The way people purchase food has largely transitioned online; restaurants now often forgo traditional menus for QR codes, enabling smartphone ordering, while grocery shopping has been transformed by delivery services like Instacart. However, until recently, the procurement process for small restaurants and local grocery stores heavily relied on outdated methods using pen and paper.
Now, GrubMarket, a company specializing in software and services that connect food suppliers with customers, is poised to enhance this distribution process by going digital, following its recent acquisition.
Headquartered in California, GrubMarket has acquired Butter, a SaaS platform designed to modernize the manual food distribution process using AI, as exclusively reported. Launched in 2020, Butter’s eight-member team will integrate its software suite with GrubMarket’s range of services.
Mike Xu, GrubMarket's founder and CEO, declined to reveal the acquisition cost, but Butter’s co-founder, Winston Chi, indicated that “most parties, including our investors, are benefiting financially” from the transaction. Butter's valuation reached $39 million during its $9 million Series A funding round in November 2022, according to PitchBook, which Butter confirmed as being accurate. The startup has garnered $12.3 million in total funding from investors such as Google's AI-focused Gradient Ventures and angel investor Jack Altman.
GrubMarket has been actively expanding over the last few years, acquiring more than 100 companies. These acquisitions primarily focus on supply chain consolidation as GrubMarket operates a B2B e-commerce platform that sources produce and ingredients directly from growers for clients like supermarkets. Additionally, the company provides essential software to distributors, similar to Amazon's dual role as both a marketplace and SaaS provider.
Butter is one of the key ventures in GrubMarket's portfolio aimed at enhancing its technological capabilities, alongside other startups like Farmigo and IOT Pay.
It remains unclear whether GrubMarket funded the acquisition with its own resources. However, given its history of profitability—Xu stated the company has achieved three consecutive years of positive EBITDA—and an annual revenue run rate expected to exceed $2 billion in 2024, it's plausible that the acquisition was financed internally. Xu did not elaborate on GrubMarket's fundraising intentions but acknowledged that the company has secured “hundreds of millions of dollars” to date. The last public funding round, announced in 2022, raised $120 million, valuing the company at over $2 billion, and reports in 2021 noted that GrubMarket was exploring IPO options.
Acquisition of Butter
GrubMarket's acquisition of Butter effectively eliminates a smaller competitor. Chi and co-founder Shangyan Li launched Butter during the height of the COVID-19 pandemic in 2020 as an end-to-end vertical SaaS solution designed to assist small and medium-sized food wholesalers in managing inventory, customer relationships, and orders.
While GrubMarket offers similar solutions, Butter quickly embraced generative AI, enhancing user workflows with innovative tools.
The traditional ordering process in wholesale food distribution was largely inefficient. Food suppliers often jotted down orders based on customer voicemails—like those from chefs after counting inventory—or manually sifted through text messages. This chaotic method frequently led to errors and missed items, making performance analysis a challenge.
By leveraging AI, Butter developed features that transform unstructured data into organized, actionable insights. The platform incorporates both third-party AI models and Butter's proprietary technology to convert voice messages into itemized orders. Users can review AI-generated data for accuracy before it enters the system, allowing distributors to analyze sales and manage inventory and pricing effectively.
“Sales reps often spend five hours a day transcribing text message and voicemail orders; this dramatically boosts productivity and reduces manual effort,” explained Li.
Crucially, Butter does not require customers to adapt to a completely new workflow. “Distributors and restaurants prefer to keep their existing communication methods. We help centralize their sales knowledge without altering their processes,” Chi noted.
“AI has the potential to enhance every aspect of food distribution. Even if we’re not replacing human efforts, AI can significantly boost sales—beginning with addressing the most pressing ordering issues,” added Chi.
Ultimately, Butter’s AI capabilities catalyzed GrubMarket’s decision to acquire the innovative startup.
Quick Deal-Making
After four years of building Butter, Chi and Li had developed a solid product but faced challenges in scaling their customer base without a robust distribution network.
Upon evaluating the market, they recognized that GrubMarket, as their largest competitor, had the necessary customer reach. They understood that Butter could complement GrubMarket’s offerings and moved to propose a merger to Xu.
“The true advantage lies not in the technology but in the data, which GrubMarket possesses,” Chi reflected on the decision to sell.
Xu was already familiar with Butter, having noted their success in securing a customer initially served by GrubMarket. “Butter’s commitment to the customer was evident; they even had team members sleeping in the customer’s warehouse to ensure quality service," Xu shared. "However, developing an ERP system requires substantial investment. With only about $12 million raised, scaling their efforts proved challenging.”
GrubMarket was pursuing its plans to automate order management, but its resources were fully allocated to other projects focused on leveraging AI for customer insight. Thus, when Butter proposed the merger, the technological benefits were clear, especially since Butter had established connections in the coveted seafood distribution sector. Butter’s outreach began in March, and by the end of April, the acquisition was finalized.
Post-integration, GrubMarket plans to leverage Butter's offerings, including AI-enhanced chat commerce capabilities, to strengthen its GrubAssist enterprise AI assistant. GrubMarket is also expected to introduce an AI-enabled digital ordering module, enabling food wholesalers to generate sales orders automatically from various channels—whether they originate from text, paper, or voice messages.
“Our approach is direct and agile,” Xu remarked on the swift transaction process. “It’s advantageous that we can merge Butter into our operations instead of starting from scratch, enhancing our software product lineup.”
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