Why Melbourne grocery startup YourGrocer has bought the last pieces of Aussie Farmers Direct

Melbourne food delivery business YourGrocer has bought the intellectual property and customer database of collapsed grocery franchisor Aussie Farmers Direct, with YourGrocer’s founder saying the purchase has been on the cards since “the day we heard the news” of the Aussie Farmers collapse.

YourGrocer founder Morgan Ranieri tells SmartCompany Aussie Farmers Direct was his company’s largest competitor and YourGrocer had been watching it for years, meaning it had a good understanding of “what was working and what was not working” when the franchise network collapsed in March.

Ranieri believes the Aussie Farmers business model was too ambitious: it was too broad, the centralised logistics model and franchise element was complicated to maintain, and “it becomes very hard to maintain high quality” in your deliveries when these factors are in play, he says.

The YourGrocer model, which currently operates across Melbourne, forms direct partnerships with independent retailers and allows shoppers to order through its platform, with free delivery on orders of $60 when users pay a $3 weekly fee.

Ranieri launched the startup in 2013 and by July 2017, YourGrocer was capturing 15% of the online grocery market in inner-north Melbourne postcodes, with $4.5 million in groceries on the platform.

The company has bought the Aussie Farmers IP, including a database of around 1 million customers, for an undisclosed sum, and pledged to bring items previously available for order through Aussie Farmers onto the YourGrocer platform.

Ranieri says the purchase will allow his business to “reach thousands of customers who care about the same things we do” when it comes to shopping locally and finding quality produce outside of the big two supermarkets.

Some former franchisees of the failed Aussie Farmers model are now using the same customer database YourGrocer has bought to start their own grocery runs, but Ranieri isn’t concerned.

“We are aware that some franchisees have been reaching out to customers themselves, and I think, well, that’s fine for them,” he says.

“These franchisees are doing what they need to do, and that’s fine.”

Ranieri reflects that “it really sucks when a company goes into administration like this, and so many people are affected by it.”

However, YourGrocer does still plan to use the customer database to target the very same shoppers that former franchisees of Aussie Farmers Direct have been delivering to themselves in the weeks after the franchisor’s collapse.

Ranieri says his business will be using the full customer list, but he believes it’s possible for both YourGrocer and other grocery delivery alternatives to succeed.

“The customer list is big enough and the grocery space is big enough for a lot of people to do quite well, I think there’s room for it. I take my hat off to any franchisees who are on the front foot,” he says.

“If there are a dozen different companies out there, all competing with Coles and Woolies, that is a great thing: it means things are less centralised.” 

Partnership model works

If former Aussie Farmers Direct customers want to start using YourGrocer, what effect will they see on pricing?

The short answer is it will depend on where the customer is located, because unlike Aussie Farmers, the YourGrocer model lets shoppers purchase from nearby partner businesses for delivery.

“As of today we have adjusted all of our fruit and vegetable box pricing, to be in line with what Aussie Farmers Direct were paying — the value for money will be better than it was,” Ranieri says. 

“It will depend on when they will buy from, because they can buy from any one of the 65 shops on our site. We have been trying to build a product that will make sense for the average Australian family.” 

Overall, YourGrocer believes its model makes the most sense for customers and challenging Coles and Woolworths, because the way it partners with local businesses is both sustainable and relevant to customers.

As the business looks to expand into Sydney using the Aussie Farmers Direct customer list, Ranieri believes shoppers in New South Wales will be interested in the service just as much as their Melbourne counterparts.

“At the core of it, our value proposition should resonate — because it’s better value for money,” he says.

NOW READ: “The freedom is back”: Aussie Farmers Direct franchisees move on as administrators recommend winding up the grocery delivery chain