NEW FRESHDIRECT CHAIR SAYS IPO A 'POSSIBILITY'

Jon Springer

NEW YORK -- Rick Braddock, named chairman of the board of FreshDirect here last week, told SN he hopes to see the Internet grocer achieve greater scale in its core New York operating area, look into new market expansion, execute better marketing, and raise more money.

In an interview, Braddock said the latter concern -- improving the company's "financial attractiveness" -- will require further investment, raising the possibility that the privately held company will explore an initial public offering.

"We're not going to say we're specifically committed to [an IPO], but it's certainly a possibility," Braddock told SN. "That's something I've done myself before so I suppose it's one of the reasons I'm involved now."

Braddock is a former chief executive officer of Internet travel site Priceline.com, which under Braddock in 1999 raised more than $100 million in an initial public offering. Braddock, who started his career in 1965 with General Foods and is also a former president at Citicorp, has served on the board of directors for Fresh Direct since last July.

Braddock succeeds founding shareholder Peter Ackerman as FreshDirect's chairman. Ackerman will remain a member of the board.

Braddock told SN he was brought on board at FreshDirect last year to address the company's marketing -- an effort he said has improved since last year but "is still not where it ought to be for a business that has this much potential."

According to Braddock, FreshDirect needs to improve marketing to a point where it can be as effective as the back-end fulfillment business.

"What I saw when I went on the board was a great business model -- a much more creative model than some others I'd seen in the Internet space such as Webvan -- with a good manufacturing facility and distribution done very effectively, but the marketing end was dramatically sub-optimized despite the fact that the customer feedback was tremendous," he said.

"We have a positive awareness among our customers, just not enough of it," Braddock added. "I feel we can create a marketing balance with fulfillment that will allow us to build a substantial business."

Braddock said FreshDirect had annual sales of more than $150 million and currently is profitable in terms of earnings before interest taxes depreciation and amortization (EBITDA). The business has the potential for exceptional returns, he added.

"The good news is we're already operating at positive EBITDA levels, but the ultimate financial metric is the margin expressed at the EBITDA level and that's going to get into double figures -- which is way above the potential for a traditional grocery store," Braddock said. "That requires us to build out the business here."