Company Context
FreshCart is a regional online grocery delivery company operating in 12 U.S. metro areas with $180M annual revenue, 8% EBITDA margin, and roughly 1.4 million annual orders. It has built a strong position in mid-sized cities through a mix of owned dark stores and third-party delivery partners. Growth has slowed from 28% year-over-year two years ago to 11% this year, and the CEO wants a more rigorous, data-driven approach to deciding where to invest next.
Strategic Situation
You are the strategy manager. FreshCart must decide how to allocate $15M of growth investment over the next 12 months across three options: entering two new metro markets, deepening penetration in existing markets through marketing and pricing, or launching a B2B offering for small offices and daycare centers. Leadership believes “the data should decide,” but the available data is incomplete and points in different directions. Your task is to show how you would analyze the data to inform a recommendation.
Available Data Points
| Metric | Existing Markets | New Market Option | B2B Option |
|---|
| Revenue growth (last 12 months) | 11% | N/A | Pilot only |
| Avg. order value | $82 | $79 projected | $145 projected |
| Gross margin | 24% | 22% projected | 28% projected |
| Customer acquisition cost | $34 | $52 projected | $310 per account |
| Repeat purchase rate (90-day) | 46% | 40% projected | 68% projected |
Additional facts:
- Two candidate new metros have a combined population of 5.2M, with an estimated online grocery TAM of $420M annually.
- FreshCart currently holds an average 6% share in its existing metros; the best-performing market is at 11% share.
- In a 3-month B2B pilot, FreshCart signed 120 accounts, generating $480K annualized revenue, but required manual operations support that reduced contribution margin to 10%.
- Marketing analysis suggests that a $5M investment in existing markets could increase order frequency by 8% and reduce churn by 3 percentage points.
- A major national competitor has announced expansion into 4 adjacent metros within the next 9 months.
Deliverables
- Outline a structured approach to analyzing the available data before making a recommendation.
- Assess the attractiveness of the three growth options using market size, unit economics, and competitive dynamics.
- Identify what additional data you would want, and how missing data should affect the decision.
- Recommend one primary investment path for the next 12 months and explain the trade-offs.
- Propose key metrics and milestones leadership should track after the decision.
Constraints
- Total investment budget is capped at $15M.
- The company must maintain at least 6% EBITDA margin during the next fiscal year.
- Operations and engineering teams can support only one major new initiative at a time.
- The CEO wants a board-ready recommendation within 2 weeks.
