Thu, Jul 24, 2014, 1:24 AM EDT - U.S. Markets open in 8 hrs 6 mins

Recent

% | $
Click the to save as a favorite.

FreshDirect Building 200,000 Sq. Ft. Greenhouse in South Bronx

There’s nothing like fresh produce straight from the farm. Green markets are popping up all over the country to meet growing demand for high quality food. But if you don’t have the time or the patience, you certainly have options. FreshDirect is one of the largest online grocers that’s been clicking with consumers seeking quality.

Grocery delivery services aren’t new; they’ve existed as long as the stores themselves. While overall grocery store sales in the U.S. fell 2.1% last year, online grocer sales jumped over 8%, according to IBISWorld. Further, they estimate online sales to grow 9.5% annually into a $9.4 billion industry by 2017.

The largest is Peapod, a service that delivers goods specifically from grocery store chains Stop & Shop and Giant Foods. The company started in Illinois in 1989 and now covers 24 markets in 13 states. FreshDirect is the new kid on the block, started in New York in 2002.

Breakout sat down with the co-founders, Jason Ackerman and David McInerney, to digest exactly what sets FreshDirect apart.

“Forget the Internet for a moment, look at a Stop & Shop and Whole Foods (WFM),” says Ackerman, who also serves as CEO. “You’d be able to articulate that they’re very different stores. It’s the same thing. We are about really the best fresh food on the marketplace and that’s what makes us different.”

The company travels around the globe looking for the freshest meat, seafood, and produce. Unlike competitor Peapod, they’re not tied to any specific grocer. They believe this enables the service to be faster and fresher.

“Take strawberries. Those strawberries are bred and grown to have a three week shelf life,” explains McInerney, “to accommodate retailers that need to move them around and around and around until ultimately they end up at a consumers house. Our model takes out a lot of the distribution because we’re buying it directly from the farm. We can take entire truckloads from the farm into us, often pre-selling it before it even arrives in our facility because we take orders seven days out.”

FreshDirect told us exclusively about plans to take that freshness to a whole new level. The company will relocate from its Long Island City headquarters in Queens, to the Bronx, New York, where they’ll have a brand new facility and products that are ripe for the picking. “We’re putting in a lot of new technologies we didn’t have room to put in place here [Long Island City],” says CEO Ackerman. “We’re putting in a 200,000 square foot greenhouse, where we’ll be growing our own vegetables on the roof. It’s gonna integrate so much of what we’ve wanted to do.”

But the company is facing growing pains. A coalition of South Bronx residents filed a lawsuit to block FreshDirect’s move into the borough citing environmental impact.

The online grocer is standing by its plan for a green transition, and despite the legal battle, says they will relocate by the end of 2015. Aside from creating jobs in SoBro, they believe their customers will be buying up what they’ll be growing there in the new greenhouse.

Of course, price is key in this competitive marketplace. Consumers have held tighter purse strings since the Great Recession - a challenge that has slowed the broader retail industry across the globe.

“People perceive that online is a luxury so there is a perception that prices are more expensive,” Ackerman admits. “We do price surveys for tens of thousands of products across all competitive landscapes, and we’re quite competitive.”

It’s all about having access to a variety of options.

“Take a category like chickens – we try to offer a wide range from really traditional chickens that people see in most grocery stores, to more of the specialty higher end,” explains McInerney. “Whether it’s organic or antibiotic free or pastured chickens, we try to provide the whole range to people so that we can hit the entire market.”

Right now, FreshDirect’s market covers New York City, Philadelphia and their surrounding suburbs. They intend to expand into the largest fifteen U.S. markets.

“We’ve been in New York for eleven years, just one city trying to deeply understand the consumer,” says Ackerman.

The focus on quality is working for New York competitor Fairway market (FWM) - a brick and mortar grocer that stresses high quality organic foods. The company went public last week and shares soared over 30-percent during the first day of trading.

It's a move FreshDirect could make itself one day.

“I think going public is something we will consider in the future,” says Ackerman. “We’ve got a lot we want to accomplish and we prefer to accomplish that currently in the private markets rather than the public markets. But likely once we accomplish more of the national rollout we’ll be a public company.”

Selling food is a low margin business, but FreshDirect believes their customers will keep buying what they’re selling. Only time will tell if this New York City favorite can find success in cities and suburbs from coast to coast.

About Breakout Profiles

Breakout Profiles offers an in-depth look at some of America's most successful companies as well as start-ups hoping to be the next big thing. We'll take you inside the front office, talking directly to the company's CEO. These hard-hitting interviews focus on what you need to know as a potential investor and on just how, in these tough times, business leaders have found a way to succeed.


Breakout Profiles

Subscribe and RSS

[X]

How to subscribe

Roll over each section to subscribe using Add to My Yahoo or RSS Feed feeds.

Yahoo News offers dozens of RSS feeds you can read in My Yahoo or using third-party RSS news reader software. Click here to find out more about RSS and how you can use it with Yahoo News.

DISCLAIMER

Merrill Lynch is not responsible for any content on this site.