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Munchery Shuts Down (techcrunch.com)
111 points by kposehn 26 days ago | hide | past | web | favorite | 168 comments



On demand food delivery has several major problems that were all very predictable

1) you can't predict how much food to make. On demand food companies were throwing away 30% of the food they made every night

drivers cost ~$25 an hour, and only do ~6 drop offs.

2) lots of idle driver time

3) routes can't be optimized (or only minor optimizations in real-time)

4) on average they are only dropping off 1.3 meals per delivery, making each meal very expensive to deliver

I helped start http://Thistle.co (only in California) to fix these problems; people order their meals for the week (doesn't work for everyone obviously) and we drop off 3x/week, with optimal routes and many more meals per dropoff. The company has been really capital efficient in doing so, hardly raising any money but doing 10s of millions in revenues.


> On demand food delivery has several major problems that were all very predictable

Hold on now, Domino’s is doing just fine. On a tear actually.[1]

[1] https://www.fool.com/investing/2018/07/19/dominos-pizza-exte...


It’s different when the food is standardized and limited in scope. It also helps that they have corresponding brick-and-mortar stores.


True, but OP claimed the entire category of on-demand food delivery has major problems. And 3 out of 4 of their concerns are about delivery logistics not menu standardization. Domino's turnaround shows that the food delivery model can work.

(If that sounds funny, read up on how Domino's has improved customer sat regarding their pizza quality in the past few years. It's a great case study, incl. how to do marketing when your brand is in the dumps.)


They are also a nationally recognized band, increasing the perception of legitimacy.


Their brand was absolute trash for awhile. Actually made the pizza taste worse (in blind studies). They turned it around.


I’d imagine the waste factor for pizza ingredients is much lower than other (attempted) on-demand foods. If it didn’t get ordered, it doesn’t get made, and water, flour, pepperoni, tomato sauce, ... aren’t going to go bad in a day (or a week)


The biggest product that Domino's sells is not pizza. It is a flag that says "Domino's" that is bought by the people who own the franchises. Domino's competitor is not mom&pop pizza. It is McDonalds/Subway/Arbys/etc

So Domino's provides the backend support + marketing + development and for that it gets a hefty fee from whoever attaches Domino's flag to the location.


Pizza is incredibly high margin with low cost of goods and lots of upsell. It's fast and easy to make and delivery has been priced in over decades. In-store purchases also offset the cost because of the vertical integration.

The model is sufficiently different enough to make it extremely viable, and perfectly scalable for the smartphone era.


Wait, why are all pizza, Indian, Thai, Sushi etc. places in my city doing this and have been for ages if it is so difficult?


Restaurants typically have a much smaller delivery area. Munchery delivered to a large chunk of the Bay Area from one kitchen.

Most restaurants typically have a mostly fixed menu. Munchery varied the menu daily.

I can't say what Munchery was paying its drivers, in a traditional restaurant or through the bullshit gig companies, driver typically make at or below minimum wage.

Most traditional restaurants farm out their site (e.g. bullshit gig companies will handle the photography and pay the photographers a pittance) or have a minimal online presence. Munchery had the overhead of maintaining much more of their online presence.

That said Munchery wasn't real-time delivery when I used it. There was an ordering window that closed by mid-afternoon. If I had to guess the constantly rotating menu created a ton of waste. Or maybe they were simply that bad at it.


>Munchery delivered to a large chunk of the Bay Area from one kitchen.

That's your problem right there. The Bay Area is not dense enough to make this viable.


Close, but the real problem is trying to compete with an established business method while claiming an innovative web presence and giving back mean anything. People order food from places they have seen under the idea that being local means they get their food sooner and its fresher and hotter and so on.

like the meal kit companies, anything you can do from a centralized site the local companies, home grown or franchise, can do as well. both restaurants and grocery chains co-opted the idea of meal kits and then had the built in neighborhood loyalty.


> both restaurants and grocery chains co-opted the idea of meal kits and then had the built in neighborhood loyalty.

This is the big thing. I can walk into a Stop and Shop or an ACME or a Shopright and buy a meal kit on my way home, and they usually have a decent selection. They aren't gormet, but they are fit for human consumption ;).

I can just throw it all into a skillet, saucepan/pot, or an instant pot and have it done in 30 minutes without chopping/dicing/slicing.


That's a very different market. Munchery was targeting the Eatsa crowd.


They were at a point where they had honestly gotten quite good at it and then they decided to put an inexperienced finance bro in charge of pretty much everything (I think he was promoted 4 times in 6 months for no objectively demonstrable reason) and gave the La Boulange guy a blank check to go do whatever the hell he wanted (and what he wanted was to siphon as much money as he could to all his buddies' companies). At that point the quality tanked, retention evaporated and the waste went through the roof because the chefs no longer had any real voice in anything. There was nothing a good marketing executive could possibly do to pull out of that tailspin and they had never gotten anywhere near a good marketing executive at any point, so the investors installed a new CEO who installed a bunch more recently unemployed Yahoo cronies who demanded around $300K/head to sit around writing reports no one ever read or did anything with and it's mostly been shocking that they survived beyond that point.


> pizza, Indian, Thai, Sushi etc. places

this selection contains the answer to your question: all those cuisines's recipes use few ingredients in a lot of variations and have preparations that can easily sit waiting for a customer.

it's harder to find restaurants or other places with large or daily menus that can sustain a structured delivery chain as primary income source, maybe they can support the more unstructured uber food aproach but usually that's it. exceptions apply, but parent listed a good deal of causes why this is capital inefficient.

these startups are trying to create a "microcatering" market, which is radically different.


To be clear, you can make a reasonable pastiche of all of those cuisines recipes using a few ingredients with a lot of variations.


