Arlon-backed Door to Door shuts its doors

The portfolio company cites 'recent events in our industry', which a regional competitor suggests likely refers to Amazon’s acquisition of Whole Foods in August.

Arlon Group-backed natural and organic online grocery retailer Door to Door Organics ceased operations on Friday, citing unspecified “events in our industry” as having negatively impacted the company’s funding prospects.

Louisville, Colorado-headquartered Door to Door said that it was with “a heavy heart” that it delivered the news, highlighting that the company had made almost 3 million deliveries during its 20-year history. In a statement, it thanked its employees and customers and apologized for being unable to meet the needs of those who had placed orders ahead of the upcoming Thanksgiving holiday.

“In the end, it’s hard to point to one thing that led us to this conclusion,” Door to Door said. “Ultimately, timing of recent events in our industry and the impact that had on our funding prospects were not in our favor, with the ultimate result being no path forward.”

An Arlon representative declined to provide more detail.

Asset-light model

Founded in Bucks County, Pennsylvania in 1997, Door to Door offered a subscription for delivery of organic, natural and local produce on a weekly or biweekly basis. According to Arlon’s website, the company operated in 30 cities spread across 11 markets throughout the West, Midwest and East Coast and maintained a network of more than 200 local farming partners or suppliers.

In November 2014, Arlon led a $25 million Series B funding round for Door to Door, joining venture capital firm Greenmont Capital Partners, which had provided the company with $2 million in Series A capital in 2012.

“We looked at several models and found Door to Door more attractive in its geographic focus and its asset-light mode. It’s a more profitable model than others we’ve seen and is capable of going quickly into new markets,” said Arlon managing principle Michelle Brooks at the time.

Door to Door merged with Charlottesville, Virginia-headquartered online grocery company Relay Foods in June 2016, when the company also announced that Arlon and unnamed Relay stockholders had provided an additional $10 million in equity financing.

“All the big players are looking for new concepts”

After announcing in June that the merged company would operate under a new name that would be forthcoming, the company announced in January that it would instead continue to operate under the “Door to Door Organics” brand.

In its June statement announcing the merger, Door to Door said that the new entity would service 63 markets in 18 US states and Washington, D.C.

Mike Hughes, founder of Doorganics, a Grand Rapids, Michigan-headquartered organic grocery delivery service that Door to Door competed with in western Michigan, told Agri Investor that news of Door to Door’s ceasing operations last week came as a surprise.

Doorganics, which focuses largely on in-state production supplemented with imported produce from elsewhere, had been planning to expand into southeastern Michigan next year, Hughes said, but decided to accelerate plans in light of Door to Door’s unanticipated exit from the market.

“There were a lot of displaced customers reaching out to us, looking for a new solution and I realized that we needed to act quickly and move our timeline up,” he explained.

Staying relevant

Amazon’s acquisition of Whole Foods in August, according to Hughes, is likely the industry event Door to Door referenced in its release. National Securities Corporation managing director for food and agribusiness Ivan Saval also told Agri Investor in an email that that Door to Door was likely referencing Amazon’s Whole Foods deal.

“All the big players are looking for new concepts to stay relevant,” Hughes said. “There’s just a lot of movement right now, a lot of people evaluating new opportunities.”

Hughes acknowledged that ensuring availability of organic produce is a challenge. He said that the key for Doorganics had been in having a transparent relationship with its customers and communicating the reality that it must maintain stocks of imported organic produce in order to bridge gaps in local production.

“Large grocery has done a great job of making us believe that we get whatever we want whenever we want all year. With organic produce, there are truly seasons that need to be taken into consideration,” Hughes said.

The large number of relationships that Door to Door had established with regional organic producers, Hughes concluded, was part of what made the sudden closure of the business a surprise.