Meat producers, Buyers Will Meet On-line

Madison-based firm to launch site that it says will chop costs, carve out  opportunities for industry

By Tom Daykin
of the Journal Sentinel staff

Last Updated: April 9, 2000

The ground beef or pork chops or chicken wings you bought last week at the  neighborhood supermarket probably got there the Old Economy way: the  supermarket's wholesaler called a meat or poultry producer and ordered the stuff.

Starting this week, however, a Madison-based dot.com will bring together meat  producers and buyers on the Internet - a process designed to reduce costs and  create new selling opportunities for the nation's $100 billion meat and poultry  industry.

FoodUSA.com plans to launch its online meat exchange Wednesday. The Internet  site will provide a place for meat sellers and buyers to make deals, with  FoodUSA.com taking a sales commission for each trade.

FoodUSA.com hopes to succeed where previous online meat exchanges have  failed. The growing company has 50 employees, plans to spend $50 million over  the next 18 months and was founded by Rod Heller, a former wholesale food  broker.

Currently, meat producers typically sell their goods by calling customers  every day, said Tom O'Connell, chief marketing officer for FoodUSA.com. Some  meat producers use in-house sales representatives, while many smaller producers  rely on independent meat brokers, he said.

A broker or sales rep each day contacts 20 to 25 potential buyers - such as  supermarket wholesalers, major supermarket chains and restaurant wholesalers,  O'Connell said. Once a deal is made, a follow-up call or fax is needed to  confirm the order, he said.

With FoodUSA.com, a broker or sales rep can reach thousands of potential  customers with the click of a mouse, O'Connell said. The deal can be negotiated  and confirmed within minutes online - which improves productivity and reduces  costs, he said.

The seller pays FoodUSA.com a sales commission of 0.5% of the trade's value.  That compares with typical meat broker commissions that range from 1% for  commodity-type products, such as ground beef, to 10% for value-added products,  such as filet mignon, O'Connell said.

In addition, FoodUSA.com provides information, including real-time news  reports affecting the meat industry, industry trend data, U.S. Department of  Agriculture reports and links to industry Internet sites.

About 300 companies - representing both meat buyers and sellers - have so far  signed up to use FoodUSA.com, O'Connell said.

The company got a boost recently when it announced an exclusive partnership  with the American Meat Institute, the nation's largest meat and poultry trade  group. The institute's 600 members represent 70% of the nation's meat and  poultry business, and those members will receive additional services from  FoodUSA.com at a discounted rate.

One company that plans to sell meat through FoodUSA.com is Green Bay-based  American Foods Group Inc.

"It allows us to use another (sales) channel," said Lanny Viegut, director of  fresh beef sales. "It may bring some new customers to the party."

Viegut, however, said he doesn't believe e-commerce will replace his  11-member sales force any time soon. He said American Foods Group will probably  use FoodUSA.com on a "limited basis" at first.

SuperValu Inc., the nation's largest supermarket wholesaler and 10th-largest  supermarket retailer, also plans to use FoodUSA.com, said Randy Domer, corporate  meat director.

"We're obviously interested in doing some business with e-commerce," Domer  said. "We see that's really the way the business is going to go in the  future."

Domer said his 14 meat buyers make daily contacts with the nation's largest  meat producers. FoodUSA.com will be helpful in making contacts with smaller  producers, he said. SuperValu, based in the Minneapolis suburb of Eden Prairie,  has both wholesale and retail operations in Wisconsin, including Cub  supermarkets.

While FoodUSA.com seems to be off to a promising start, Viegut said its  future success could hinge on the participation of the nation's very largest  meat producers, such as IBP Inc., ConAgra Inc. and Cargill Inc. Viegut said  previous attempts at creating online meat exchanges failed because there weren't  enough participants and because bidding information wasn't kept updated.

O'Connell declined comment on whether IBP, ConAgra and Cargill will be part  of FoodUSA.com, citing the firm's confidentiality policy. He said the exchange  will have enough buyers and sellers to make it work.

Previous attempts at Internet-based meat exchanges were part of larger food  industry exchanges, O'Connell said, and didn't have enough expertise  specifically linked to the meat industry.

He also said those exchanges didn't have enough technical support to make  sure information was updated.

Appeared in the Milwaukee Journal Sentinel on April 10,  2000.