At least around here:

1) Pizza is made on demand, quickly, from a small number of relatively non-perishable, cheap ingredients. You won't throw away a significant dollar value of raw materials. Also, pizza is popular, and your delivery drivers can stay busy. Pizza is so suitable for delivery that it's the ur-example.

2) Indian does have long lead times (the sauce cannot be made on demand), but the core food item is rice (which can be made in advance in bulk, and is also very cheap), and sauce, but the way the restaurant works is they make up a small number of sauce bases, cook up some meat, and then combine when the order is made. You don't necessarily know how much butter chicken will be ordered in a night, but you can cook batches during the night to adjust to demand.

3) Thai, around here, is always run out of an existing successful Thai restaurant, so they can piggy-back off the volume of the restaurant. It also tends to be a bit pricier, probably to reflect the higher margins. It also tends to centre around stir-fry, which again is cooked mostly on demand from a small-ish number of prepared ingredients.

4) Sushi...not popular around here (sushi is, but there is ZERO delivery options), but sandwiches, mexican, and turkish kebabs are. Again, you can get a bunch of cheap bread, tortillas, or pitas, a small number of mostly cheap, mostly non-perishable, mostly interchangable ingredients, and churn out chicken quesadillas, beef burritos, etc. Leftover bread is a small cost, and if you're careful you can minimise loss of meat, as you prepare more batches over the night.

5) Fish and chips (very popular around here), made from frozen ingredients and a VERY small selection of fresh ones, deep friend on demand.

See a pattern? A lot of "combine cheap starch with some fresh vegetables and/or meat that can be prepared quickly, ideally from frozen", where in many cases on-demand labour (putting the sandwich together, putting toppings on the pizza) will be a major chunk of your inputs, and ingredients will be minimal. In all cases you're looking at cuisines where it's relatively popular, the ingredients are relatively cheap, and critically you have a lot of interchangeability, a small number of ingredients, and low preparation times, etc. The fish and chip shop doesn't care if they sell 80 scoops of chips or 40, they've got tons spare in the deep freezer, and they're being cooked on demand; no wastage. Their main concern is just selling enough of anything to cover the cost of the oil in the deep fryer.

What will NOT work is something like a steak, roasts, ribs, fancy fish; stuff that has expensive ingredients and (especially) long lead times. You can't just cook up 40 plates of ribs on spec to see if you'll sell any tonight. (Well, not and stay in business for long.)

And if we look at the screenshot of Munchery's menu, item 1 is Corn Husk Roasted Salmon, item 2 is Honey Glazed Pork, item 3 is a side, item 4 is Roasted Chicken. These are the exact sorts of thing that will wreck your economics. No doubt they were popular; people are sick of pizza, indian, thai, mexican, etc as delivery options, especially at $11 a plate! But as the joke goes, if you lose money on every sale, you can't really make it up in volume. :)

Edit: Munchery tried to work around this by closing orders early, I think at 2pm, but 1) that's going to lose you some volume and 2) that's still not enough lead time.

> why are all pizza, Indian, Thai, Sushi etc. places in my city doing this

They're doing something very different.


> They're doing something very different.

I don't buy this explanation. I can easily get roasted chicken, honey glazed pork, salmon, bbq ribs and a ton of other 'complex' dishes delivered with no fuss and for similar prices. Pizza, thai etc are popular because, well, people enjoy the food. There is nothing radically different about doing other cuisines, except messing up logistics or not meeting consumer demand...


These VC subsidized delivery businesses are all built to artificially scale rather than built to necessity, with almost comically predictable results. Webvan showed us how that works in practice 20 years ago and most of these latest companies are still repeating its mistakes. Then whoops the cash is gone and it turns out they never actually had a real business at all (they were merely net delivering money to customers, a truly extraordinary business model).

The winners are going to be giants like Amazon that can absorb zero or negative real margins and can play a very long game until vehicle improvements (automation + electric) cuts into the delivery cost (and or they'll just find a way to bundle in other products/services to produce a broader profit).


Exactly. There isn't a billion dollar market to tagging $5-10 on each Five Guys order for a 30-75 minute delivery. I order food delivery from these places about twice a month, and almost never pay anything, due to competitive pressure. End of the day, I'm never, ever paying $10 to get $20 of burger delivered.

Even Amazon gave up on paying me to deliver groceries to my home. They would have a guy in a deli in New Jersey (~200 miles away) slice ham and turkey cold cuts in the middle of the night, and deliver via USPS by 7:30AM. Truly a marvel of modern logistics, except they couldn't figure out how to not put big cans of olive oil on top of eggs or bread.

We probably got an average of $50/week in refunds.


basically the model is operate at a huge loss subsidised by investors until you can monopolise, then start vertically integrating and increasing prices. It's like if an Indian takeaway took a $MM loan to buy out all the other Indian takeaways in the area and then doubled the prices everywhere. The "tech" angle is just putting a happy face on monopolisation and price gouging.


Munchery provided nutritional and caloric info for all their dishes. Their portion sizes were decent, and the food was tasty. If you're counting calories and hate to cook, it was not a bad option.


Well, I my area there are several delivery options with lead times of about 45-60min which do ribs/steaks and some Greek cuisine delivery (including many types of meat). Service area is about 3-4 miles to about 100k inhabitants of that area.

All have been in business for years (at least around 2010) and most longer. I would not be supersized if they are quite profitable.


I'd be surprised if they weren't running out of restaurants. If you're already running a restaurant, adding a handful of extra covers a night and paying somebody to deliver them locally isn't going to drive down your margins (and probably will drive them up, assuming you get enough orders to cover the driver cost).

If you can outsource your driver to somebody like Deliveroo or Uber Eats, even better ...


If you outsource, service goes to hell and you lose business. Contrators of contractors just dont care about you or your bottom line. Most successful delivery services are hyper local, or pizza.


