Online meat broker cuts back

By TOM DAYKIN
of the Journal Sentinel staff
Last Updated: Jan. 16, 2001

A nationwide online meat brokerage based in Madison is running out of cash and could go out of business if it doesn't find new investors or a merger partner, a brokerage executive said Tuesday.

FoodUSA.com, which was launched last April, has already laid off most of its employees, said Tom O'Connell, chief marketing officer. The company, which sells wholesale meat and poultry through the Internet, may soon have a new investor or owner, he said.

"There's a lot of suitors out there who are finding what the (FoodUSA.com) management team has put together," O'Connell said.

But O'Connell also said the company needs more cash, and might be forced to close if a buyer or equity investor cannot be found.

"Anything's possible," he said, "but we'll have to cross that bridge when we come to it."

At its peak, FoodUSA.com employed more than 40 people. It now has about a dozen employees, O'Connell said.

However, FoodUSA.com remains the country's largest online meat brokerage, O'Connell said. The Internet site provides a place for meat sellers and buyers to make deals, and it takes a sales commission for each trade.

Founded by Rod Heller, a former wholesale food broker, FoodUSA.com had high hopes when it launched last year with $50 million in venture funding. The company was designed to reduce costs and create new selling opportunities for the nation's $100 billion meat and poultry industry.

Heller's idea was to use the Internet as a more efficient way of selling meat. Those sales have traditionally been done by brokers or in-house sales representatives for meat suppliers who call on supermarket wholesalers, supermarket chains and restaurant wholesalers.

FoodUSA.com recruited employees from such well-known meat suppliers and buyers as Johnsonville Foods Inc. and Fleming Cos., and created an exclusive marketing partnership with the American Meat Institute, the nation's largest meat and poultry trade group.

By October, FoodUSA.com had brokered $30 million in meat sales and had more than 1,350 registered sellers and buyers.

However, like other dot-coms, the business spent cash quickly.

"It costs a lot of money to continue the marketing and sales efforts of a dot-com," O'Connell said.

And FoodUSA.com may have been overshadowed when the meat industry's largest suppliers - led by IBP Inc., Tyson Foods Inc., Cargill Inc. and Smithfield Foods Inc. - announced plans to invest $20 million in their own online meat brokerage.

Those plans, which were announced around the time that FoodUSA.com was launched, have not yet materialized.

Appeared in the Milwaukee Journal Sentinel on Jan. 17, 2001.