Freshdirect: Expansion Strategy
14 Pages Posted: 21 Oct 2008
Abstract
FreshDirect, a home-delivery business, wants to use the additional capacity in its meat-processing facility to expand into national competition. The description of the beef supply chain in this case will help students analyze the best way for FreshDirect to take on Omaha Steaks as well as how to best serve restaurants.
Excerpt
UVA-OM-1115
FreshDirect: Expansion Strategy
FreshDirect: Expansion Strategy
Jason Ackerman, president and CEO of FreshDirect, tossed the copy of the New York Times article on the table and complained:
I appreciate the free publicity, but yet another reporter just doesn't get it. There is no reason to compare us to Webvan or other dot-com grocers that closed down in 2001. We're not a “Last Mile” delivery business; we are a specialty producer selling directly to consumers. It's all about higher quality food at lower prices.
In 2003, FreshDirect had a customer base of 120,000, with 2,500 more signing up each week, a retention rate of more than 64%, and an average order size of $ 100. The company, with its 300,000-square-foot state-of-the-art processing facility, was located just outside Manhattan and had generated an operating profit a year ahead of schedule. FreshDirect had 30% to 40% gross margins that were higher than the industry average and was targeting revenues of $ 2 billion by 2007. Ackerman was confronting the key issue of capacity utilization when he started exploring new channels such as mail-order and institutional markets.
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Keywords: eCommerce, retail, operations strategy, supply chain management, expansion
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