Dave Laukat knew he had to find a better way.
Laukat had built Chicago-based Best Foods into a $42-million-a-year business by supplying such giants as Pepsi and Frito-Lay with ingredients for their products. But he got into inventory trouble. For example, sometimes clients would discontinue items and leave him with as much as $1.5 million worth of often perishable excess inventory and no quick way to get rid of it.
“I was forced to sell the company because of cash flow problems,” he says.
Then a friend, an executive at Amazon.com, suggested Laukat try a food-related venture on the Internet. The idea was that the online immediacy would mitigate the perishability potential.
Earlier this year, Laukat established Ecfood.com, an Internet company devoted to automating the food brokering industry by creating a virtual market for food products, packaging, supplies and equipment.
The Ecfood.com site gives the industry a venue for brokering food deals between two parties, as well as a forum for auctions of massive quantities of product.
“We’re mimicking what goes on in the industry without the automation,” Laukat says.
Specifically, Ecfood.com provides Internet auctions, fixed price sales and classifieds to existing distribution systems. Companies such as Dairy Queen, Dreyer’s Grand Ice Cream Inc. and Americana Group use the site to sell excess product and equipment ranging from several thousand gallons of barbecue sauce to large conveyer systems.
Laukat stresses the site’s information-dissemination features, like its ability to confirm if kosher products have rabbinical blessing or if baked goods received safety certification from an industry trade organization
The company takes a 3% to 9% cut of each transaction depending on the amount of work it has to perform. If Ecfood.com only has to arrange for two parties to get together via its site, fees usually are at the low end of that range. But many food industry deals involve things like trucking a sample of the food to a buyer or potential bidder for inspection. When Ecfood.com sets that up, it gets a bigger cut.
Laukat predicts his company will clear about $1 million in revenue this year and possibly as much as $8 million by 2000.
Ecfood has done some small-scale direct mailing but plans to further promote itself through trade shows and ads in industry publications.
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