I’ve used DoorDash and Grubhub quite a bit. They’re both quick, reliable, and generally seem to care more than your average pizza delivery driver. The drivers will typically go out of their way to make sure you get your food on time and still hot. Maybe it’s just my area, but I’ve mostly switched from restaurants that self-deliver to these two companies.


While that sounds plausible it doesn't appear to be compatible with the success of Just Eat, for example, who are doing awfully well ...


Counterpoint (maybe?). For munchery, because meals are expected to be delivered cold, you have all day to cook.


Takeout and restaurants that do takeout are either easy on demand foods or complements to the core business. I used to work at a coffee/sandwich shop where catering drove margins -- delivering a box of sandwiches to a business meeting or small event is enormously profitable, but wouldn't keep the lights on.

The problem with cooking anything on demand is that scaling up distributed cooking doesn't work well while preserving quality. If you want cheap, you get fast food, and if you want expensive, you have a quality cafeteria.


They specialize on the kind of food that is favorable to this.


Small area. Small customer base. Selective customer base.


I don't see how munchery could possibly be throwing that much food away.

1 - ordering closes (closed?) at 2pm.

2 - I generally ordered Sunday night / Monday am for the coming week: 2 meals for 2 people each.

3 - with price increases over the last 18 months, they're pretty price comparable to delivery. I have a hard time believing there's no gains to having an industrial kitchen rather than a storefront, and from closing ordering at 2pm.

Also, Munchery charged $7/delivery, and I tipped $5. So they should have been breaking even at 3.6 deliveries/hour, assuming your $25/hr number...


is 30% waste a lot for a restaurant? What is the industry standard there?


30% waste on cheap side ingredients (lettuce) will kill your margins.

30% waste on meat will kill your business.


What really kills meal-kit companies is just one thing: churn.

If you look at some published data from a while ago, Blue Apron has 15% user retention after one year, Hello Fresh 11%.

As a consumer, at first might sound a good idea and convenient to order pre-made food you don't have to cook but soon you realise it gets quite expensive compared to just get your groceries delivered and cook.

I don't know in the US, but in Europe for an average family of 3/4 members using meal kit companies is bloody expensive in the long run and you can't even get meals for the entire week.

Also if you get 2/3 meals a week, then you have to shop for the remaining days and you inevitably end up wasting food.

Personally, I don't event think you can compare meal-kit companies with the likes of UberEats or Deliveroo. The latter can reach economies of scale far more easier than the former.


As a consumer, at first might sound a good idea and convenient to order pre-made food you don't have to cook but soon you realise it gets quite expensive compared to just get your groceries delivered and cook.

I have tried many of the meal box companies and the real problem is quality. The food quality is usually not high and the recipes are basic. I imagine that even novice, unskilled cooks will realize after a couple of months that they don't need the box.


> after a couple of months that they don't need the box.

Maybe that's a good thing and something that these companies should push for? Maybe they already do? Sell it as a service for three months, one up front price, one'ish meal a day that you prepare and cook with the idea that this is a learning activity rather than following strict directions or assembly. As you move further through your cooking education the meals become more complex. I would think you could charge more for this while having better/more ingredients and having a smaller customer base.


They can't. They have a native local competitor that stocks everything they do and is located within a few blocks ( or a few exits on a road ). The competitor is called "a grocery store". There's typically more than one of them in the area.

The total possible market that meal kit companies can extract value from is very small - it is not only people who have more money than they have time and people who do not know how to leverage money to get others to do the entire process for them.


> I don't know in the US, but in Europe for an average family of 3/4 members using meal kit companies is bloody expensive in the long run and you can't even get meals for the entire week.

This is definitely true in the US as well, even in areas with slightly higher prices for groceries in which meal-kit companies still charge their normal prices. You could eat out and get a main dish in one of a variety of restaurants in any city in the US for the price of the meal-kits I found.


There is a difference between meal kit companies like Hello Fresh, Blue Apron, and Plated and fully-prepared companies like Thistle or Freshly. The value-prop of not grocery shopping is there for both but one doesn't require cooking, which is important to some people and one takes the guesswork out of cooking to hopefully make you a better cook, which is important to some other group of people. There is also a difference between those companies and delivery services. Even though UberEats will deliver you freshly made food, you have to order it every day and need to wait for it to be delivered. With these other services, the packages are just delivered to your door in a box and you only need to place the order once a week.

Delivery is expensive, so these services are out of reach for your average consumer. However, when you think about it, the people most likely to get a ton of value from prepared foods are people most likely to have a busy job where they make a higher wage than the average consumer.

Additionally, user-retention metrics in weekly subscription services can be misleading. If you're still ordering 52 cycles after signing up, you're likely a whale for the service.


All accurate and great points. To add a couple more:

- Limited meal customization. Want to order an item minus the mushrooms? Too bad, since the meals are prepped ahead of time.

- Limited inventory throughout the city. Have you ever not been able to order your favorite dish off Postmates because it was sold out? On demand apps have this problem every night.

Source: Worked for an on demand food delivery company.


Not everything applies to Munchery. Orders were closing ahead of time, so no waste. Drivers had a routes, because they've been delivering multiple orders at the same time. Munchery was a model for me when I tried to run "Dinner delivery" startup in Kyiv, Ukraine, but we were actually partnering with restaurants to prepare foods. - I think big leakage for a Muncher - was a stuff salaries and all the kitchen equipment/space costs


> 1) you can't predict how much food to make. On demand food companies were throwing away 30% of the food they made every night

I'd say that's just how the food business works. A big part of running a restaurant, a food stall, or even a supermarket is to forecast how much food you're going to sell on the day and thus how much supply you need to buy.


As someone who grew up in a restaurant, this seems crazy to me.

This appears to be a restaurant that tries to make every kind of meal, and deliver it.

