LONGO'S PURCHASES GROCERY GATEWAY

JON SPRINGER

TORONTO -- Longo Brothers Fruit Markets here last week said it agreed to acquire Grocery Gateway after that online food retailer filed for receivership, Anthony Longo, president of Longo's, told SN. Longo's will reportedly pay $6.96 million Canadian (about $5.3 million U.S.) in the transaction, which is similar to a pre-packaged bankruptcy reorganization.

Longo's, a family-owned chain with 14 stores here, previously had a partnership with Grocery Gateway in which orders were picked from Longo's stores. However, Grocery Gateway had switched to a warehouse-based model in 2001 and could not support the overhead of that system, Longo said. Longo's plans to shutter the warehouse and operate the service using a store-pick model in the Toronto market.

Acquiring the online retail operation gives Longo's a tool to leverage its existing assets while expanding its own e-commerce offerings, Longo explained. The chain currently offers gift baskets and catering through its Web site. "Part of our go-to-market strategy is to increase our presence online and prior to [acquiring Grocery Gateway] we were looking into partnering with them. Grocery Gateway has done a great job of building their brand and they have great recognition and visibility."

Longo said the company would initially "scale down" the coverage area of Grocery Gateway while it perfects its store-pick model. A message on the GroceryGateway.com Web site late last week informed customers there may be certain interruptions in service but added other changes, including widespread pricing changes, "will be very good news for you."

Sobeys, the Stellarton, Nova Scotia-based supplier to Grocery Gateway, terminated its supply agreement with the online grocer prior to its filing, Andrew Walker, a Sobey's spokesman, told SN. Walker declined to divulge specific figures but said Grocery Gateway represented "a very small amount" of Sobey's overall sales.