Some $56.5 billion in online transactions are predicted for the food industry by 2004, according to market research firm Forrester Research. If the number of new dot-com exhibitors at IFT’s recent Food Expo is any indication, the food industry is increasingly moving towards online transactions with its customers and suppliers. This is causing some to rethink the links in the supply chain including the one between food product developers and food ingredient suppliers.
Estimated to be a $300 billion marketplace in North America alone, the food industry is thought to be marked by buyer fragmentation among many manufacturers and incompatible, labor-intensive logistics and communications systems. Many of the new e-commerce companies believe that food ingredient purchases typically involve multiple, redundant sets of fax and phone communications throughout the purchasing, planning, shipping, tracking, receiving, invoicing and payment processes that can be streamlined by moving the process to the Internet. Smaller food manufacturers also have limited access to a broad set of ingredients because it is not cost-efficient for large suppliers to transact with them directly.
The new business-to-business (B2B) ecommerce companies are hoping to provide a standardized, automated trading and logistics infrastructure. By encouraging economies of scale and streamlined processes, they believe they will increase savings and revenue opportunities for food manufacturers and suppliers of all sizes. B2Bs envision food manufacturers purchasing more efficiently while suppliers can reach a broader set of buyers. Transactions that currently generate multiple documents and phone calls will be captured once in a secure and confidential digital environment. Status of orders will be traceable along the delivery chain electronically.
Although some of the luster may be off the dot-com companies and venture capital may be a little harder to obtain, the B2B e-commerce arena is providing and will continue to provide opportunities and challenges in the day-to-day operations between buyers and sellers in the food industry. This column provides an update of some of the latest happenings in this area, including information on Internet exhibitors from the recent IFT Annual Meeting and Food Expo held in Dallas, Tex., June 10-14.
Rmbid.com, Charlotte, N.C., is a B2B e-marketplace that is designed for buying and selling raw materials in the food industry. Set to launch in the fall of 2000, Rmbid.com will provide an environment for purchasing transactions. The site will allow buyers to post their volume, product specifications, and delivery requirements for sellers to bid upon, at no cost to the buyer. Interested sellers can then present the buyer with a bid. Sellers will be responsible for transactions fees once the materials are purchased. The site will safeguard the free market system by allowing qualified buyers and sellers to remain anonymous during the bidding process.
The site’s sellers will consist of ingredient processors, distributors, and packaging suppliers. Buyers will include national, regional, and local accounts. Both buyers and sellers will be qualified prior to participating in any bidding transactions.
bMarco, New York, N.Y., is a comprehensive Web site aimed at providing food industry individuals the ability to source products, get technical information, and read industry news and happenings. The site provides member qualification, sample management, stored inventory management, as well as a electronic marketplace for food ingredients.
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FOBChemicals.com is an online procurement site for commercial chemical buyersinterested in commodity-, traded-, and research-grade chemicals. The site claims to have signed 3,025 registered users and has access to 330,000 chemicals from more than 8,000 manufacturers. The site’s aggregate purchasing system is said to centralize and aggregate orders via the Internet. The site also offers buying groups that bring together purchasers with similar requirements.
Verticalnet is a creator and operator of vertical trade communities in a variety of industries including the food industry. In the food industry, they have branches in the bakery, food ingredients, food packaging, dairy, meat and poultry, and beverage areas. The sites feature news, features, and marketplace areas. The Food Ingredients Online, Horsham, Pa., site was an exhibitor at the Annual Meeting in Dallas.
INC2inc, Dallas, Tex., is aimed at enabling multiple buyers (food manufacturers) and sellers (food ingredient, raw material and packaging suppliers) to transact business on the Web, eliminating inefficiencies. The company was formed in March 1999 by food industry and technology executives and had more than $1 million in transaction volume for May, 2000. The company estimates that buyers will be able to transact business through the marketplace with more than 300 suppliers by year-end, and more than 90 of those suppliers are in the process of adopting the marketplace.
Cargill, a Minneapolis, Minn-based distributor of agricultural and food products and services, is working with Ariba, a B2B e-commerce platform provider, to build an online market called Novopoint. The Novopoint marketplace will give buyers and sellers of food ingredients, packaging, and related services a single place to connect with each other, conduct transactions and better manage their supply chains. The company will serve participants of all sizes from every facet of the food industry, including buyers and suppliers of oil, sugar, colorings, packaging, chemicals, freight and everything in between.
Novopoint, which is currently under development, will be: operated by a neutral, independent company, with the majority of equity ownership to be held by companies recognized as leaders in the food and beverage industry. The site will be focused on simplifying interactions between food and beverage manufacturers and their suppliers, with customized features for individual users; and is expected to launch this summer.
