Dive Brief:

• Cargo, a startup that provides Uber and Lyft drivers with mini concessions for their passengers, is heading to Los Angeles. Drivers sign up to receive boxes of items to sell to riders, including snacks, electronics, toiletries and cosmetics. The service is already available in New York City, Dallas, Atlanta, Minneapolis and Singapore.
• Passengers can purchase the products by logging onto the Cargo or Snapchat app, accessing the mobile menu, entering a unique box code and selecting the items they want. Purchases can be made via credit card or mobile wallet. Drivers hand the products to their passengers when the car is stopped at red lights or stop signs.
• Cargo raised more than $5.5 million in a financing round earlier this year. The service plans to be in more than 20,000 ride-sharing vehicles by the end of 2018.

​ Dive Insight:

As people lead more on-the-go lifestyles, they’re also relying more on ride-sharing apps like Uber and Lyft. At the same time, demand for quick grab-and-go snacks from local convenience stores is increasing. Cargo taps into both of these trends to deliver a service that, if it continues to grow, could put further pressure on food retailers.

Expanding to perpetually congested Los Angeles seems like a savvy move for the startup. The city isn’t pedestrian-friendly like New York City, and drivers in LA spent an average of 102 hours last year stuck in traffic, according to transportation analytics company Inrix. a lot of those hours were spent in a ride-sharing car. According to rideshare information hub rideshareapps.com, the total distance from Uber trips in the past five years is more than a trip around Saturn.

In Singapore, Cargo partnered with ride-sharing company, Grab — raising questions if the startup will try to partner with other transportation services. Cargo has also partnered with CPG companies like Coca-Cola and Kellogg, providing the brands with a new distribution channel.

Cargo is hoping to grow the service by offering incentives for drivers, who reportedly earned 25% of all Cargo sales plus a $1 base commission. The company says current drivers make about $300 per month using Cargo. 

Convenience stores have seen sales increase due to the millennial-driven surge in snacking, and businesses like Cargo are catching on. However, the growing number of health-conscious consumers who aren’t looking to eat processed snacks may prove a stumbling block. C-stores and manufacturers are adapting to this trend by providing quick snacks with healthier ingredients, lower sodium, and that are less processed. According to a study from The Center for Generational Kinetics, 89% of millennials consumed a better-for-you snack in the past week, and 64% said they look for snacks with fewer ingredients.

Cargo fits into the trend of ways to make the convenience store more convenient. Another startup, Bodega, brings unmanned pantry-style boxes of nonperishable goods to places people are, like building lobbies. Both of these concepts are relatively new, though Bodega has said a 30-location trial in the San Francisco Bay area was successful and plans to have 1,000 pantry boxes in national distribution by the end of the year.

In order to be successful, Cargo should focus its efforts on providing healthier snacks and becoming a service drivers need in their cars. But success could doom this startup: Lyft or Uber could just create a similar in-house service and ditch Cargo altogether. Regardless, grocery and convenience stores should take notice, and maybe revamp just how convenient their necessities are to consumers on the go.