WALLINGTON, N.J. -- Parmalat, the international food company with U.S. headquarters here, last week said it would purchase a 22.3% stake in NetGrocer.com, North Brunswick, N.J., for $30 million.
The deal, set to close early next month, represents Parmalat's first foray into e-commerce and is believed by industry sources to be the largest ownership stake a food company has taken in an Internet grocery retailer. Executives from the companies told SN the deal would spark brand recognition and sales for Parmalat products while providing critical funding and a potential for international expansion for NetGrocer.
"We believe the Internet is a good vehicle to push sales and, especially, awareness of our products," Aldo Uva, president and chief executive officer of Parmalat USA, told SN. The companies came together as a result of existing marketing agreements between them, said Jim Chambers, CEO of NetGrocer.com.
"We were talking about marketing plans with them, and we knew they had some interest in the Internet channel," Chambers told SN. "In the meantime, we were beginning to look for third-round mezzanine financing. They stepped up and said they'd take a stake. It's terrific for us in a financial and strategic sense."
Based in Collecchio, Italy, Parmalat has a strong presence in Europe, Asia and South America, and its international resources could help expand NetGrocer globally, Uva said. However, no specific plans are in the works yet, according to Chambers.
The investment comes amid a rough month for Internet grocers. Industry pioneer Peapod is facing an uncertain future after investors abruptly pulled out of a planned $120 million financing deal and its CEO resigned. Stock prices in publicly traded companies Streamline.com and Webvan each sank to historical lows and the initial public offering of HomeGrocer.com after a small early rise has quickly fallen back to the price at which it entered the market.
Chambers, whose company is privately owned, acknowledged the Internet grocers are facing "a tidal force of downward pressure," but added "the fundamentals of this business are too strong for everyone to just go away."
Uva said that Parmalat's investment would bring "a sense of reality" to the Internet grocery business. "We have roots in the food industry," he said. "We're bringing something real to that space."