"Restauranteur" might well be the second oldest profession. There should be dozens of people in everyone's network who could tell you how the business works. The Everything Delivery is also a business model that most people in the business could critique.

A friend of mine runs a very popular sushi chain in central London. It works, but only because everything is highly controlled. They know exactly how much fish people are going to want, and they know when. They know where to deliver to as well. Having all this knowledge means they are able to cut that fine line between the minimum cost and the revenue.


TechCrunch on the shutdown: https://techcrunch.com/2019/01/21/munchery-shuts-down/

The meal delivery companies all seemed to expand too fast. There were no economies of scale to be had by geographical expansion. These companies needed to absolutely nail one or two big metros before even thinking about expansion.


I didn't realize that the name recognition was so regional in this space. I remember traveling internationally years ago and looking at Yelp for recommendations. After reading a few reviews and seeing what restaurants had the highest ratings I could tell that it was mostly used by tourists, not by locals.

I know for restaurants the real money is made by expanding and sharing the suppliers, management, advertising, but for something like a delivery app I'm not sure what the benefit of growing quickly is if you have competition outside of being first to (that local) market.


Ok, we've added that URL above. Thanks!


> nail one or two big metros

is there any that tried instead to partner with some existing catering company to leverage their off time instead of building everything from scratch?

seems to me building your whole cooking chain is quite inefficient


LeanLunch are doing this well in Leeds, UK. But I don't think they're backed by absurd amounts of VC cash (and pressure) either.


With more actual restaurants delivering through Postmates/Door Dash/Uber Eats there are just a lot more options available from known restaurants. At a similar price point, I would rather order from a restaurant that I either have already ordered from or that has good reviews vs a non-restaurant food delivery service that I don't know anything about.


Interesting that on the SAME day I received an email from the Dept of Public Health re: my complaint re: Munchery's food handling standards, Munchery announces that they're closing--immediately. It's a shame that, what once was a really good food delivery service, Munchery lost its 'successful charm'. The DPH stepped in because I complained that our meals were delivered way after scheduled time and they were NOT under refrigeration. Unfortunately, my meal contained raw tune which eventually led to serious food poisoning. After that incident, I didn't trust Munchery and never ordered from them again. Munchery began to overload their drivers with far too many orders which made deliveries late. This indicates a lack of sound infrastructure, greed, and a lack of concern for their hard-working drivers, as well as the customers who are receiving meals that are going to make them sick.


I've used Munchery a handful of times back when they were prominently featuring local chefs. The sushi was always done by these two guys and it was always mediocre. The only other problems I've had came up later and were: they've shifted the menu to exclusively bland recipes by the Munchery kitchen and the delivery became unpredictable.


It seems like they just did too much. GrubHub, UberEats, DoorDash are all significantly difficult without the cost of making food at scale. I'm impressed that they raised the amount of money they did.

The most interesting work in the food delivery space, IMO, are companies that want to bring the Deliveroo model to the US:

- https://www.cloudkitchens.com/ (aka City Storage Systems)

- https://2ndkitchen.com/

It'll be really interesting to watch this space evolve. I wonder if prices will drop in the long run without sacrificing quality (I'm hopeful, but my rational side says otherwise)


Isn't Deliveroo's model exactly the same as that of GrubHub/Seamless, DoorDash, Postmates, Caviar, etc.? In Europe, there's also Just Eat and Foodora in the same space.

Deliveroo has started expanding to use local kitchens (that have no physical restaurant where diners can go), though you'll also find examples of those on GrubHub/Seamless.


> Deliveroo has started expanding to use local kitchens (that have no physical restaurant where diners can go), though you'll also find examples of those on GrubHub/Seamless.

Not nearly to the same scale as GrubHub. Deliveroo's prep kitchens (called RooBox or Deliveroo Editions) are a lot more ubiquitous. Additionally, Deliveroo actually provides & helps prep kitchens, whereas GrubHub is fairly hands-off when it comes to whether a restaurant has a retail location or is delivery-only.

Their ability to provide prep kitchens works twofold: 1) Help drive down cost, and, more importantly, 2) Gets more restaurants on Deliveroo to drive sales. This is also a perfect touchpoint to sell all sorts of things a restaurant would want: packaging, point of sale, marketing materials:

https://restaurants.deliveroo.com/en-gb/

The fundamental difference is that GrubHub & UberEats are (mostly) just delivery. Deliveroo is full vertical integration. I would not be surprised if they start impacting & controlling supply chains soon.


Delvieroo here in Australia doesn't prepare their own food, they just deliver food in the same light as Ubereats and Menulog. Interesting they have a different business model internationally.


>> I'm impressed that they raised the amount of money they did.

I'd be impressed if they could do something productive with the money. Raising money isnt a goal or milestone in itself, it is more a reflection of networks than intelligence/grit/creativity/deliver-ability.


AKA commissary kitchens with a cloud backend so you have to have internet connectivity to use the stove...

These types of kitchens have been around for decades, and are very popular with catering-only companies.


> These types of kitchens have been around for decades

Yep exactly, I don't think anyone has done it quite like Deliveroo has though. I also wonder what the economics look like for delivery-only kitchens.


My office has been using them for years for dinner orders, sad to see them go. We used to use Sprig and Munchery (anyone staying for dinner gets to pick), but then Sprig shut down, so we moved to a choice between Munchery and a group Caviar order. Realistically, Munchery hasn't been as popular: we've had maybe 1-5 people order Munchery and 5-15 people order Caviar each day, but it was nice to have the extra options. One notable downside to Munchery compared with others was that the food is cold and you need to heat it up yourself. Now with Muchery gone, I guess we'll try to find some alternative. Definitely sounds like a tough market.


Can we take a step back and talk about the management, scheduling, and boundary issues that are resulting in your needing to order dinner at your workplace, seemingly every single night?

