Net Growing as New Way to Pick Fruit

David Lake makes his living buying and selling produce. It’s the buying part he’s not always too crazy about.

A co-owner of MCL Distributing in Los Angeles, a produce distributor with annual revenue of $25 million and whose clients include small retailers, restaurants and hospitals, Lake spends several hours a day on the phone trying to locate the sweetest corn, juiciest tomatoes and freshest bell peppers at the most reasonable prices. When he finally does find a vendor with whom he wants to do business, Lake often has to draft a purchase order, send it by fax and wait for a confirmation call--a time-consuming, tedious process.

Lake recently found a different way to purchase fruits and vegetables. In early October, he logged on to Buyproduce.com, one of the nation’s newest online produce marketplaces. With a few clicks of a mouse, Lake was able to find several avocado and pepper growers, compare prices and make a selection in a matter of minutes. Lake has already made three purchases on Buyproduce for a total of $15,000 and plans to make many more.

“We’re looking for the smartest and quickest ways to do things,” Lake said.

Buyproduce, an Irvine-based upstart headed by a pair of hard-driving twentysomethings, believes it can meet the needs of Lake and many other buyers and sellers in the nation’s estimated $75-billion produce industry.

“Buyers have never been able to find all the suppliers available to them, and suppliers have never been able to find all the buyers available to them--until now,” said Brent Keefer, Buyproduce’s 27-year-old chief executive.

Buyproduce is an example of a growing number of companies that have made business-to-business e-commerce a powerful force in the American economy, confirming early projections that business rather than consumer trade would be the most powerful economic use of the Internet.

Business-to-business e-commerce sales are projected to reach $1.3 trillion in the U.S. in 2003, accounting for 9.4% of all business sales and more than 12 times larger than the business-to-consumer e-commerce market, said Varda Lief, a senior analyst with Forrester Research in Cambridge, Mass.

An estimated 300 business-to-business electronic marketplaces have sprung up online, bringing together buyers and sellers of everything from cows to chemicals to plastics to natural gas. Added to that are a slew of companies that offer the software, hardware and consulting services that make such e-commerce possible.

By streamlining the purchasing process, business-to-business e-commerce is expected to save American businesses $57 billion in 2003, according to a recent report by Bear Stearns.

“It is so much more efficient and less expensive than doing business the old-fashioned way through phone, fax and mail,” said Jim Sterne, president of Target Marketing, an Internet consulting firm in Santa Barbara.

Buyproduce aims to be at the forefront of the business-to-business e-commerce revolution. Like most online business, everything about it, as well as its industry, move at cyberspeed.

Buyproduce, which charges sellers about a 2% commission on every transaction, faces an onslaught of new competitors. Agribuys.com of Torrance, an online food marketplace headed by a former McKinsey consultant, has just launched. FreshPlex, an online produce marketplace being developed by World Commerce Online, is expected to debut sometime next year.

ProduceOnline.com of Pasadena, an online produce exchange and portal, is expected to pose the biggest challenge. The company charges transaction fees of less than 1%, will offer lots of content, including electronic bulletin boards for buyers to communicate with one another and links to government agencies, online weather reports and trade publications. “If you need to know anything about produce, we want to be your first stop,” said Chuck James, ProduceOnline chief executive and a Wharton MBA.

In an effort to preempt competitors, Buyproduce has made recruiting buyers and sellers a priority. Since launching Oct. 4, it has signed up 225 companies and is adding more daily. To keep buyers, suppliers and growers happy, customer service agents help build their online catalogs and tutor them in navigating the site, which Buyproduce spent more than $1 million to create.

The company, which incorporated in March, has a war chest of nearly $1 million from private investors and personal savings and is nearing a multimillion-dollar deal with Silicon Valley venture capital firm Sequoia Capital. The company has used its money, supplemented with credit cards, to get the word out. Buyproduce has run several large ads in trade publications, and hired former Dodgers manager Tommy Lasorda and ex-football great Dick Butkus to sign autographs at a recent industry trade show to generate buzz. “They’re being talked about,” said Ben Wood, editor of the Packer, a weekly produce industry newspaper.

At Buyproduce’s Irvine headquarters, youth, ambition and energy abound. Fresh-faced men and women in jeans, shorts and T-shirts input computer data, schmooze with produce buyers and sellers, toss a Nerf basketball around and work and work and work.

Heading up the 22-strong Buyproduce team are chief executive Keefer and co-founder and chief operating officer Robert Bonanno, 29, both of whom attended USC. Despite their ages, the pair have a combined 15 years experience in the produce business.

Keefer’s family has been in the produce business since coming to America from Sicily in 1906. “Agriculture is in my blood,” he said. After leaving college, he held sales positions at A.T.B. Packing Co. of Turlock, one of the nation’s largest melon suppliers and later at Denice & Filice Packing Co. of Hollister, one of the nation’s largest bell pepper suppliers. In 1996, he co-founded Keefer Farms, which grew, sold and packed produce, among other things.

Before joining Buyproduce, Bonanno managed and operated Don Bonanno Citrus Co., a recently defunct Irvine-based firm involved in all aspects of the produce industry, including growing, marketing, sales and distribution.

To supplement that background, Keefer and Bonanno have assembled an experienced board of directors that includes Dick Spezzano, a former vice president of produce and floral at Vons, and Allen Barbieri, former president of Buy.com in Aliso Viejo.

Buyproduce projects a loss of $3 million this year on sales of $100,000, and a loss of $17 million next year on sales of $10 million. The company hopes to turn a profit by 2001.

Perhaps the biggest unknown for Buyproduce is whether it can attract major buyers such as Safeway and Albertsons. Tom Stenzel, president of United Fresh Fruit and Vegetable Assn. in Alexandria, Va., said huge retailers would probably shun the site because they have developed a reliable network of suppliers whom they trust. Buyproduce is likely to appeal most to “peripheral players,” he added.

Buyproduce’s Bonanno disagrees. “Why would a retailer spend $50 for a box of avocados when they could come to our site and find one for $45?” he said. “Everybody could benefit from having more information.”

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* NEW BREED

Entrepreneurs are making the Southland a fertile hub of e-commerce. A1