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Online grocer FreshDirect, which boasts more than 600,000 customers in New York, New Jersey and Connecticut, has struck an agreement with Wm Morrison Supermarkets, the United Kingdom’s fourth-largest food retailer, under which Morrisons will make an investment of $50 million in FreshDirect Holdings LLC. Along with FreshDirect’s declaration of greater expansion, however, came the news that chairman and CEO Richard Braddock has left the company.
“This investment is a strong endorsement of our unique business model from a major player in the supermarket industry,’ noted Jason Ackerman, founder and CFO of Long Island City, N.Y.-based FreshDirect.”This new partnership and capital strengthens our ability to support our strong growth and continued expansion.”
Added Morrisons CEO Dalton Philips: “I have seen retailers all over the world. Few have inspired me as much as the team at FreshDirect, a highly successful and profitable food retailer with a track record of terrific customer service. What we learn from FreshDirect will be invaluable as we plan our own profitable e-commerce business for the U.K.”
FreshDirect will use the Morrisons investment for such things as funding its ongoing expansion in the online grocery market, as well as further capitalizing the business to support its resources for customers and offerings.
The two companies share a highly complementary business approach, including customer-centric cultures that place service and quality uppermost. Morrison hopes to leverage FreshDirect’s expertise in e-commerce technology, marketing and merchandising, and direct delivery of fresh foods and groceries to help it refine its own e-commerce strategy in Britain. Meanwhile Morrisons’ solid food sourcing and operations abilities will improve FreshDirect’s supply chain and operations.
Under the terms of the agreement, Morrisons will acquire an approximately 10 percent equity stake in FreshDirect. The e-grocer will receive a minority economic interest in Morrisons’ planned London-based online operation. Philips will join the FreshDirect board, and the company has agreed to let Morrisons to install a team at its Long Island City facility to share best practices and learnings in regard to FreshDirect’s business model.
To lead FreshDirect into its next phase of growth, the board has undertaken a professional search to find a new permanent full-time CEO to replace Braddock. The board has appointed Jim Manzi, a board member and seasoned executive, to take on the role of chairman, while Ackerman, FreshDirect has assumed additional operational responsibilities as interim COO while the search goes on.
Bradford-based Morrisons operates 439 stores across the United Kingdom. The company sources and processes most of the fresh food that it sells though its own manufacturing facilities, giving it close control over provenance and quality.