Fresh ideas fuel the entrepreneur. Something clever, unique.
Adapting to change and evolving drive the entrepreneurial spirit.
But what does it take to turn an idea into a multimillion-dollar business?
“The combination I”™ve learned is, I know how to manage at scale and most entrepreneurs don”™t,” said Rick Braddock, chairman and CEO of Long Island City-based Fresh Direct.
“That”™s why you see so few entrepreneurs who actually start an idea who wind up with a very large company. Some who”™ve done it are Bill Gates, Michael Dell, but most people who are entrepreneurs can”™t make that step forward.”
Braddock is making an ambitious move into new markets with Fresh Direct, the online grocery purveyor. The company, which employs 2,000 people and has been serving New York City for six years, last week began delivering its products into Fairfield County, Conn., as well as to 10 additional communities in Westchester.
The Business Journal caught up with Braddock recently as he visited several markets in the area.
In an “Online” interview, Braddock, who grew up in Greenwich, Conn., talked about the expansion. The former corporate executive turned entrepreneur offered some of the management and marketing savvy he”™s gleaned in his successful 45-year career, which began with product management at General Foods, transitioned to top posts at Citicorp and Priceline.com and led him to Fresh Direct in 2005.
Following are edited excerpts. For the entire interview, go to our website westfaironline.com.
Caryn McBride
Fresh Direct is on the move into new markets. What”™s the company”™s expansion strategy?
Rick Braddock:
“We”™ve been in business now for about six years entirely in New York City proper and we”™ve gotten to a point where we”™re growing and successful. We”™ve grown through all of last year, obviously a tough economic time, in the range of 5 to 10 percent sales increases. Now, as we move into this year, we”™re actually growing in the 20- to 25-percent range.
“We”™re also profitable. We”™re probably the first online grocer that I”™m aware of that has ever made money. So our expansion is built on two things: strength and, secondly to some degree, following our customers. As people move up to the suburbs ”¦ we”™re in effect reacquainting ourselves with some customers who have used us before. And we can exist, we think, equally as well in a thinner suburban market as opposed to the densely populated urban centers.”
The expansion comes on the heels of your launch of an iPhone app. How is that working?
“That”™s only been in the market, so to speak, for about three weeks, and we have, I”™m proud to say, a pretty spectacular app. IPhone, conceptually, takes the portability of our business, which is one of our key appeals ”“ you can order from us any time, anywhere you choose, pretty much 24/7 ”“ and we have a pretty powerful and effective app on iPhone. And in three weeks it”™s already generating 2.5 percent of our total sales. And, of course, we”™ll be on iPad.
“The values of the Internet that play through our business model ”“ the ability to know our customers in great depth (and) the real-time nature of the interaction your customers demand in today”™s world ”“ are the two key attributes we try to use to create the advantage we have with an online grocer versus the sort of static offline store-base model.”
Fresh Direct is a privately held company. You”™re profitable ”“ $250 million in revenues last year. What are you projecting?
“We had $250 (million) and given the growth rates I talked about we”™re probably at a run rate of about $300 million today and, as I say, growing quite rapidly ”¦ last year we added about $20 million in revenue. This year it will probably be more like $50 (million) more. So that $300 million run rate will probably be a full year number, too.”
The company is raising money, privately, to expand into a new market, which you”™re not ready to disclose. But what”™s your strategy for an IPO, in general?
“There”™s a couple of things about IPOs that are important, particularly for people who think they”™re just a get-rich-quick scheme. The first is you”™re actually becoming very visible in the market for what you would describe as your unique selling propositions and why someone should want to invest in you. Second, you”™re embarking on a course where there”™s much more visibility to your results.
“So, when I think about that for Fresh Direct, there are three things we have to prove to the financial marketplace as a public company: One is the attractiveness of our financial model, and our financial model is quite attractive. The second is we are managing our business, what I would call, ”˜uniquely differently”™ in the Internet age. And again, I think we have proven we”™re in good shape there. And third is to prove that we can expand. That would be the basis of the new market. My actual thinking on the evolution now would be (that) we continue to perfect and strengthen our results in New York, which are very strong now, move to the new market to prove expansion and then do an IPO after that.”
Take us behind the scenes at Fresh Direct. The food is stored in your Queens facility. Chefs prepare meals?
“We start out being a full-service grocer. We have a range of offerings but obviously focus on our fresh lines. We (bring) in directly to that (the 300,000-square-foot warehouse) warehouse from the slaughterhouse, the Fulton Fish Market, the orchards and there are no intermediate warehouses. Then we assemble (the orders) in this fairly sophisticated facility, with 15 or so temperature zones, and ship them out direct to our customers.
“So, we take probably a week to two weeks off the supply chain of an average grocer and because of that our fresh product gets to the customers faster. ”¦that kind of capability and the fact that we have very good margins means we can afford to innovate and build some fairly unique products.”
What led you to Fresh Direct?
“I”™ve been running businesses for quite a few years. All the businesses I”™ve ever run have been consumer-focused; that”™s what I like to do. When I finished my corporate career, I decided the rest of my career I wanted to work in growth. I like to grow things. I like to take risks and create things out of nowhere or nothing. And so if you do that, I believe, seriously you tend toward smaller companies, earlier-stage companies. And in so doing I got onto the Internet about 10 years ago, first through Priceline and then through Fresh Direct.”
What”™s your advice for business people, especially in tough economic times?
“The way to ensure your success is get as close to your business and your customers as you possibly can ”¦ a good service measure for us is not something we can measure because it”™s internal to us. A good service measure is something that measures the service through the customers”™ eyes. As they see it. And that is a challenge to do well. And if you do it well you have a much more customer-focused company.
“There”™s been a lot of sloganeering over the last months about companies saying ”˜in a bad economic time you must be close to your customers.”™ That”™s true, but it really is sloganeering if you don”™t change your management process to encourage that to happen ”“ not only in your own mind, but in the mind of all your people.”