Sounds like something must have gone seriously off the rails over there.


I know right?

And as a write this, the only other reply to you is basically a confused "but how else would you do it", since apparently the concept of putting in your 8 hours and going home to eat dinner with your family just doesn't compute.


As some cities have started banning employee cafeterias in new buildings (to encourage workers to eat in the vicinity), there could be a return to catering and meal delivery services. I think Munchery was a little too much too early. They needed to establish a following before digging deep into VC funds.


That doesn't really resonate with me, might just be a cultural disconnect.

I've worked at 5 Bay Area tech jobs, and in all of them, it has been fairly common that some people choose to stay for dinner. Sometimes it's people who start the day later, sometimes it's people who are working a bit extra. I'm having a hard time remembering a time where I felt pressured to stay for dinner, it's just a schedule that some people have. Two places I've worked (including my current place) have offered free dinner for anyone around at dinnertime.


I'm having a hard time remembering a time where I felt pressured to stay for dinner

If back before I was married I'd worked at a place that offered free dinner and snacks I'm convinced I would have happily and voluntarily stayed at the office until late basically every night. So as such I'm really glad I never did.


For accountants, this describes their life during the tax busy season (Feb-Apr, and/or July-Sep, depending on their firm's client base).

12 hour days are expected at most firms. New hires can look forward to 14 hour days. Compliance sweatshops will expect 16 hour days, though are usually very generous with salary to compensate.


how else are you going to feed a group of people in a big city? e,having people make their own food is irritating(and can't be included in "perks"), having a staff kitchen/canteen is a cost center.

how would you do it better?


> how would you do it better?

I was lucky enough to have bosses who would come around at 5:30 and say 'Oi, what are you still doing here, go home'


Quite. We sat down as a team and spoke about sustainability to the one guy who was working late regularly. And pointed out when he wasn't quite grasping it that we weren't going to allow code he had written on his own into the codebase.

You might think it's a sprint. You're wrong.


Pretty sure it is about not working at dinner time for what seems to be most nights based on OPs writing. So I think everyone would do better by not having that many work hours.


I presume Caviar is a company and your office isn't munching on gourmet food every day?


It's a service owned/run by Square (https://www.trycaviar.com)


Wow did not know they were owned by Square! Only knew they took over OrderAhead, which I liked, and tacked on lots of fees. They have a service fee, delivery fee, and driver tip as separate line items.


It's time that companies who put food in a box and mail it to peoples' houses stop claiming to be tech companies.

They are just food delivery companies who happen to have websites. Like all other food delivery companies and restaurants, they are in a cutthroat low-margin business and a few bad months can kill their company. They have no moat because anyone else can also deliver food.


Being a "tech company" has something to do with the ethos, I think, or how investors view the company. It has very little to do with "technology" (which is ubiquitous in any case). For example, Rolls-Royce does technology, but they're not a "tech stock" or a "tech company", I think, or only marginally, as I understand it. But perhaps there is no common understanding of the term.

(Edit: Personally I get annoyed when some stupid web programming framework gets described as "technology". Gas turbines are proper technology, in my opinion!)


Technically, there is no such thing as a tech company. They are all selling something, usually software directly or better software-powered versions of existing industries.

Amazon is retail, AWS is IT, Google/Facebook are ad networks, Microsoft/Apple is hardware and software, etc.


Let me put it this way:

Could people have put food in a box and mailed it to your house before the invention of computers? Yes.

Could people have offered computer hardware and software before the invention of computers? Of course not, that's silly.

Of course Microsoft and Google and Apple and Facebook are tech companies. It requires ridiculous reductionist contortions to argue otherwise.

On the other hand, Munchery could have existed at any time the USPS and Visa/Mastercard were operational. Restaurants have been delivering food for far longer than computers have existed.


Do you think tech is just computers? Of course you cant offer computer software until computers are invented, what does that statement prove exactly?

Technology is scientific knowledge, strategies and processes used to solve problems. It's been around since the dawn of civilization and is used by every company to conduct and improve business.

Let me put this way: your average hospital has 1000x times more technology in use at any given moment then even the most silicon valley "tech" companies, but they are properly classified as healthcare companies.


This is the kind of reductionism that blends everything together, which is useless. Nobody is better off for having thought this way. It just muddles everything together and there is no upside to doing it.


Actually this is the opposite since it's clearly defining the kind of company based on what it actually produces and the industry it serves.

Reductionism is considering tech to only be something about computers and that only a handful of special companies are the only ones who use it. Perhaps you missed my statement about the hospital?


Nobody’s arguing about whether they use technology, but about whether their business is defined by technology enough to be called “tech companies”. Nobody refers to hospitals as “tech companies”?


What does "business defined by technology" actually mean? Can you describe it clearly?

Since technology is applied science, why does a hospital using complex scientific machines to deliver healthcare not qualify but a company building a webapp to order food does? Where's the line exactly?


Can your whole online business be trivially replaced with a phonecall to a local service? congrats you're not a company that can succeed in the tech space because the competition is skyhigh.

Nowadays i'd say a tech company is defined by the "tech" it is implementing to disrupt/control the market. no disruption tech = waste of vc capital. "we do x better" isn't enough to last unless it's so radically better it is a new space(google's call screening feature could be spun off into it's own company for eg)


What is the "tech space"? That's still conflating tech as just computing.


Yes. That’s how it is used.


The point is that the boundaries are being blurred. Is Amazon a tech company? Is Netflix? Is Netflix a tech company if they mailed you CDs instead of streaming the material?

Doing anything at scale pretty much turns you into a tech company these days.


No, doing things that you could not do without the benefit of technology is what makes you a tech company. Obviously you can stretch the definition of technology to mean pretty much anything if you are not arguing in good faith.

