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Fish Story
From fishing net via Internet: fresh food anywhere, overnight
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Business New Haven
1/22/2001
By: Lori Green
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You may not be able to see them, but scores of fresh Scottish salmon, genuine Dover sole and pristine Chilean sea bass are flying FedEx to white-tablecloth restaurants and high-end seafood markets across the U.S.
How exactly does the premium catch of the day in Morocco or Ecuador find its way to Reno and Phoenix? It's got a lot to do with the speed and flexibility of the Internet. But even more to do with a guy who from the age of 12 harvested Long Island clams to sell at New York's Fulton Fish Market. That was before he'd partnered with Federal Express, so he had to get the guys who could drive to move seafood products to buyers in New York City.
Today Greg Belanger - CEO, president, and founder of Freshnex.com - is a maverick of distribution technologies whose online supply chain solutions are revolutionizing the food industry. The company's Web-based marketplace links buyers and suppliers of fresh seafood and high-quality perishable foods and allows them to conduct transactions directly.
Having worked his clam business on and off throughout college, Belanger went on to receive a graduate degree in history from the University of New Orleans. Perhaps it was the time he spent with his academic mentor, renowned historian Stephen E. Ambrose, that prompted Belanger's early musings on distribution channels and the efficient transport of goods from ocean to ocean and ocean to table. Or, could it be mere coincidence that today Belanger runs Freshnex.com, and Professor Ambrose's latest book is Nothing Like It in the World: The Men Who Built the Transcontinental Railroad?
Belanger first struck out as a New Orleans-based investigative reporter covering Louisiana prisons, politics and the shrimp and oyster industry. He then returned to Connecticut to teach journalism at Central Connecticut State University. But the sea beckoned him once again. Prior to starting up Freshnex in 1997, Belanger founded the Purity Processed Shellfish Co. and soon after launched a marketing firm focused on food distribution.
Explains Belanger: “I was discovering that, especially with seafood, the origin of the product, the care in the packaging and harvesting techniques were very important to buyers - and particularly important to high-end chefs.”
Initially, the Freshnex concept was designed to facilitate the relationship between chefs and primary suppliers, using a common e-commerce principle known as “disintermediating some of the supply chain.” But it's really a lot simpler than that: if you don't take ownership or inventory of the product, you can sell fresher product at a competitive price.
Competitive pricing results from Freshnex's ability to electronically aggregate buyers in order to procure the highest quality product for them at the best possible price. The range of buyers includes upscale restaurateurs, chefs, and retailers of all sizes. Suppliers, too, benefit from the expanded marketing and distribution channel that Freshnex's online exchange provides.
”We will always service the premium white-tablecloth buyers because we can get them the kinds of products and quality they demand,” says Belanger. And suppliers on the Freshnex marketplace who normally don't have the opportunity to sell on a national level can offer products to a collective of white-tablecloth restaurants as well as other high-end purchasers.
The company's fulfillment partnership with FedEx is critical to Freshnex's growth strategy. Conducting transactions via Freshnex gives buyers access they've never had before to a variety of reputable suppliers. Once they've placed all of their orders, buyers receive a consolidated invoice on the spot from Freshnex - and then all their orders arrive the next day. Belanger points out that from a customer's point of view, it's a single delivery - even though the products actually originate in, say, ten different locations.
Management's focus on distributing perishable foods - fresh premium-quality fish, meats and produce - faster and more reliably than they've ever moved before is reaping rewards: a rapidly expanding customer base, high customer retention, growing brand recognition, and robust demand domestically and abroad. The company is also actively expanding and diversifying its revenue streams.
Rallying over cyber-battlefields littered with corpses of B2B dot.coms, Belanger and his team have been driving sales growth at a monthly rate of 40 percent, he says, 14 percent over plan, for the past few months. Sales are expected to reach $40 million this year, and the company expects to achieve a positive break-even point by first quarter 2002. Confidence in Freshnex's long-term viability has come in the form of capital infusions from Connecticut Innovations Inc., CMEA Ventures, Marubeni Corp., GE Pension Trust and NeoCarta Ventures, among others.
With brass like Belanger, it's little wonder that Freshnex is so well poised on the springboard of success. With an entrepreneurial style that blends the methodical with the intuitive, Belanger's approach has enabled the company to take an early and commanding lead over other wannabes in the Internet food space.
“We started off with a couple of guiding principles,” Belanger says. “One of them was that the Internet was only a tool, and if it did not substantially improve the transaction, then you wouldn't motivate people to use their computer to conduct business. So we had to bring customers something better than what they were using.”
In fact, Freshnex delivers not only something better, but something really new: a dynamic set of operational relationships that could not exist without the distributive platform of the Internet. Direct relationships between primary suppliers and buyers are made possible by breakthrough e-commerce applications and processes developed in partnership with NeuVis, a Shelton-based e-business software developer.
Yet it's not always about cutting out the middle guy - completely. Traditional food distributors find it painful to handle perishables. Even when a conventional distributor manages to fill a Texas chef's order for Alaskan cod, he doesn't necessarily want the buyer to know where it came. Why not? Because distributors generally go with the low-cost provider rather than the quality supplier with the best price.
Contrast this with Belanger's bottom line: fish procured via Freshnex may be a little more expensive (or a little cheaper, depending on local market conditions), but it's always competitively priced - and indisputably fresh. The Freshnex team works vigilantly on economies and efficiencies to keep it that way. It's not just a rumor: Belanger has personally audited every one of the company's 9,000 transactions to date. What can you say? He's the guy who's always bench-training to pump up gross margins.
