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The Benefits of Focusing on a Niche and Serving it Well: EcFood - A Dot-com Making It

Written By: Olin Thompson
Published On: April 2 2002

Event Summary

Food and beverage industry strategic sourcing vendor ecFood, recently announced exceptional results for 2001 with dramatic increases in revenue, gross margin, transaction volume, customer acquisition and services. The privately held company closed out the year with record-breaking performance, including an 815% increase in gross margin from 2000 and revenue of $37.6 million. ecFood also acquired a major dairy industry purchasing association, retained two top ten food company accounts, and expanded its list of products and services.

Market Impact

ecFood (www.ecFood.com) was a pioneer in bringing web-enabled sourcing software tools and services to the industrial food sector. Founded in 1998 and headquartered in Santa Clara, Calif., ecFood combines substantial food and beverage industry knowledge with e-commerce technology. According to Dave Laukat, CEO of ecFood, "We provide online methods that reflect real world purchasing practices in the industrial food industry. ecSourcing, our suite of sourcing and bidding solutions, takes the "best practices" of the industrial purchasing system and blends them with the inherent efficiencies and savings of the new economy."

While the dot-com and technology bubble burst in early 2001, ecFood kept pace as one of the top web-based Procurement Service Providers for the food and beverage industry. ecFood increased alliances with various purchaser and suppliers in 2001, including new customer relationships with two top ten international food companies. With the acquisition of the Masters Group (formerly Master Dairies) in September, ecFood's annualized revenue volume increased to more than $250 million. The purchase also significantly strengthened ecFood's demand aggregation strategy. In its first full quarter since being acquired by ecFood, the Masters Group dairy purchasing association realized significant savings and economies of scale on dairy ingredients and materials such as resin, vinyl gloves, and liquid sugar.

Services offered by ecFood include demand aggregation, specification management, auctions, RFP and RFQ. Additional services added in 2001 were invoicing and payment programs, which expedited the supply chain process for both sides involved in the supply chain process. Plus, ecFood expanded aggregated product programs in packaging, logistics and ingredients. ecFood currently provides online transaction and membership-based group buying services to over 40 industry leaders from several segments of the food industry. Segments include major consumer brand manufacturers, processing manufacturers, bakeries, dairy, foodservice, retailers, cooperatives and buying groups.

But the proof is in the savings for ecFood's customer base, some sample savings across different types of food industry purchases include:

Ingredients Packaging Supplies
Orange Juice 3.0% Labels 15.0% Uniforms 12.0%
Olive Oil 10.0% Closures 15.0% Vinyl Gloves 25.0%
Beans 9.7% Bubble Wrap 32.5% Bulk Fuel 3.5%
Citric Acid 20.0% Stretch Wrap 30.0% Transportation 8.1%
Walnuts 6.0% Milk Crates 11.2% Plastic Pallets 11.2%

Customers further prove ecFood's business model by repeat use of the ecFood services. Sample ecFood customers include International Multifoods, J.R. Simplot, Pillsbury, Wawa, Inc., Shamrock Foods, and Furman Foods.

User Recommendations

Food companies should investigate strategic sourcing services like ecFood to increase the effectiveness of their procurement operations. These services leverage the abilities of existing buyers to increase efficiency and lower prices. EcFood should be placed on the short list of strategic sourcing services for any food company.

While proving its business model through growth and a growing customer list, ecFood should expand its market presence within the food industry through increased marketing efforts.


About the Author

Olin Thompson is a principal of Process ERP Partners. He has over 25 years experience as an executive in the software industry with the last 17 in process industry related ERP, SCP, and e-business related segments. Olin has been called "the Father of Process ERP." He is a frequent author and an award-winning speaker on topics of gaining value from ERP, SCP, e-commerce and the impact of technology on industry.

He can be reached at Olin@ProcessERP.com.

 
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