I think all of us in 2019 have a fairly standard consensus understanding of what technology means in the context of this conversation and it would not be good to hijack that to mean anything you want it to mean.


>> stretch the definition of technology to mean pretty much anything

The actual definition[1][2][3] of technology is applied science and knowledge for practical means. Narrowing the scope to fit arbitrary companies seems like the real stretch to me.

1. https://en.wikipedia.org/wiki/Technology

2. https://www.merriam-webster.com/dictionary/technology

3. https://www.open.edu/openlearn/science-maths-technology/engi...


So, when colour television was the cutting edge of technology, the TV companies were tech companies?


No, there is no "tech company".

Amazon is retail, like Walmart has been. Netflix is media production and distribution, like Fox has been. Both have figured out new business models but that doesn't change the business that they're in.


Blurry boundaries do not mean no boundaries. Amazon, with their AWS services is squarely a tech company. Netflix arguably a bit less than say above-mentioned Amazon, but they do heavily depend on technology and innovate in that sphere, however are certainly less tech company than Xilinx, Motorola or International Rectifier, but certainly more than Domino or Papa Johns.


Netflix are a Media company.

They leverage some damn impressive technology, but their business is about delivering media for end user consumption, much like any of the TV companies during most of the 20th century, for example.


They can be both. I would not myself call Netflix call a tech company, but many people would, and I kinda see why. Munchery-punchery, OTOH are not technical at all, but certainly are hip.


> Technically, there is no such thing as a tech company. They are all selling something, usually software directly or better software-powered versions of existing industries.

Oh hush, you. You know how much extra they're paying us because they have low profit expectations? Let the investors keep calling it tech.

But seriously, I think one could make a distinction between companies that focus on using new technology to scale businesses (which are mostly old, but can be scaled in new ways using technology) vs. old businesses that focus on just remaining old businesses. The idea being that if you are a "tech" company, you are rolling the dice on being able to expand much harder/faster than a company could have with older technology, and also have significant downside in that regard. To be a 'tech company' in this regard is to be trying to get big in ways that make it more likely you will get big or go bankrupt, whereas a more traditional company might take a more conservative approach.

I mean, the important distinction here that the market is maybe missing is that if an old company puts enough effort (or rather, has enough success) scaling their business using new technology, they probably should be put in the same risk/reward bucket, and if you do succeed, well, you probably should no longer be thought of as a 'tech' company by this definition. Like I think you could argue that Apple might not be a 'tech' company by that definition (you could argue that they were a tech company when they figured out how to sell pocket computers to normal people - of course, you could also argue that they try to do that all the time, it's just they are at the point in their product development lifecycle where they have a super successful old product and none of their new stuff is really that visible.)


That's not a very useful label then. They're just better executing companies in the sectors they're in, and sometimes it's older companies too as they innovate.


Your first sentence conflicts rather severly with your second. As an investor "better executing companies" are exactly what I want to invest in.

But personally, I think "higher risk" is a better descriptor of 'tech' than "Better executing" - by my definition, a tech company is applying new processes to their business that would not have been possible with older technology. That's a risky thing to do, and it can go badly and go well; It's easy to overestimate how useful a new technology is, or how much difficulty your traditional competitors will have competing with you.


Okay, but how is IT not tech? It’s right there in the name.


How many companies can you point at that don't rely on IT?

If relying on IT makes you a tech company, then basically everybody is. If what you provide is technology, then maybe you're a tech company, if what you do is provide a banking service, you're a bank. Try running a bank without using modern technology to the limit ...


AWS literally sells IT. That’s the point I was trying to make.


Technology is vast, not a good label. IT is narrow and actually describes computing which is why AWS, Dell, HP, SAP, Oracle, etc are IT.


I can understand the justification. The fact is they are relying on technology to reduce the greatest cost of operations ala personnel. This use of technology is providing data to improve logistics, menu normalization, ordering, onboarding and reducing things such as customer support by surfacing timely information to end users. Alerts on pickup, delivery, etc. It's believed that these efficiencies produce opportunities to improve the margin one percent at a time.

For their tech-driven-optimization methods; one could argue they are a tech company.


Every company uses technology to improve their business operations. There's nothing special about that.

I think people just conflate software as tech. Using software to run a better food business just means you're a better food business.


Microsoft, apple and google, Intel are pretty much at the forefront of information technology and/or electronic technology. Tesla is a great auto tech company. What are you talking about?


It is a very simple rule: if it is in the South Bay or Southern part of the East Bay or Peninsula - than it is probably a tech company (Tesla, Micron, Intel etc.). Otherwise it is another pseudo-tech Hipthing.


The meal kit companies do have fundamental operating advantages which have yet to translate into a massively successful business. By offering customers only a limited choice of meals, they are supposed to achieve huge economies of scale. The problem is that perishables delivery cancels all of these out and then some.

This business will be won by operators with local infrastructure and no delivery... like selling meal kits at grocery stores, or prepared meals for family dinners at office cafeterias.


Economies of scale means that the more customers you have, the cheaper it is to offer the service per customer. In this case, the cost basically remains the same, no matter how many customers you have.


I know what economies of scale are. When you are buying and prepping 100,000 of the same meal at once it is much cheaper than prepping 100,000 different meals.


> Founded in 2010, the San Francisco-based business had raised a total of $125 million in venture capital funding, reaching a valuation of $300 million with an $87 million round in 2015, according to PitchBook. Munchery was backed by Greycroft, ACME Ventures (formerly known as Sherpa Capital), Menlo Ventures, e.Ventures, Cota Capital, M13 and more.

I would absolutely love to hear some of these VCs rationales for investing.


It will never happen.

I've long thought that in the same way that DDG is a viable alternative to Google on a critical front (privacy), it's viable for an enterprising young VC to carve out a market based on radical transparency of both their wins and their losses.

