Good Eggs, Downsized: How the Food Community Copes When a Promising Tech Startup Fails Them

Marcie Jimenez was having a bad week. Her hard drive went down, there were problems at her house, and the phone line went out. Then on Wednesday, August 5 she received an unexpected email from the CEO of Good Eggs, an online farmer's market that delivered produce and baked goods from her Santa Ynez Valley farm to customers' homes in Los Angeles. The email told her that Friday would be the final day of the service. Good Eggs was shutting down its Los Angeles operation. "I was in tears, I was so overwhelmed," she recalls. "I couldn't believe it."

News of Good Eggs' closure made headlines the same day. After raising nearly $53 million in funding from big-name investors like Index Ventures and Sequoia, the San Francisco-based company revealed its plans to cease operations in its newest markets: Los Angeles, Brooklyn, and New Orleans. They would once again operate only in San Francisco, and with a smaller home-team staff to boot. "The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain," CEO Rob Spiro wrote on the company's blog. "Today we realize that in order to continue innovating in San Francisco, our original market, in order to continue figuring out all the complexity that is required to achieve our mission, we cannot productively maintain operations in other cities."

That mission, as defined on the company's website, is to "grow and sustain local food systems worldwide." To do this, the company has a website where consumers can browse and choose from various farmer's market fare — think produce, small-batch juices, bread from artisan bakeries, and the like — and Good Eggs will deliver it right to their door. "By supporting local food systems, we are casting a vote for the kind of world we want to live in," the website reads. "Local food systems are generally made up of small, independently owned farms and companies. Owners care about the quality of the food they're producing, the land they tend, the people they're employing, and the communities they're a part of."

These "independently owned farms and companies" are at the heart of the Good Eggs mission. Of course, many people are impacted any time a company closes, from customers to vendors to employees. But with Good Eggs, it seems that the closure may well have an outsized impact on the very people the company meant to empower — small, local food makers and growers.

The email vendors received from Good Eggs.

Good Eggs for Bigger Vendors

Los Angeles baker Zack Hall operates the acclaimed Clark Street Bread, which has a retail kiosk in Downtown LA's Grand Central Market. He also operates a robust wholesale business, where he delivers his loaves to cafes, restaurants, and other shops in the LA area. His business was well-poised for the Good Eggs model — which requires participating farms and vendors to physically drop off their items at a Good Eggs location — as he already had a wholesale operation and drivers doing regular deliveries. Even so, getting his breads to the Good Eggs warehouse on time proved challenging at times. "It's out of the way for my drivers," he explained, citing the age-old wisdom that "it takes forever to get around LA" and that Good Eggs could have chosen a more conveniently-located space.

Photo: Clark Street Bread/Facebook

For Hall, "Good Eggs was what we consider a small account." He says at his busiest with Good Eggs, he'd be fulfilling orders for 30 loaves a day, convincing him that it was worth it to send his drivers the extra distance to the Good Eggs warehouse. But other times he would do as few as six, four, or even one. "Those are the days where you're questioning is it even worth it to have this as an account," he says. Since the closure, Hall's concern has mostly been for the Good Eggs employees who are now out of a job. But when it comes to the impact on Clark Street Bread, the closure is just "not that big of a deal."

Viraj Puri, the CEO of New York City-based vegetable and herb growers Gotham Greens, says much the same thing. Gotham Greens, which can be found on the shelves of major New York-area markets like Whole Foods, D'Agostino's, and on Fresh Direct, didn't rely on Good Eggs for a significant amount of sales. For Puri, it was more about a shared vision. "I think they're sort of cut from the same cloth as us," says Puri of Good Eggs, "I think they really represent the changing consumer preferences toward more locally and sustainably grown food, and they were strong advocates for the local and regional food shed." Bill Niman, founder of Niman Ranch and current CEO and founder of BN Ranch, sent word via email that his business has also "not been negatively impacted by the refocus at Good Eggs" and the ranch "remains supportive of their business model and will continue to supply them if the opportunity remains available to us."

Coming to Depend on Good Eggs

But for Jimenez, the Los Angeles closure wasn't just a matter of being taken by surprise. She had worked with Good Eggs since it first arrived in Los Angeles in 2013, the company having reached out to her after connecting at a farmers' market in town. Jimenez and her team "worked hard to be good vendors" and to "grow with them." When Good Eggs suggested she hire staff dedicated to packaging goods specifically for the company, she listened, hiring two additional staff members who spent a portion of their day exclusively on Good Eggs-related picking and packing. She increased her acreage to provide what Good Eggs had requested. She also describes limiting the other outlets and CSAs she'd work with, because she had to save the "pick of the crop" until the Good Eggs order came in the night before. "We made a lot of concessions for them," she explains. "We put our faith in them."

