“We believe the trends that have emerged over the past year are here to stay": Hungryroot CEO Ben McKean

Jeremy Liew, Partner at Lightspeed Venture Partners and Ben McKean, Hungryroot Founder and CEO joins the Yahoo Finance Live panel to discuss Hungryroot's growth.

Video transcript

AKIKO FUJITA: Transformation of the grocery market, with online delivery services seeing rapid gains. Hungryroot certainly no exception there, with the company seeing its business grow seven-fold over the last year. Let's bring in the CEO and Founder of Hungryroot. We've got Ben McKean, along with Jeremy Liew. He's a partner at Lightspeed Venture Partners.

Jeremy and Ben, it's good to have both of you on today. Ben, let's start with you, because it feels like we've had so many of these conversations of online food services, whether it's grocery or food delivery, seeing rapid gains. To what extent do you think that's going to stick around as more and more people go out, get vaccinated, and get back to business?

BEN MCKEAN: Yeah, well, thank you for having us on. We believe that the trends that have emerged over the past year are here to stay. Consumers have become more comfortable grocery shopping online. And through the past year, there's been emergence of new shopping experiences. Hungryroot is one example of that.

ZACK GUZMAN: Jeremy, I mean, when we look at kind of how the space has grown, it's also, to Akiko's point, been different for different companies out there. If you're a meal kit or a service that delivers groceries at home, obviously been very good. Not the case for a lot of other operators out there.

But the one common theme I suppose among some of these companies, like Hungryroot, has been focusing on the health of consumers as well. It seems to be a theme in some of the companies you've invested in. Talk to me about how that has really also enjoyed a boom here in the pandemic.

JEREMY LIEW: Yeah, I think you're exactly right. One of the really interesting things about this pandemic has been that it's almost forced people to try something new. And a lot of the things that they've ended up trying, they've ended up loving.

So whether it be from a health perspective, companies like Peloton, or whether it be other connected fitness businesses or businesses like Hungryroot-- where people have discovered that the convenience and price and ease and health of buying groceries and getting them delivered through e-commerce-- has been transformational for a lot of people. And so when you've got that high NPS, when you have really high retention, and then the pandemic drove people to try something they might not otherwise have done, they get very pleasantly surprised. And I think we're going to see that behavior continue for a really long time.

AKIKO FUJITA: Even with that said, Jeremy, when you look at the grocery delivery space as a whole, it feels like it's becoming increasingly crowded. Hungryroot sort of differentiating itself by not just doing the delivery part, but offering recipes as well, additional services. But I wonder, when you look at the landscape overall, how many of these players do you think will actually survive, Jeremy?

JEREMY LIEW: The grocery market is just so large. And I think if you look at where things are in the physical world, you've got very many successful supermarkets that are addressing different segments of the market, from a Whole Foods or a Draeger's at the high end to more mass market brands, like a Safeway or a Piggly Wiggly, and so forth. And so I think that there's just enormous scope within the market for many companies to be successful, and that's exactly what we've been seeing.

ZACK GUZMAN: Yeah, Ben, to the point there that Akiko was making, it seems like-- I'm not sure if there's a crossover between better financial fundamentals when you target and focus in on maybe a healthier consumer, as opposed to just a general kind of cook-at-home, grocery-at-home customer. But you guys really do flex that. You don't have artificial sweeteners, high fructose corn syrup, artificial colors, preservatives in the foods that you offer to customers. But talk to me about maybe, you know, the key difference in focusing in on that and what it means for the financials at a Hungryroot.

BEN MCKEAN: Yeah, absolutely. So you can think about Hungryroot as Whole Foods meets Netflix. The key shopping experience that we're building is, we do the work for the customer of recommending and actually predicting the groceries and the recipes that they're going to love so they don't need to do the meal planning. They don't need to go into a grocery store and choose among the 40,000 SKUs and try to figure out what's going to work for them.

And there's two key benefits of that from an economics perspective. One is the customer finds tremendous value in the service that Hungryroot provides, not just the individual grocery items. And so they're actually valuing the service, and they're willing to pay for that service.

Secondly, though, we are the primary grocer for our customers. They're spending more on Hungryroot than any other grocery store that they may be shopping at. And the reason that's so critical is our average order value is $114.

And the key with shipping perishable food and delivering groceries to consumers directly to their door is you need to have a high AOV, because that way you're able to offset some of the shipping costs. So those are two key aspects of our model that result in both our tremendous growth, but then also our P&L profitability.

AKIKO FUJITA: Jeremy, you have backed a number of big companies that our viewers are certainly familiar with, whether that's Snap, Ripple. The Honest Company now filing for an IPO too. When you look at where the public markets are right now, how do you advise some of these companies, the startups that you have backed? Is this a good time to come to the market, just given how hot the IPO space has gotten? Or do you advise them to maybe stay private for a little longer because there are concerns about froth in the market?

JEREMY LIEW: Well, Akiko, I think when they're passing hors d'oeurves, it's a good time to eat. So when the public window is open and you have a company that has predictability of revenue and either profitability or path to profitability and good growth, then I think those things are always going to be welcomed by the public market.

ZACK GUZMAN: And Jeremy, just to follow on that, I mean, obviously I think with the timing of The Honest Company coming out too, would you put that more in the camp of maybe the health aspect being so popular right now, to Akiko's point-- the market being so hot right now-- or just the timeline for a company like that at the stage it's at to be going public right now?

JEREMY LIEW: Well, The Honest Company-- similar to Hungryroot-- is doing revenue in the hundreds of millions of dollars, has been growing really steadily, and is profitable. And like I said, those are the aspects of businesses that I think public market investors find interesting and compelling. Any company that has those characteristics, I think, is going to be welcomed by the public markets.

ZACK GUZMAN: Jeremy Liew, partner at Lightspeed Venture Partners, and Ben McKean, Hungryroot Founder and CEO, appreciate you both for joining us to chat all things on that front. Be well.