“An underlooked and underserved market”: How one startup is making online grocery more accessible for EBT recipients

While many of us might turn to Facebook groups to share the ceramic cat figurine we scored at a yard sale or gush over Rihanna’s pregnancy (maybe that’s just us), Justin Intal found something more inspirational on the platform: an idea that could potentially improve the way millions of Americans grocery shop.

Intal is co-founder and CEO of Forage, a third-party processor allowing online grocers to accept payments from consumers receiving government assistance. Think Stripe, but for Electronic Benefits Transfer (EBT).

Before the pandemic, Intal, himself on EBT at the time, was living in Oakland, California, and operating Forage Grocery, a consumer-facing app founded in 2019 that helped shoppers optimize their in-store spend. To get different perspectives on “the whole ecosystem of groceries” within EBT—like how far families drive just to stock up—he started a Facebook group that swapped shopping tips and recipes, made up of 10,000+ parents across the country.

He noticed one of the biggest struggles parents on SNAP (Supplemental Nutrition Assistance Program) said they faced was their inability to buy groceries online. So Intal and his two Forage co-founders set out to find why it was “so painful” for online grocers to cater to the 42 million Americans receiving these subsidies.

Equal footing

The issue isn’t that it can’t be done. In 2017, the USDA Food and Nutrition Service (FNS) introduced a SNAP Online Purchasing Pilot, enlisting at least seven retailers—including Amazon, FreshDirect, and Safeway—to evaluate the “technical and security challenges” that go with payment processing before expanding nationwide.

• The program has since rolled out to more companies like Walmart, Aldi, and BJ’s Wholesale Club across 48 states.

But for smaller merchants, it can be a big ask.

Clicking into place: Intal told Retail Brew he saw firsthand how antiquated EBT payment processing was when he connected with The Hub on the Hill, a local grocer in Essex, New York, in 2020. Without a way to process payments online, workers would actually carry a physical POS system to shoppers’ homes when fulfilling deliveries and swipe their EBT cards in person (fingers-crossed the cardholder was there at the time).

The grocer introduced Forage to the FNS and the idea of building an API for grocers to accept online EBT payments “took on a life of its own,” starting in December 2020, Intal said.

Its grocery app was then shelved, and Forage participated in Y Combinator last summer to go all in on payments.

• It scored $2 million in funding at a $50 million valuation, Intal said, from investors including former Instacart exec Nilam Ganenthiran.

“This has always been an underlooked and underserved market,” Intal said. “These large or popular payment technology rails, from your PayPal to your Stripe, are not touching this at the moment."

Paying for it: While larger retailers like Walmart and Amazon have built out their own systems, Forage works to simplify payment processing for smaller platforms, who aren’t quite tech aficionados. It’s now working with Shopify merchants, as well as online grocery retailers and delivery services like Jokr, Local Express, Flashfood, Boxed, and, most recently Farmstead, to add EBT payment-processing capabilities. (One has received certification, though Forage would not disclose which one.)

Merchants’ prep to accept EBT payments online isn’t easy. They have to ensure their websites and mobile apps are FNS-compliant through a comprehensive certification process (which requires lots of documents and even a test at the end), and must also tag inventory correctly, and have the ability to split payment methods if a shoppers’ EBT only covers some of their purchase (like if they’re buying both food and cleaning supplies, which aren’t covered).

• The process can take up to 18 months, the company said, but it works to get it done in six.
• Forage has formed a team of 10, including several EBT experts—like the former general manager of Hart’s Grocers (one of the original seven grocers picked for the USDA pilot program), plus the former EBT director for the state of Vermont—to help navigate the whole process.

“The expectation of grocers or merchants to become technologists is not what they are. They’re there to sell food,” Intal said. “For them to become compliant based on USDA regulations, that’s something that they are not an expert on, and will take years to actually execute on.”

That’s time they might not have, given how quickly online grocery has grown. When Covid hit, sales in the US skyrocketed 54% in 2020 to $95.8 billion, and reached $97.7 billion in 2021, per Brick Meets Click.

• Plus, SNAP recipients grew by 4+ million that year, with 1.5+ million more added in 2021.

Up next: The company is currently raising a Series A round, with ~$7 million committed, Intal told us. This year, he said Forage will look to add new forms of government assistance to its service, like EBT Cash, WIC, and Double Up Food Bucks.

“Our main focus this year is just having the ability to checkout with dignity online,” he said.