Doing so however would be the equivalent of airing dirty laundry; there's a lot of people out there who don't want you to know how the sausage is made (FOMO, very little due diligence, etc.), and they likely won't want to get a reputation for calling out founders for their failure, lest their dealflow dry up.

I happen to believe however that the positives of being radically transparent and being notable for that very feature would outweigh that perception. Doesn't appear many VCs agree with me so far.


Portfolio theory. VC is not about in-depth rational understanding, it’s about getting into as many deals as possible. Due diligence costs too much.


They do due diligence to ensure what the founders are pitching is based in reality - i.e., current sales and growth figures, unit economics, industry data, general trends.

But they know they can't accurately predict the future so they don't spend much time trying to do that.


Basically FOMO at a time when everyone wanted to invest in Uber for X.


I'd really, really like to see a breakdown of expenses for the company's operating lifetime. In my mind this amount of funding should let you build functional nationwide delivery infrastructure, not only three cities, maybe open 100+ locations; but I'm likely wrong and would love to see how. My first guess would be most of it is burned on marketing and software development (?).


They overpaid for:

salaries

No one in the restaurant business makes the salaries that restaurant logistics companies pay.


For people who might be like me and not know what Munchery is: https://munchery.com/

Curiously, no mention of shutting down on their site that I could see.


I read their website and I'm still concerned i don't get it. (or maybe that's why they're shutting down).

So they deliver you the food from their menu? So its just a professional food business with delivery but without the restaurant/dine-in option? So presumably their competition is actual professional restaurants and they're just in the professional food business?

I'm still struggling to understand how this is different from just ordering food delivered from any other food business? The fact that they say...presumably with a straight face...that you reheat their meals suggests to me that they must be pitching to sacrifice quality for convenience, but they seem to want to believe they're upmarket...

Forgive me, it just doesn't compute?


I've ordered over 200 times.

Munchery is pretty good food, with better variety than sf peninsula restaurants, and definitely much healthier, delivered cold to your house. The value is it's waiting when you get home. You reheat it and have a good (sometimes great!) meal in 5 minutes.

As for local restaurants, there's not great delivery options here, particularly if you don't want pizza or sandwiches.


Yeah, this was the weird part. I couldn’t find any mention, just this.


It looks like maybe they are pivoting to a blue apron style boxed meal delivery? Before they would deliver premade food (like restaurant delivery). You could order from a different menu each day as you wanted it. I used it a few times in the beginning. Slowly portions became smaller and more expensive, and the menu became very repetitive so I stopped using them in favor of restaurant delivery. I actually didn't realize they stopped doing business in Seattle last May until I saw this announcement and started looking around.


Is that what you are seeing on your end? A pivot to a Blue Apron like meal kit? For me it seems to be a prepped food delivery service still.

Blue Apron is flailing like crazy - down 80% or so since IPO less than two years ago. And the IPO itself was double digit percentage lower than it was supposed to be in the first place. Can’t imagine how you would jump into the meal kit niche these days.


>Is that what you are seeing on your end? A pivot to a Blue Apron like meal kit? For me it seems to be a prepped food delivery service still.

Interesting, for me it's showing "The Plaid Box", a weekly subscription box.


Ah interesting. Geo location or a/b testing I guess. Or they just haven’t fully rolled things out.


As a driver and biker myself, Munchery had a great culture. We worked really well together as a team to complete challenging routes in heavy traffic, and 3 months of the year are rainy, which complicates everything.

I think 30% is low. I’ve seen 100+ lobsters, 100+ steaks, 200+ salmon, and more in a single night. It was very frequent, no one who worked there paid much for food since you could live on the Munchery diet as we called it. Every Wednesday, Thursday and Friday (and Sunday at one point too) were big giveaway days. At least 2000 meals per week were given away.

Best side job ever. But I said this years ago when I started, “how can they keep giving away this much food?”. I was told it was never a profitiable buisness and it was kept alive by investors. They did pad the tip pool, especially around the holidays. But typical pay was between $20-$25 an hour with tip, $15 without tip. It was less but it’s always been minuniun wage for SF.

The one thing the food did do was keep everyone very happy and loyal to the company. Most have been there for 5+ years, a few since near the beginning.

I never understood why they missed the mark so much in predicting the amount of food. The last few weeks, they have been making less food, letting items sell out.

My biggest complaint is I didn’t even get notification ahead of time. In the middle of the shift, they shutdown and told us we’re being laid off. Everyone is scrambling to find new jobs as no one is getting paid anymore and no one knew it was coming this quickly, we all thought at least another 6-8 months. Even a 2 week notice would have been nice. I found it very disrespectful to just close one day with no notice to your employees that this is coming.


Wow that's a lot of food waste! Was upper management really disconnected with the kitchen staff and delivery drivers? They must have known burning through that much cash and wasting food is incredibly wasteful and unsustainable right? I'm really having a hard time getting my head around why management simply didn't just tighten the belt buckle...

Also assume you were paid by the hour? How many deliveries would you typically do since traffic is so terrible around the times they deliver?


I could've sworn that they closed down a year or two ago. Are you sure you just got this?

Edit: yeah, looks like this happened 8 months ago (https://munchery.com/blog/a-letter-to-the-munchery-community...)

Edit 2: oops, that was only NYC and Seattle - looks like I remembered incorrectly!


Maybe they are shutting down by geography?



This is unfortunate. I would hope we see a postmortem to get a better understanding of what went wrong. This information could be incredibly valuable to other founders working on similar challenges.


The business model of losing money on every sale, but making up for it with volume, turned out to be unsustainable, who knew?

It was nice to get VC-subsidized dinners while it lasted.


