,
Our last B2B Distribution newsletter looked at “new frontier” c-suites at billion-dollar distributors.
This newsletter shifts our attention back to manufacturers. Over the summer, we pointed out that manufacturers are drastically outpacing B2B distributors in their investments in tech startups.
We see that trend continuing unfortunately with two recent investments by General Mills into GrubMarket, a B2B food marketplace, and Schneider Electric into Kojo, a SaaS tool becoming a marketplace for construction goods.
Do these manufacturers understand the broader implications of their actions? And, what could they be doing differently?
Enter: the Anti-Amazon Alliance. Who else wants to join?
-Alex
Manufacturers Setting Up Big Tech?
Grubmarket is now worth over $2 billion and receiving a strategic investment from General Mills. Kojo is worth $275mm and received investment from Schneider.
Manufacturers are accelerating the behavior change amongst business customers and suppliers. Cutting distributors out entirely - or - in the best case scenario - cramming down their margins.
But, what manufacturers are also doing is much worse: they are creating an acquisition target for big tech.
General Mills isn’t getting a ROFR on Grubmarket. Schneider isn’t getting a board seat on Kojo. What control do they have to prevent digital disruption from getting out of hand? Not much it seems…
One way to combat this threat is to join the Anti Amazon Alliance. Just like YCombinator’s SAFE structure set a standard for early stage investing. We have the opportunity to set a legal, investment standard for tech startups to adopt who want to help distributors. One of the easiest ways to prove your loyalty to distribution? Make it really, really hard for Amazon to buy you. Sign up here to receive more info and updates: AntiAmazonAlliance.org
Grubmarket: A Hybrid Marketplace
The best tech monopolies are not just platform businesses. They also have linear businesses too. Amazon has Amazon Basics, advertising and fulfillment services. Apple makes its own hardware. Salesforce sells its software as a SaaS product.
Grubmarket’s M&A spree over the past few years has more-so been focused on linear M&A than acquiring additional tech capabilities. They bought almost 40 regional food distributors, selling mostly produce and a few selling meat. Compared to buying roughly 8 tech startups.
It’s hard to get third party inventory on consignment if it isn’t ambient, shelf stable product. So, Grubmarket decided to acquire the highly perishable distribution capabilities - we call this a linear hook. And, then they install their own cloud based ERP wholesaleware.com. They also sell the ERP tool to other third party distributors at a subsidized rate (another linear hook) - because Grubmarket wants access to your data and inventory levels.