It has cost Efdex $100 million to develop, the margins are tight, but in
an $11 trillion per annum market, and the opportunity to build a huge
database of loyal buyers and sellers, how can you go wrong?]
Industry Standard
http://www.thestandard.net/articles/display/0,1449,4995,00.html?home.tf
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Soup-to-Nuts Electronic Trading
By Bernhard Warner
Linking buyers and sellers of tomato juice and garlic cloves on an
electronic trading system may not sound like the sexiest e-commerce
play, but it's got all the markings of a big business. That's the
thinking of Efdex, a relatively unknown startup that's pouring big money
into what it's calling "the Instinet for the food and beverage
industry."
The Stamford, Conn.-based company is unveiling the service to businesses
and restaurants today, starting with the U.K. (Vendors from across the
globe can participate, but for now the buyers must be located in the
U.K.) A U.S. buyers' market will be in operation just after Christmas. A
third market, in France, will launch some time next year. The slow
market-by-market buildout is expected to continue for several years. The
company has offices in London and Singapore, with many more planned for
the United States and Europe.
The launch of the Efdex network caps four years and $100 million spent
developing the real-time trading system, which comes replete with a vast
product database, news feeds and up-to-the-minute pricing information on
products varying from fresh strawberries to balsamic vinegar.
In the seller's market, restaurants, caterers and food buyers around the
world can shop for the best prices on products. And since the system is
completely automated, it tabulates a buyer's expenses as they occur,
thus minimizing the time and money spent running that segment of the
business.
"We're talking about a real trading system here," says Tim Carron Brown,
chairman of Efdex. "It will be just like the financial markets."
And, because many of the vendors still conduct their sales with a
telephone, pencil and pad of paper, Efdex will give away computers and
souped-up Internet access, at least in the beginning. "It's just cheaper
for me to give them everything they need," says Brown.
The market for buying and selling food and beverage products is $11
trillion. The company estimates that if it covers 15 percent of the U.S.
market, it can generate $3 billion a year. But the startup costs
associated with a global electronic trading market are high. So high in
fact that it's unlikely competitors will be popping up overnight.
The company's business plan is not complicated. It will provide the
entire trading system to food and drink distributors and retailers free
of charge. That means, in some cases, it will be giving away PCs with
broadband and eventually satellite Internet connections to restaurants,
supermarkets and their distributors. Clients will pay Efdex a monthly
fee for access to market data. In addition, Efdex will collect, on
average, a commission of 1.2 percent per transaction. The company will
also sell advertising, but ad revenue is expected to be small at first,
says Brown.
Efdex is building a large media operation to keep the service brimming
with timely news about the food and beverage industry, similar to what
Bloomberg has done with its financial information terminals. Efdex
operates a 60,000-square foot production studio outside London to
develop multimedia news packages for its service. "We already have
reporters and producers producing 12 hours of video a day," says Brown,
a veteran of the magazine industry. Brown is the founder of the English
trade publication Marketing Week.
Some of Efdex's early investors include Bill Cox, whose family owns a
controlling stake in Dow Jones, and Canadian brewery heir Ian Molson.
The company is in the process of raising $50 million in financing, and
plans to file for an IPO in the United States by the end of the first
quarter next year.