For example, Freshnex's close alliance with FedEx allows the company to drain costs out of transactions by focusing on supply-chain management and fee structures instead of inventory risk and disposition. As business volume and electronic connections with FedEx increase, so will profitability and margin expansion.
Gourmet or specialty seafood counters such as those at quality chains like Whole Foods care about cold-chain custody throughout the distribution network. Supermarket and restaurant chains are likewise concerned about public health-perceptions about the quality of seafood. Freshnex's services make the difference between fish that is a few days old instead of seven, ten or even 15 days old. “We track every package through the FedEx system,” Belanger explains. “Our software can tell us: We know when it was harvested, where it came from, when it got delivered.”
Just in case you haven't seen the film Castaway, FedEx is that non-stop, overnight delivery machine run on clockwork logistics. And, according to Belanger, “They move a lot more seafood than you would imagine.” Especially since Freshnex set up shop in New Haven.
Yes, even a virtual marketplace has to have a roof over its head. Freshnex's new headquarters occupies 7,000 square feet in the Connecticut Financial Center on the New Haven Green. Its 57 employees, up from 12 only a year ago, are concentrated here in Connecticut.
Freshnex deploys a small direct sales force regionally, as well as a sales team focused on national accounts, including large restaurant chains. Signature chefs and leading operators of white-tablecloth dining rooms are rapidly embracing Freshnex as the pipeline of choice for quality perishables and ingredients.
Last year, sales grew most in Arizona, Nevada, California, Colorado and Texas - regions where fresh fish and quality produce tend to be scarce and costly. The company currently has customers in all but five states. While discrete transactions can range up to $20,000, most average around $1,000. Fees are generally a percentage of the gross value of the transaction. There is also an open-market option with a flat fixed transaction fee. Other fee variations exist based on market spreads, subscriptions and memberships.
A typical morning on the Freshnex exchange begins almost like any other marketplace, minus the trading din of a commodities pit or the pungency of a barn-house bazaar. Each day suppliers post a certain amount of product at a price. Then buyers log on to view the products, suppliers and landed prices - the “all-in” price calculated by Freshnex. It includes freight, margins and any other costs.
When a buyer clicks to say, “Yes, I'll take this,” it triggers a pick-up and delivery schedule and Freshnex settles the transaction's finances. Says Belanger, “All three elements of a given transaction occur simultaneously: you find the product, we get the product to you, and then you pay for the product.”
The company has recently streamlined its supplier base so that if it's Chilean salmon you want, or shrimp from Ecuador, Freshnex will offer you only the world's three best producers. Increasingly, too, the company acts as representative, or as an extension of the sales and marketing arm, of the network of suppliers on the system by making recommendations to buyers who request help in sourcing a particular product. Freshnex's newly formed sourcing and supplier-relations department now focuses on managing and growing these aspects of the business.
The company decided that instead of having as many suppliers as possible, as other e-marketplaces do, fewer, higher quality suppliers would be more productive. Consequently the ratio of registered suppliers to buyers has declined significantly during the past quarter. Since more business is being driven to a smaller group of premier suppliers, those suppliers have greater incentive to work more closely with Freshnex.
As Belanger puts it, “We've come up with a model that's more about forming a close knit of regionally distributed suppliers that create a suite of products that cover most of what the buyers want.” As a result, Freshnex has very few one-time customers.
The management team made the strategic decision to develop a superior transaction engine before embarking on expensive brand awareness campaigns. Again, unlike many other pure-play Internet companies, Freshnex resisted the pressure to advertise and promote themselves into legitimacy before Belanger calculated that “The block-and-tackle work was done in order to make it a real business and get all the transactions to work.”
While the first generation of technology ran off a small PC, the new system, now in its fifth iteration, is more reliable and scalable, generating more than 300 dynamic pages. Four separate graphic interfaces greet each of the company's user-segments: chefs, restaurant operators, suppliers and grocers.
Freshnex has also recently been penetrating a fifth segment: food service for hotels, casinos and resorts, Freshnex is customizing further to provide the best product mix, service and transaction experience for this market.
Belanger is keenly attuned to the importance of customization in meeting the distinctive needs of each market segment. For the high-end chefs, there is a qualitative difference when Alaskan prawns arrive live at their restaurant the day after they've been ordered. Same with delectables such as buffalo, natural beef and pork, produce or truffles.
Food services, too, are responding to chefs who want to serve natural tenderloin or buffalo. And consumers continue to demand fresher and higher-quality products at grocery seafood cases.
Other major technology-based initiatives for the year include an integrated retail-case program, software upgrades and more comprehensive Web-based communications directly with suppliers and producers of seafood products. These improvements will enhance Freshnex's ability to understand their suppliers' businesses and to help buyers make better purchasing decisions. Belanger envisions buyers being better able to see what's available and assume positions more rapidly, based on future landings, price changes and supply.
This innovator is not just another “solution” company in search of a problem to sell to. Belanger responded to a genuine cry from seafood and produce sellers: “How do I get fresh perishables directly to my stores with enough shelf-life so that I can sell them before I have to discard them?”
Belanger sees Freshnex as essentially “food-centric” and focused on solving an industry problem. “We're turning away business that we do not want to be in, and that discipline has been paying off.”
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