It's amazing to me how few companies get this, and even more amazing that they ever find funding, much less multiple rounds.


my questions though are like: how much scale do you need to make it not a money loser? how do you rationalize the loss-leading? has any company ever broken past that threshold? (i'm guessing uber ?)


>>I would hope we see a postmortem to get a better understanding of what went wrong.

High level -- FOMO lead mediocre VCs to take OPM (LPs reaching for yield) and spray and pray. Bros who went to Stanford gave other Bros who went to Stanford $100M+ because of connections, because what do you have to lose?


There's no mystery. This is just not a viable business model as known for 20 years now from the first dot-com bust. The economics haven't changed meaningfully since then for there to be another serious attempt.


$125 million raised, and they only cover the Bay Area, the most competitive market for this kind of service?

Is there even $126m of value in delivering food in an area with a population of 7 million?


This is a sad announcement for a service I didn't even know existed.

Over the last few months my schedule has gotten extremely busy and I haven't had time to do any of my normal cooking. I've been just grabbing fast food and putting on more weight than I would like. Toying with the idea of hiring a personal chef along with a nutritionist to plan/prepare meals, I was hoping to have a high quality meal served within seconds of walking in the door. Basically eliminate the stress of dinner and poor diet. I seriously wish I would have heard of this service as it solves my problem in a vastly less expensive way.

So yeah, sorry to hear of the closure and I wish everyone over there the best of luck on future projects.


Full disclosure: I work for Kettlebell Kitchen, and KBK partnered with Munchery to take over the NY region.

Give KBK a try. Our focus is on healthy meals delivered right to your home or gym.

To add value to this thread: the ordering platform is a SPA with all the typical complexity problems. We're in the process of making it way better. Blog posts incoming!


I don't know where you live, but most places there are healthier options for takeout (like salad). A personal chef is much more expensive than you think.


As another user mentioned, prep was a key. There was also the aspect of having a customized diet based on my specific needs and tastes. Takeout is a great move and what I've currently settled on for the time being but it isn't perfect. Aside from not being able to get highly custom meals that fit my exact demands, I also still have an issue with actually picking the food up during rush hour. Generic order delivery services are pretty great at this thankfully and I've just been having them deliver food to my car as I leave the office for the day.


I’ve hired a chef to do meal prep, it’s not that expensive and the food was fantastic.


A personal chef to come to your house is much more expensive than a takeout salad. I would love to see a link to such a service that is affordable.


This conversation is pretty meaningless without numbers on "not that expensive" and "more expensive than you think".


You’re right. I paid $300 plus food costs for a week of meals.


15,000 a year. That's a lot.


hmm i’ve thought about this but thought it would be way too expensive. any more details on how you did this? what area do you live in? how much approx was it? you let them in your house in the afternoon and they cook and have it ready for when you go home?


Does anyone have a rough idea what proportion of expenses Munchery spent on?

* marketing and promotional costs

* management overhead and office expenses

Perhaps I’m naive, but looking at their fundraising history, $125M in investment should have been more than adequate to cover launch and build-out costs, considering their core food supply costs would have been covered by actual customers’ order fees.

Is this another example of scaling prematurely and hoping you can recoup all of the massive promotional expenses you’ve employed once you have major regional markets under your thumb?

Generally expensive corporate office space rates in the Bay Area, Los Angeles, Seattle, and New York don’t often help, either.

Edit: Added clarification of questions.


Word is that all the 'employees'(1099ers) found out this morning. In somewhat understandable angst, they've cleaned the place over, bringing in trucks to take all the now un-used heaters, ovens, and all the soon to be spoiled food. Rent is due in 10 days afterall.

So, if you are in the market for some industrial grade kitchen supplies, now is the time to act on that impulse!


I’m waiting for a “book the cook” food delivery service where I can ask a chef to cook whatever, get a quote, pay for it and have it delivered.


There goes my $500 gift certificate... Any suggestions on how I can recover that, or have it returned to the initial buyer?!


You are very likely to be out the money. The bankruptcy proceedings will determine how giftcard owners are compensated. Hard to say if it will be favorable, but I suspect they may be even less senior than unsecured debt (or they may be categorized as unsecured debt). Consult an attorney, but it may not be worth their time.


Ask the initial buyer to file a chargeback if it was purchased via credit card. At least in the US, there's good protections that way for preventing folks from owing money for goods and services they didn't receive.


But they did receive the gift card. Why should the payment processor assume the risk that, possibly years later, someone doesn't honor the gift card?


They're not assuming the risk, the merchant bank is. And the merchant bank should be mitigating that via holding back a portion of credit card receipts from companies for the specific purpose of honoring chargeback demands.


I don't think you can chargeback years later, it's usually 45-120 days.


In certain states, money used to purchase a gift card is required to be held in escrow, which would be held separately in receivership. Definitely worth asking about.


Looks like the site is still accepting payment for gift cards.


Just to add to the others -- if the initial buyer paid with PayPal, they could have up to 180 days from the date of purchase to initiate a Significantly Not As Described (SNAD) claim.


Edit: I read a stale link. My bad.

---

I live in the bay area, have ordered over 200 times with Munchery, and haven't gotten any shutdown email.

All meals are shown as sold-out through Friday. Normally you can order up until 2pm the day of.


One thing that I don't understand is why the Social Team are still posting food porn even after this message. Have they not been informed yet?


They're probably using this: https://hootsuite.com/platform/scheduling


They're using Twitter Media Studio according to the app tag in TweetDeck.

https://media.twitter.com/en_us/articles/products/2018/media...


Scheduled tweets


automated zombie bot is still paid, automated zombie bot does at it is told


youve released some great talent into the world. munchery developers are some of the best ive worked with :)


(deleted)


That article is from May of last year.

(I also just got the email that OP quoted.)


I did check their own site first. The lack of indication of problems misdirected me. They even have job postings still up.




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