“If it typically takes 10 days for a product to get from farm to customer, we’ll do it in five,” said Jason Ackerman, the company’s co-founder and chief executive.
Washington’s burgeoning food scene makes it an obvious choice for expansion, Ackerman said. The company, which has no bricks-and-mortar locations, has a warehouse in Prince George’s County and plans to hire about 50 full-time employees. Delivery will begin April 5 for residents in the District, Arlington, McLean and Bethesda.
“Washington is full of busy working people,” Ackerman said. “They value great quality food, but they also need convenience.”
FreshDirect is hardly the first grocery delivery service in the Washington area. A number of large supermarkets, including Giant and Safeway, offer delivery, as do third-party services like Instacart. Relay Foods, a Charlottesville-based online grocer, created a similar model when it launched in 2008. (Earlier this year the company announced plans to merge with Colorado-based Door to Door Organics.)
“This is undoubtedly the future of grocery shopping,” Relay Foods founder Zach Buckner told The Washington Post in 2013. “Netflix, Apple iTunes and others have wiped the video store category off the map. The same thing is on its way for groceries.”
In the case of FreshDirect, items are delivered from farms straight to the company’s manufacturing facilities, where they are prepared into meals or packed into boxes, and delivered to customers’ homes. Delivery costs $7.99 per order, or $129 for a year.
The company has 3,000 workers, including roughly 50 who travel from farm to farm.
“When the Alaskan fish are running, we’re there too, making sure we’re buying from the right guys,” Ackerman said. “This isn’t like buying Kellogg’s Cornflakes, where you know you’re going to get the same product no matter what. To get the best fresh food, you have to have a relationship with each fishing boat, farmer and rancher.”
In the late 1990s, Ackerman was a New York City banker who noticed the grocery industry was rapidly changing. Supermarket chains were increasingly trying to compete with Wal-Mart by becoming bigger. Shoppers, meanwhile, wanted the opposite.
“Consumers wanted fresh food — they wanted to know where things were coming from, and I realized supermarkets were going to be doing a worse and worse job of that,” Ackerman said. “As these chains got bigger and bigger, they were really losing the ability to manage quality.”
He and Joe Fedele, co-founder of New York’s Fairway Market, knew they wanted to come up with a new model. They toyed with the idea of opening mega-stores — 100,000 square feet or larger — that would carry a variety of fresh produce. But in the end they nixed the idea of bricks-and-mortars locations altogether.
“We found that nothing was more effective and efficient than not having stores,” Ackerman said.
They raised $70 million to get started. (“The only useful thing about being an investment banker is that you know how to raise money,” Ackerman said.) After that, the duo hired 15 chefs, butchers and bakers, and 10 technologists. Together, they set out to find a new way to source and sell groceries. It took two and a half years of planning before they sold their first product.
It was quick to catch on, Ackerman said. He hired 1,000 employees in the first year. Four years later, the company turned a profit. Today, it has more than $600 million in annual sales.
Over the years, FreshDirect has begun adapting to customers’ requests. In the beginning, Ackerman says hardly anybody bought antibiotic-free chicken. Today, it makes up 85 percent of the company’s chicken sales. Grass-fed meat become another fast-growing item.
“During the holidays, we used to sell a bunch of those good ol’ frozen turkeys,” he said. “Now it’s like I can’t even give away a frozen turkey. It’s all free range, grass fed, cage free. Anything but frozen.”
Over the years, the company has also begun expanding its lineup of household products and supplies. It currently carries about 12,000 packaged and fresh products, and plans to add another 7,000 this year.
But Ackerman said, the company’s focus continues to be on its fresh foods.
“I’m not going to win over any customers by carrying Tide,” he said. “I’m going to carry Tide to be convenient. But I’m going to excite people by carrying a great jumbo blueberry or a fantastic ripe cantaloupe that’s better than anything they’ve tasted before.”