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Startup Cemetery

A big resource for entrepreneurs and startup owners, in which we have collected and analyzed why +100 big companies have failed. Learn from mistakes, and avoid being part of the 90% of businesses that fail.

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Munchery

Gourmet meals at your doorstep

General Information
Category
Food and Beverage
Country
United States
Started
In 2011
Business Failure
Business Outcome
Bankruptcy
Closed
By 2019
Cause of Failure
Multiple Reasons
Founders & Employees
Number of Founders
Three
Name of Founders
Conrad Chu, Tri Tran, Van Tran
Number of Employees
Between 101 And 250
Funding
Number of Funding Rounds
8
Total Funding Amount
$125.4M
Number of Investors
20
Description

Back in 2010, Munchery co-founders Tri Tran and Conrad Chu came up with a seemingly brilliant idea in Munchery. Hiring a team of gourmet chefs that would cook up a variety of uniquely crafted, continually changing menus, Munchery allowed users to order this food and have it delivered straight to their doorstep. Customers would then be able to rate the food and the chefs according to their satisfaction. This idea of gourmet meals on-demand allowed the company to raise its most recent $125 million in total funding and was speculated to be valued at $300 million at its peak.

Cause of Failure

Munchery had a very interesting growth story. For the first few years, as a San Francisco-based platform for on-demand, microwavable gourmet meals, the business did quite well. Riding on the momentum of early success, in 2015, Munchery, in a bid to outdo its rival Blue Apron, branched into offering ingredients for customers to make their own meals (and providing them the appropriate recipes to do so). The San Fransisco-based startup continued to generate a lot of media buzz and expanded into New York, Seattle, and Los Angeles soon after. They were outperforming Blue Apron and almost every other on-demand food delivery startup, attributed to the convenience their microwavable foods model brought and Munchery’s pride on the quality control they offered that other on-demand startups, who depended upon restaurants, couldn't. They also prided themselves in sourcing 100% natural ingredients and working efficiently under their schedule-ahead model that constantly optimized the efficiency of their couriers.

So what went wrong with this seemingly successful business?

Pascal Rigo, a celebrated chef who at one point served as Munchery’s Chief Customer Experience Officer, stated in his interview with the San Francisco Chronicle that “[startups] can be either a good food company or a good delivery company, but I don’t think anyone has been able to do both.” He left the company in 2015, after just 5 months of joining. Munchery’s attempt to juggle both of these titles led to difficulties at scale.

Munchery also realized late that its original heat-and-serve meals had geographical constraints, as to ensure quality, food had to be delivered within a short drive of its kitchens. To accommodate for this, Munchery accelerated its expansion, setting up expensive production kitchens in Los Angeles, New York, and Seattle. These proved to be too expensive both financially and logistically, and the new kitchens were shut down by May of 2018. Additionally, new competition from Uber’s Eats spinoff and DoorDash started to kick in and Munchery soon could not match the variety offered by these companies that could source from multiple restaurants.

Another area where Munchery failed was in acquiring new customers. They attempted to use aggressive discounts to achieve success in this sector, offering things like $20 off a user’s first two orders and subscription plans that offered a free 1-month subscription to first-time customers. However, despite these efforts, Munchery failed to retain customers in any significant way. These disappointments led to Tri Tran stepping down from the position of CEO, replaced by James Beriker, who employed a slew of layoffs and other belt-tightening measures. Beriker also raised prices, which would only lead to a further downward spiral for the company amidst increasing competition.

Despite its ambitious mission, Munchery could not deliver on the gourmet experience that it promised and closed its doors to users, alongside similar decisions by startups Spring and Maple—early concepts of the “ghost kitchen” that shut down and was acquired earlier in 2017, respectively.

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