Photo: Jimenez Family Farm/Facebook

In return, Good Eggs represented a "big part of weekly sales" for Jimenez Family Farm. It also represented her well on its website. She recalls spending time with a photographer to make sure her baked goods and produce looked just right (she is crossing her fingers that Good Eggs will let her keep those photos, saying that would be "a saving grace"). And Jimenez liked the mission and the people she worked with there. "We thought it was a really good fit," she recalls of her decision to sign on. And she has nothing but positive things to say about the Good Eggs staff she worked directly with, including a particularly dedicated driver who would help her load if she was in a time crunch.

But there were issues. She remembers being asked by someone from higher up the corporate chain to grow three acres of carrots specifically for Good Eggs, only to have to explain that the nature of farming means the carrots won't grow on demand and that she'd have to keep some in a cooler, which basically defeats the point of what she's doing. "They needed someone on their staff at that senior level who really understood what was happening at farm level," she adds.

With only two days notice of the closure, Jimenez was forced to find other buyers for her produce, and three days after the closure, she seems harried but optimistic. But what of those additional employees she hired to help with Good Eggs processing? Citing the never-ending amount of work to be done on a farm, Jimenez has found a way to keep these team members on staff. "We still have beautiful product and there are other people who want it," she explains. Like Hall, she says she's mostly concerned for the Good Eggs employees in Los Angeles who are now out of work. "They were good, dedicated people."

Even in San Francisco, where Good Eggs is continuing to operate, smaller vendors are feeling the squeeze. Luisa Alberto, co-creator of San Francisco's Sow Juice, has been selling her fresh juices on Good Eggs since it first opened. She worked for the company, helping to on-board the first vendors and helping create the website. Spiro is on the board of her juice company. Yet August 28 will be her last day selling through Good Eggs.

The main reason she's ending the relationship is that Good Eggs changed its fulfillment schedule. "The window of time that producers now have to actually produce their product if they make it to order, is much, much shorter," Alberto explains. The final orders are now coming in at 10 p.m., with the expectation that they will be delivered to the Good Eggs warehouse at 7 a.m. the following morning. "For us, that doesn't work. We're pretty small and we actually specialize in making juice fresh to order. We don't mass produce bottled juice... so that's been a challenge for us."

She also notes that for smaller vendors, there's another challenge: infrastructure. "Good Eggs was starting to depend more on our infrastructure, so now the burden is carried more by us," Alberto says. "One of the recommendations they had if it was challenging for us to get our product to the warehouse [was] a courier service that we would pay for." This solution, she notes, "can be prohibitively expensive." So if a small vendor isn't already doing deliveries, adding the cost of getting the goods from production facility to Good Eggs might not be worth the trouble.

"Good Eggs was starting to depend more on our infrastructure, so now the burden is carried more by us."

Alberto sees yet another potential red flag for the small makers. She sees Good Eggs competing with "the Safeways or the Whole Foods of the world" who have "products that are built to last in a different way, and Good Eggs was trying to bring to market all of these other great products that don't have that same shelf life." Now, with its gigantic, newish warehouse facility in San Francisco, Alberto suspects that this represents a major shift for how Good Eggs will work moving forward. "They've got a ton of square footage. They can store a bunch of stuff, and I think they're finding that's what they need to do in order to make this work. That inherently means that they need more shelf-stable product." For small producers like Alberto, who is opening a retail kiosk this year, this just isn't the right fit for her product, which must be consumed within 24 hours.

Still, Alberto says she would recommend Good Eggs to fellow San Francisco vendors, just "not for the small guys." Instead, she thinks Good Eggs works for "someone who's sort of in the middle phase, where they've got infrastructure, they're looking to grow their business, they have the capacity, and they just need sales." In other words, Good Eggs works for larger independent producers, like Hall's Clark Street Bread and Puri's Gotham Greens. "We were a startup not too long ago," Puri says, also noting the Good Eggs staff was "professional, "passionate," and "very committed." "So I can certainly appreciate and empathize with the situation."

Research: Vince Dixon/Eater

Food Distribution is a Tough Business

When reached by Eater, Good Eggs declined the opportunity to comment. Jimenez, Puri, and Alberto all identified the difficulty of food distribution/logistics as a reason why Good Eggs might have needed to downsize. Alberto put it this way: "Being able to coordinate a schedule where you can bring all of these different goods from all these different people to one place every day, and have it be fresh, and have farmers be picking all of their beautiful produce... I mean, it's just a logistics nightmare."

As Spiro wrote in the letter that (as of publishing) still lives on the now-defunct Brooklyn, New Orleans, and Los Angeles site and on the blog: "We didn't fully anticipate the challenge of creating a new kind of food business that required a different approach to supply chains, logistics and commerce — it was, and is, more complicated than we imagined. We made a mistake in expanding as quickly as we did."