Jessica Nilsson at Northzone has followed Matsmart for two years. The Swedish venture capital firm is now investing in the site that specializes in selling soon-to-be expired groceries.
Matsmart is the result of an idea to decrease food waste and offer cheap goods. In 2010, Erik Södergren started to purchase merchandise with short dates to his Ica store in Akalla. The idea soon proved to be a win-win situation for both wholesales and customers looking for a bargain.
“His store turned into sort of a “red-tag store” and customers in the area could come in and shop several times during a day instead of once a week”, co-founder and CEO for Matsmart Karl Andersson says.
Erik Södergren soon realized the force in the business but also that an Ica store was the wrong arena. He wanted to move the grocery bargains to the internet instead. He contacted his friend Karl Andersson who soon took to the idea and in turn got colleague Ulf Skagerström aboard.
“We started googling and realized that the amount of food waste is gigantic. And since then it has grown ten times bigger. People also like to make bargains and the fact there is a TV-show about Ullared says it all. The third prediction we made is that food e-commerce is increasing constantly”, Karl Andersson says.
Matsmart was launched two years ago. The food site is run by Karl Andersson and Ulf Skagerström today. Erik Södergren is still a co-owner but is remains at work in his Ica store.
“We have sold more than 1.000 tones of goods so far and about a third of it would have been thrown away if we didn’t taken it in and sold it”, Karl Andersson says.
The warehouse which is located in Katrineholm consists of surplus goods which is about to expire or incorrectly labeled. It can be pasta, rice, canned food, mineral water, snacks and coffee, i.e. items where the expiration date isn’t set as a safety measure.
“The best-before dates on these goods are only recommendations. The supplier only guarantees that the item will have the same structure, consistency, durability and carbonic acid level as when processed until the expiration date. But that doesn’t mean that it’s inedible just because it has expired”, Ulf Skagerström says.
This fall the company also started to sell misshaped candy at a fraction of the price. Most of the produced candy is perfectly shaped, but sometimes there are a few shaped wrong during the process.
“A raspberry-liquorice skulls that’s missing an eye or with the wrong color tastes just as good anyway. We sold five tons in ten days”, Karl Andersson says.
Karl Andersson got in touch with Jessica Nilsson in February 2014. She had been part of founding the German food box-giant Hello Fresh. He knew that she had just gone over to the other side and started working as an investment manager at Northzone.
“It is a rather funny story because my first phone call at Northzone was actually with Kalle and Matsmart was the first company I met with. When you told me about your idea I instantly felt it was a smart business model that actually solves a major problem within the food industry”, Jessica Nilsson says while she turns towards Karl Andersson and Ulf Skagerström.
Food sales over internet are increasing rapidly and the industry predicts a big breakthrough ahead. At the same time, Jessica Nilsson points at the fact that food is one of few segments where prices are as high or even higher than in stores.
“It is hard to motivate why you as a customer should shop online. It is one of the reasons why I like Matsmart, because they fill a segment which is not available online today”
Since the first meeting, Jessica Nilsson has been following Matsmart and when the company raises $3.5 million, Northzone is the lead investor. Business man Robert Ahldin’s investment firm Edastra, which already owns a part of Matsmart, are making a follow-up investment. The investment bank GP Bullhound also becomes a minor shareholder in the company.
“We have proved that the business model is working, so now is the time to step it up in all of Sweden and expand the operations. We will also be looking at the other Nordic countries in due time. We have customers all over Sweden but we want to reach even more Swedes now”, Karl Andersson says.
This years revenue will land at approximately $3 million.
Where will Matsmart be in five years?
“We will be a large and well established company in Sweden and have operations in Europe. We will generate a revenue of at least $120 million”.
How do you view the competition from food sites such as Mathem?
“We see them as a complement rather than competition. What they have accomplished online is fantastic. We study them, learn from them and try to find our own path. Mathem isn’t a main competitor in any way. We will never be able to offer the kind of range which they have. We are more of a wholesale trader”.