Loblaw will introduce Canada’s first-ever fleet of driverless delivery trucks to Toronto roads in January, part of an investment in a Silicon Valley autonomous vehicle startup by the venture arm of the Weston family’s corporate empire.
Gatik, a Silicon Valley-based autonomous-vehicle startup is partnering with grocery giant Loblaw to bring five driverless delivery trucks to the Greater Toronto Area. The trucks will attempt to solve the “middle-mile” logistics issue for the grocer, navigating crowded urban and semi-urban roads, to transport online grocery orders from Loblaw’s automated warehouse centre to its grocery stores. The news comes as part of a US$25-million Series A raise led by the Weston-owned Wittington Ventures and Eric Schmidt’s Innovation Endeavours fund. Co-founder Gautam Narang believes that Gatik’s comparative advantage is AI self-driving software that successfully enables big delivery trucks to traverse non-highway roads.
Gatik, headquartered in Palo Alto, Calif., will provide the retail giant a fleet of five box trucks—Ford Transit 350s equipped with Gatik’s self-driving software—to transport goods from Loblaw’s automated micro-fulfillment centre to its grocery stores across the Greater Toronto Area. It marks a technological achievement that could dramatically change the makeup of the traditional delivery supply chain in Canada, lowering costs for retailers while putting thousands of truck-driving jobs on the line.
The trucks have already been in operation for 10 months on designated routes as part of Gatik’s pilot project in Toronto, but Loblaw will begin using the trucks permanently in January.
“The whole idea here is to fill the supply-chain gap between long-haul trucking on one end and last-mile delivery on the other,” Gatik’s co-founder and CEO Gautam Narang told The Logic.
Monday’s announcement coincides with Gatik closing a US$25-million Series A funding round co-led by former Alphabet chairman Eric Schmidt’s Innovation Endeavors and Wittington Ventures. Wittington is the venture capital arm of Wittington Investments, a holding company owned by Canada’s billionaire Weston family, which controls Loblaw.
“[Gatik] reached out to us, we heard them out, and we were really interested in the solution the company was providing to the middle-mile logistics-delivery problem,” said Jim Orlando, managing partner at Wittington Ventures, who joined Gatik’s board earlier this year. It is Wittington’s first investment in the company. Orlando would not disclose its valuation of Gatik, but said he was confident the fund’s investment would pay off.
Gatik focuses on the middle-mile segment of the delivery supply chain. The company’s trucks are equipped with proprietary technology that can navigate semi-urban and urban routes, meaning they can pick up online grocery orders from small warehouses or fulfillment centres and deliver them directly to a grocery store in a crowded, urban environment. “That’s what distinguishes our technology from companies that are focusing on automating semi-trailers or very large trucks for highway driving. We can do both, surface streets and highways,” Narang said.
Narang co-founded Gatik in 2017 alongside his brother Arjun, its chief technical officer, and Apeksha Kumavat, its chief engineer. The trio have worked together in robotics and AI for over a decade. They chose to focus on Toronto as a commercial market in part because of the city’s growth as a hub for AI and machine learning, and opened an office in Toronto last January that now houses 15 employees, mostly software engineers.
“We made the decision to expand to Toronto in January 2019, specifically because we wanted to make sure that we were close to the AI machine learning talent that the Ontario region is famous for,” he said. That geographic choice led him to Wittington.
In addition to installing the self-driving software, Gatik equips the interior of the trucks with refrigeration units and lift gates. The five Loblaw trucks will operate 12 hours a day, seven days a week, along five different routes, covering an average of 300 kilometres a day.
“As more Canadians turn to online grocery shopping, we’ve looked at ways to make our supply chain more efficient. Middle-mile autonomous delivery is a great example,” said Lauren Steinberg, senior vice-president of Loblaw Digital. “With this initial rollout in Toronto, we are able to move goods from our automated picking facility multiple times a day to keep pace with PC Express online grocery orders in stores around the city.”
Loblaw, Canada’s largest food retailer, has seen a massive surge in sales since the start of the COVID-19 pandemic as Canadians have been cooking more at home in the absence of restaurant dining. In the third quarter of 2020, Loblaw’s revenue totalled $15.67 billion, up from $14.66 billion the same quarter a year prior, driven by a rise in online sales, which more than doubled in the third quarter.
Short-haul logistics, according to Narang, is usually the most expensive part of the supply chain—a US$1-trillion market—with inelasticity that does not allow for the kind of growth that real-time e-commerce demands. Gatik already has a partnership with Walmart, announced in June 2019. and operates 15 autonomous delivery trucks across North America. Narang expects that number to rapidly expand as the company continues conversations with “multiple other Fortune 500 companies.”
He pointed out that Ontario, in particular, has a friendly regulatory environment for self-driving vehicles, another reason for the company’s Toronto expansion. In 2016, Ontario launched a 10-year pilot program to test automated vehicles, and expanded that program in early 2019 to allow self-driving vehicles that were not registered pilot participants to operate on Ontario roads as long as they had a human driver in the vehicle. All Gatik’s trucks will have a co-pilot.
Various unions have already sounded the alarm bell over the coming wave of driverless trucks. In 2018, Suncor Energy eliminated 400 truck driving jobs at its oilsands sites in northern Alberta in favour of driverless ore-hauling trucks, a move that Unifor national president Jerry Dias called “a mistake.” A 2017 internal report by the federal government suggested that over one million jobs could be eliminated from autonomous-vehicle use. A series of Statistics Canada studies released earlier this month found Canadian firms that invested in and adopted automation employed more workers relative to their industry peers, adding more high-skilled and low-skilled jobs, though middle-skilled jobs—those requiring vocational or trades qualifications—were more likely to decline.
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The Series A brings the total amount Gatik has raised to US$27 million. According to data from PitchBook, Gatik had previously raised US$4.5 million in June 2019 in a seed round led by Innovation Endeavors, with additional participation from autonomous vehicle- and supply chain-focused investors like Trucks Venture Capital and Dynamo Ventures.
Editor’s note: This story has been updated to reflect the increased value of Gatik’s Series A round.