Retail gourmet

REVIEW SUMMARY
Company. Innovative Food Holdings
Industry. Food distribution
Key. Use wholesale experience to build a retail network.
At a Glance. Click here.

When the U.S. slapped a 300% tariff on Roquefort cheese from France last year, Justin Wiernasz was ready.

The president of Innovative Food Holdings had stocked up on 2,000 pounds of the pungent cheese, anticipating the trade war that erupted when France banned the importation of U.S. hormone-treated beef. The U.S. retaliated by targeting the Roquefort cheese makers, severely curtailing supplies.

Wiernasz promised to keep high-end chefs across the country well supplied throughout the stinky cheese incident. For picky chefs, imitation Roquefort cheeses from nearby regions of France wouldn't do. “We're doing it to protect our customers,” says Wiernasz.

The Naples based supplier of gourmet foods to chefs recently launched an online retail operation, promising uninterrupted supplies of specialty cheeses, meats, seafood and other delicacies with the same attention it devotes to the chefs it serves today.

Shortly after it launched its retail Web site, ForTheGourmet.com, the company notched $50,000 in sales to consumers in December. The company partnered with Amazon.com, which hosts a page in exchange for a percentage of sales.

Wiernasz, 44, and Chief Executive Officer Sam Klepfish, 39, say their foray into consumer sales is a result of what they call “the gourmeying of America.” Prompted by television shows such as the Food Channel, Americans are seeking specialty foods they can prepare in their own kitchens.

And Americans seek out what Klepfish calls “story meals,” or food that can be traced to a particular area. For example, chefs and food aficionados may want to serve cod from Chatham Bay or salmon from the Columbia River.

This attention to food from single origins started with wine and cheese and spread to all kinds of other delicacies, from coffee to chocolate and seafood. For example, 20 years ago there were only a few dozen olive-oil companies in the U.S. and now there are more than 100, each touting their own provenance.

Driving this single-origin trend is the concern over hormones, chemicals, antibiotics and allergens such as gluten. Knowing where food comes from gives people reassurance that they're buying foods that haven't been altered or don't contain ingredients that will spark allergies.

The hot trend today is “molecular gastronomy,” products such as gelatins, gums and carbonation that change the taste and texture of foods. Celebrity chefs such as Wylie Dufresne of wd-50 and Thomas Keller of The French Laundry and Per Se are among the best-known chefs who perfected this kind of creative cooking technique.

Innovative Food's new focus on consumers helped drive revenues to $7.6 million in 2009, up 9% compared to 2008. The publicly traded company boosted the number of customers by 19% and orders rose 27%. It reported profits of $845,611 in 2009 compared with a $2.4 million loss in 2008, filings show. (Its shares trade over the counter with the symbol IVFH.)

You be the chef
The target market for Innovative Food Holdings' consumer focus is the kind of customer who might shop at Whole Foods and upscale food boutiques. These are people who are willing to pay more for quality food and have the disposable income to do so, even during recessions.

Customers who order from ForTheGourmet.com care more about the quality of the food rather than fancy packaging. For example, cheese may ship wrapped in butcher paper with the name of the product scribbled with a grease pencil, just as it might from a neighborhood specialty food grocer.

The lack of fancy packaging isn't by design. Fact is, many of the company's perishable-food suppliers have never sold their products to the public. Restaurant chefs don't care what the packaging looks like; they only want the freshest ingredients and they never want the supply to be interrupted. “We give authenticity,” says Wiernasz.

Some vendors initially were reluctant to get into the retail business, but Klepfish says the prospect of growing revenues in the downturn has been appealing. “Volume heals all sins,” Klepfish chuckles.

Klepfish is quick to point out that the company doesn't speculate on the supply of food. For example, when the prices for Roquefort cheese spiked during the tariff war with France last year, Innovative Food Holdings didn't jack up the price of the Roquefort it had secured before the trade spat.

The company does likewise with lobster tails. Executives know exactly when demand will spike for the crustacean (like Mother's Day) and will stock up before prices go up because they don't want to pass that cost to their customers. Klepfish says that generates customer loyalty, which he prizes over short-term speculative profits.

Shipping and quality control
Because Innovative Food Holdings ships luxury perishable items such as Hudson Valley foie gras and Chesapeake Bay soft-shell crabs to top chefs around the country, quality must meet stringent requirements.

Wiernasz says Innovative Food Holdings only accepts about 10% of the vendors who pitch their specialty foods to them.

The logic: If a chef or consumer is going to pay $70 a pound for Kobe beef, it better be good. “Every time a chef gets a box, there's got to be a wow,” says Klepfish.

The customer-service department includes three classically trained chefs who have tested all the products. They speak chef language and are knowledgeable about the latest ingredients and trends, such as molecular gastronomy.

Innovative Food Holdings doesn't let suppliers ship the products. Instead, the company contracts with FedEx to pick up and deliver the food to customers, taking control of the distribution process and tracking every package. Last year, the company shipped 40,000 packages of food to more than 14,000 locations. The company has hundreds of suppliers, but uses about 60 of them on a regular basis. “We do spot checks constantly,” Wiernasz says.

The company has built a sophisticated computer system that allows its staff to track hundreds of orders to the chefs and Klepfish says that same system can now be used to sell the same foods to consumers.

But the challenge in retail food distribution is that there are hundreds of competitors trying to do the same thing online. Innovative Food Holdings' Amazon page is a start, but Klepfish hints at other plans.

For example, the company owns a subsidiary called Food New Media Group. Klepfish won't reveal plans for this endeavor, but hints that it will take advantage of the demand for food-related information to generate sales. “The goal is to build shareholder value,” he says.