Cargill is also involved in an effort by meat and poultry processors to form an ecommerce system. IBP, Inc., Cargill, Inc., Smithfield Foods, Inc. , Tyson Foods, Inc., Gold Kist Inc., and Farmland Industries, Inc.’s red meat businesses have signed a letter of intent to create an online, B2B marketplace for meat and poultry products, service, and information. The marketplace will be a neutral web-based exchange that will provide a single place for buyers and sellers of meat and poultry products to connect with each other. The marketplace will be open to buyers and sellers of meat and poultry products. Together, the founding members have combined meat and poultry sales of over $40 billion. The initial capitalization for the company is $20 million. The exchange is expected to be launched this summer.
Fifty large food, beverage, and consumer product manufacturers have joined with the Grocery Manufacturers of America to explore creating a new, open, electronic marketplace, called Transora, that would be accessible to all supply chain players and could connect to other exchanges in the future. Included in the project, were such household names as Kraft, Procter & Gamble Company, Bestfoods, Nestle USA, and Unilever. While the exchange is likely to begin with the procurement of materials, supplies and services, this marketplace could eventually include other processes that will allow the supply chain to improve the value it delivers to consumers.
Initially, the initiative will bring multiple buyers and sellers into a virtual marketplace to support catalog purchasing, bidding and price quotes, on-line sourcing and auctions for raw materials, packaging supplies, and other goods and services critical to their operations. Participation in the exchange is voluntary. The exchange could eventually encompass other supply chain processes, such as: collaborative planning and demand management, flow management, order fulfillment, customer service, new product commercialization, and relationship management.
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In February 2000, GlobalFood-Exchange.com, an Internet business-to-business marketplace for the food industry, announced that it had obtained $12.2 million in first round funding from Charles River Ventures, Sigma Partners, and Bain Capital. The site allows registered buyers and sellers to access a large national and international customer base, as well as an extensive set of resources. The additional investment was aimed at allowing the site to deepen their customer service and ecommerce capabilities.
ecFood.com, Santa Clara, Calif., is a provider of Internet-based supply-chain solutions for the industrial sector of the food industry. According to the company, there are three stages between companies in the commerce process: find, approve, and engage. ecFood.com helps food companies navigate these three stages through consulting, supplier recruitment, demand aggregation, purchaser auctions, seller auctions, certifications, storefronts, electronic procurement, a product catalog, financing, and logistics.
The Food Processing Machinery & Suppliers Association (FPM&SA) has launched a new web site that will enhance online customer connections and sales. Called processfood.com, the site is a vertical food industry portal designed to bring together buyers and sellers of food processing machinery, supplies and services. The site is produced by food industry insiders, making it the best source for information about and for food processing technology suppliers. Processfood.com is a quick and convenient online resource that enables food industry professionals to join in on all the latest news and trends in food processing. The site offers a service to match buyers and sellers of food processing machinery.
As in other Internet B2B arenas, there are several companies being launched in what may well be a very competitive field. Is one or two companies in the area . . . one or two too many? Will these B2Bs offer the right mix of customer service to both suppliers and buyers to be successful? Will some ingredient suppliers who are focused on providing value-added speciality ingredients be willing to compete in a more price conscious open arena?
A Food Industry Dot-Com Score-Card
Although some of the shine has come off the dot-com companies, with the NASDAQ’s downward shift in April, various companies have launched or will launch web sites in the B2B e-commerce area for the food industry.
Transora—www.transora.com —is a joint venture of the Grocery Manufacturers of America with food and beverage distributors and PricewaterhouseCoopers to form an online exchange.
Novopoint—www.novopoint.com —Cargill is teaming with e-commerce provider Ariba to do an online marketplace.
bMarco—www.bmarco.com —is a food industry auction and sourcing site.
FOBchemicals.com—www.fobchemicals.com —is an online procurement site for commercial chemical buyers interested in commodity-, traded-, and research-grade chemicals.
GlobalFoodExchange.com— www.globalfoodexchange.com —is an Internet marketplace for business-to-business food commodities trade. Apt
Food Ingredients Online— www.foodingredientsonline.com —is part of the VerticalNet family of vertical trade communities in a variety of industries including the food industry.
Rmbid.com— www.Rmbid.com —is a B2B e-marketplace that is designed for buying and selling raw materials in the food industry.
The Food Processing Machinery & Suppliers Association— www.processfood.com —has launched a new web site that will enhance online customer connections and sales.
ecFood.com—www.ecFood.com —is a provider of Internet-based supply-chain solutions for the industrial sector of the food industry.
by JAMES GIESE
Associate Editor