Cousins Cameron and Pey Manesh saw a new business in the eyes of a guy from West Virginia.
Last March, a crab-lover rolled up to one of his family-owned Cameron's Seafood trucks in Hagerstown, Md., to buy a bushel of Maryland blue crabs. Cameron's, which has about $20 million in gross revenue each year, sells raw and cooked seafood at 14 locations — 11 storefronts and three trucks — in the Baltimore-Washington-Philadelphia market.
"He is used to paying $315 for blue crabs in West Virginia, so it's cheaper for him to drive six hours, round-trip, for a bushel from us for $255," said Cameron Manesh, whose family has run the seafood chain for 32 years. "That's when Pey had the lightbulb moment."
Within weeks, the cousins had launched an online business to ship the family's products to blue-crab junkies and seafood-lovers across North America. Pey figures out the seafood end, while Cameron handles finance and administration.
The cousins' project is a timely example of the high-stakes challenges involved in the businesses of home food delivery and ready-to-eat meals spreading across the nation through businesses such as Blue Apron, Hello Fresh and Plated.
The cousins start with several advantages: They leverage the company's Rockville store, so they have no rent and can use its employees. They buy product from the store as needed — a huge plus, because it reduces waste. And finally, they are able to tap into the million-customer base that the bricks-and-mortar business has built up over three decades.
"We envision shipping crabs and crab cakes nationwide to people who can't get real Chesapeake Bay crabs," said Cameron Manesh, 37, who spoke for himself and his 28-year-old cousin.
Five months in, Cameron's Seafood Online has shipped about 1,000 orders of Maryland blue hard-shell and soft-shell crabs, crab cakes and jumbo lump crabmeat to customers in 46 of the Lower 48 states. The average order is around $160, and the nascent online business has pulled in more than $150,000.
"I am aiming for $1 million in sales by the end of next year," Manesh said. His goal is to gross $20 million within a few years.
FedEx picks up his products twice a day at the Rockville Pike store. There are 29 states close enough to receive his orders via FedEx Ground. The rest of the orders are sent by air.
Manesh knows that the real way to make money on this business is selling Cameron's Seafood products to the Costcos, Harris Teeters and Walmarts of the world.
In other words, he needs to scale it. There is one big contract set to launch in April 2018 that will send up to 640,000 flash-frozen crab cakes a year to a home delivery service, which he declined to name because it isn't a done deal.
"For that deal, we have a third party preparing, flash freezing, and packaging the crab cakes," he said. "The food-delivery service picks it up in pallet form."
We've all been hearing and reading about the logistics of home delivery, especially with Amazon.com (whose founder and chief executive, Jeffrey P. Bezos, owns The Washington Post) pioneering that sector. Amazon's purchase of Whole Foods Market last summer has fueled speculation about the online retail giant's intentions about food delivery.
At the moment, Cameron's Seafood Online is focused on the home customer. A few hours with Manesh at his Rockville headquarters, which is above one of his family's retail locations, gave me an appreciation of the supply-chain logistics involved in delivering food — including highly perishable fresh seafood — to homes.
"We catch the crabs each morning from the Chesapeake Bay," he said. "They are steamed in Old Bay seasoning and chilled for six hours to cool them down to 34 degrees before they are shipped with gel packs."
The aim is to have the seafood delivered within 24 to 48 hours of the order.
This is fairly complicated stuff. Just looking around the store, I saw bushels of live crabs that came in from the Chesapeake a few hours earlier. About 10 crabs of the 60 to 72 in each bushel die before they are sold, which is an expense that Cameron's must absorb.
"We did a lot of research before we did anything," said Manesh, whose day job is serving as a broker for people who buy and sell large apartment properties. The brokerage is another of his family's businesses, begun by his father.
To find out how others were shipping food, he and Pey ordered several meals from Blue Apron, which ships 60,000 orders a day.
"We reverse-engineered the Blue Apron packages to see how they did it, including the frozen gel packs they included to keep the food fresh," he said.
One of the early setbacks came when some Cameron's Seafood Online customers complained that the crabs and crabmeat were arriving with melted gel packs. It turns out that the packages needed up to five weeks during summer months to freeze thoroughly.
The solution: Pay companies to store the gel packs at minus-10 degrees.
The Manesh cousins bought hundreds of foam coolers for shipping the crabs. They bought bubble-wrap to protect soups and hired an uncle's company to print labels and instructions. The components are all stored in a vacant Germantown, Md., home where his family once lived.
Manesh's wife, Mimi, built the website. Manesh invested $65,000 of his own cash to launch the business. (The online business is a separate company from Cameron's Seafood, which is owned by Cameron's father and uncle.)
Manesh said he expects to be cash-flow positive by December 2018 if he can get the big retail contracts with stores and meal services. It could take longer if he relies only on shipping to individual home customers, which are expensive to find. The company has spent more than $42,000 on Google AdWords and social-media sites such as Instagram.
There are about 4,600 names in his customer database, and the search for each customer — known as customer-acquisition cost — is a lofty $35 each, which he must reduce by 66 percent to make a profit.
Manesh said the goal for home delivery is 100 orders per day. He throws in free delivery for orders of more than $200 in the closest 29 states.
I don't know if he is going to succeed, but he appears to have his eyes wide open. He, Pey and Mimi — all of whom own some of the business — work seven days a week.
Cameron knows what it takes to get a start-up off the ground. After graduating from the University of Maryland in 2002, the finance major launched a payment system designed to help people save for retirement.
Manesh lost $50,000 but learned a couple of lessons. First, you need more money than you think. Second, if the start-up can't make money in three years, "take it behind the barn and shoot it. It's a hobby, not a business."
He has been working at his father's apartment brokerage for years, connecting high-end buyers and sellers that include foreign investors, real estate investment trusts, endowments and high-net-worth individuals.
His father and uncle founded the seafood market as a way to bring in cash between real estate deals. It sells 75,000 bushels of fresh crabs a year, 150,000 crab cakes and 500,000 pounds of shrimp.
"It's like an old-school fish market where you come in and pick out your fresh seafood and take it home," Manesh said.
From April through November, which is Maryland's crab season, the lines are out the door. But traffic drops during the fall and winter. Manesh sees his online business as picking up the slack.
"We see a large market with untapped potential," Manesh said.
It just might keep the crabs crawling out the door during those slow months.