03.10.2011 – FreshDirect Gets $50M to Expand Outside NY – CRAIN’S NEW YORK BUSINESS

FreshDirect gets $50M to expand outside NY

The Long Island City, Queens-based online supermarket got a big boost from a U.K.-based supermarket chain that wants to incorporate the FreshDirect business model into the London shopping scene.

By Benjamin J. Spencer
March 10, 2011 3:45 p.m.
FreshDirect

David Neff
FreshDirect said its unique e-commerce model has set the food retail industry abuzz.
Updated: March 10, 2011 5:32 p.m.

Online grocer FreshDirect bagged a big ticket item Thursday, when it snagged a $50 million investment.

Long Island City, Queens-based FreshDirect and food retailer WM Morrison Supermarket, based in West Yorkshire in Northern England, announced Thursday that Morrison will invest $50 million in FreshDirect, kick starting the online food retailer’s planned growth and expansion outside the tri-state area.

FreshDirect would not immediately elaborate about which markets it is eyeing.

A deal between a New York company that specializes in sourcing and delivering fresh groceries and a supermarket chain across the pond may seem unusual, but FreshDirect said its unique e-commerce model has set the food retail industry abuzz.

“This investment is a clear validation of FreshDirect’s business model,” said Jason Ackerman, FreshDirect’s founder and chief financial officer. “It will help us expand capacity to support accelerated growth and geographic expansion. Also, the Morrisons team’s deep knowledge in food retailing will be valuable to the FreshDirect team.”

Under the terms of the deal, Mr. Ackerman said, FreshDirect will host a “multi-disciplinary” team of top Morrison managers who will be “embedded in FreshDirect” at the company’s headquarters. They will study FreshDirect’s methods for storing, packaging and delivering groceries and take the system back to London for their own use.

“What we learn from FreshDirect will be invaluable as we plan our own profitable e-commerce business for the U.K.,” said Morrisons Chief Executive Dalton Phillips, in a statement. Morrison’s investment represents about a 10% stake in FreshDirect; under the agreement, Mr. Dalton will also join the company’s board.

FreshDirect will also receive a minority interest in Morrisons’ planned online operations in London. Mr. Ackerman wouldn’t specify the value, saying it was “confidential.”

For a relatively new retailer, FreshDirect has endured its share of ups and downs. Just a few years ago, during the height of the recession, Crain’s reported on a company in crisis, almost buried in federal immigration investigations and state environmental fines. The company also battled against a strong union push.

But Morrisons’ strategic investment capped a three-year period a “20% growth rate annually” where the company ended 2010 with around $300 million in revenue, according Mr. Ackerman’s spokeswoman.

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beejmckay

"The crew of the 'Rose Noelle" sits at Constable Godinet's dining table, enjoying a breakfast of whiskey and ice cream." Name's Beej. I'm a writer, filmmaker, amateur guitarist and drummer, and sometime photographer based in Bushwick, Brooklyn.

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