Digital grocery startup features fresh, local foods

SAN FRANCISCO (KGO) -- A new San Francisco startup says it can deliver locally grown produce and other groceries in a timely matter and at a competitive price.

Ordering groceries online is nothing new, but Farmstead thinks it has a model that makes it different.

Colby Holiday fries his farm fresh brown eggs. "Like I said, we like food. We like to eat." he said.

He used to make regular trips to the farmer's market in order to get the best and freshest produce. That changed after the birth of his baby nine months ago.

Now he orders his groceries online using Farmstead.

"Farmstead is basically taking the same produce you would get at your Farmer's Market and the produce you would get if you were at one of the high end grocery store chains in the city and delivering it straight to you," said Colby.

Farmstead's produce, perishables and other groceries come from one of two warehouses in the Bay Area where the staff prides itself on keeping its inventory to only the necessary minimum.

"As you can see our shelves have just enough to fulfill the orders for the next few days and not much more," said co-founder Pradeep Elankumaran.

The U.S. Department of Agriculture estimates grocery chains throw out more than 13 billion pounds of food each year.

Farmstead hopes to eliminate that waste by using artificial intelligence. It will take data from its customers and only stock what is needed. It also sells imperfect produce at a reduced price, which other grocery stores might throw out.

"We call them ugly products. Ugly pluets and plums when they're in season. Things that are cosmetically challenged, but taste just as great."

Right now Farmstead only delivers from San Francisco to San Jose, and parts of the East Bay and South East Bay.

Delivery is guaranteed within 35 minutes in San Francisco, three hours elsewhere.

The groceries arrive in insulated bags with ice bags.

The company says prices are competitive. "It's the exact same. Sometimes it's even cheaper," said Colby.

By 2025, the online grocery industry is expected to reach 100 billion in U.S. Sales and 20 percent of the market.

"We are a new digital grocer. The big guys are frankly dinosaurs," said Elankumaran.

Delivery charges start at $3.95, but is free if you make regular weekly orders. Discounts are given if your groceries arrive to your door late.

Click here for more information about Farmstead.

Written and produced by Randall Yip