FreshDirect Expands Delivery to Philadelphia

“Phase 1 is those first eight City Center ZIP codes, and we plan to keep expanding there, and to keep expanding around the perimeter of New York City. There will definitely be expansion in both directions.” — John Leeman, VP of marketing, FreshDirect

NEW YORK — Online grocer FreshDirect here said last week it is expanding its delivery service to the Philadelphia market effective Oct. 1, on what happens to be the company’s 10th anniversary.

The company, which is often cited as one of the few successful online-only grocers in the U.S., will serve several neighborhoods in the Center City area from a refrigerated warehouse near the Delaware River waterfront in Philadelphia, John Leeman, vice president of marketing for FreshDirect, told SN last week.

He said FreshDirect believes Philadelphia has a burgeoning food culture and an affinity for the freshness and quality that FreshDirect seeks to offer. Although the company will compete against Ahold’s Peapod by Giant online service in the market, Leeman said he believes FreshDirect will compete more directly against the more upscale chains that have expanded their presence in the area in recent years.

FreshDirect made its Philadelphia debut last week with a press conference and a $5,000 donation to local hunger-relief agency Philabundance. Speaking at the event was David McInerney (pictured standing at the podium), one of the co-founders, who discussed local sourcing. Jason Ackerman, cofounder and chief executive officer, presented the check to Philabundance.

“If you look at things like freshness and quality and value, companies like Wegmans and Whole Foods are more direct competitors than Peapod,” he told SN.

FreshDirect will initially launch in eight central Philadelphia ZIP codes, with plans to expand throughout the greater Philadelphia region in 2013. The eight ZIP codes include the following neighborhoods: Rittenhouse, Logan Square, Washington Square, Old City, Society Hill, Bella Vista, Queen’s Village, Graduate Hospital, Grey’s Ferry, Fairmount, Art Museum, Spring Garden and Northern Liberties.

Read more: FreshDirect Pilots Snap Test in Bronx Expansion [4]

“Phase 1 is those first eight City Center ZIP codes, and we plan to keep expanding there, and to keep expanding around the perimeter of New York City,” Leeman said. “There will definitely be expansion in both directions.”

Current Philadelphia market-share leaders are Supervalu-owned Acme and Ahold-owned Giant of Carlisle, Pa., with a grocery share of about 16% and 15.6%, respectively, according to Metro Market Studies. A&P’s Pathmark and Superfresh also operate in the market, as do Wal-Mart Stores and Target Corp.

FreshDirect began by serving a small section of New York City from a massive warehouse and production facility in Queens and has since expanded its service to include a wide swath of the city and several suburban areas in New York, New Jersey and Connecticut. It recently agreed to relocate its New York distribution hub to a new facility it is building in the Bronx.

Read more: FreshDirect Sells $50M Stake [5]

Its annual revenues were estimated at about $300 million in 2010 when the company took on a minority investment from British grocery concern Wm Morrison Supermarkets. Updated revenue information for privately owned FreshDirect was not available last week.

Leeman said the company would need to build brand awareness in Philadelphia.

“Certainly there were people who moved to Philadelphia from New York and were FreshDirect customers before, and they know us, but for the most part we don’t think the existing brand awareness will be very high,” he said. “We’ll build awareness the old-fashioned way — we’ll build awareness, encourage trial, and hopefully the business will keep growing like it did over the past 10 years in New York through strong word-of-mouth advocacy.”

New Ad Campaign

The move into Philadelphia comes as FreshDirect launches a new ad campaign emphasizing the quality and freshness of its products. The campaign includes billboards, truck skins and other media, augmenting the company’s traditional online and direct-marketing efforts.

Leeman said that FreshDirect would consider expanding its marketing to other media as well.

“In Philadelphia all media is on the table,” he said.

Read more: Ackerman Named CEO at FreshDirect [6]

FreshDirect will also support local charities in the Philadelphia market as it does in New York. In Philadelphia, it will work with hunger-relied organization Philabundance and with Project H.O.M.E., which seeks to aid homeless people in the region.

As far as expanding the company’s delivery reach outside the New York and Philadelphia areas, Leeman said the company “has its hands full right now.”

“We are a ways away from a broader expansion in the country,” he said.

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