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Entrepreneur Connects Producers, Suppliers via the Web

Page 2 of 1

By A. Rojas

October 2000 - B2B sites, virtual marketplaces, and global portals are several of the words abuzz in the electronic commerce field today. The trend toward business-to-business commerce cuts across a wide range of business categories, from equipment auctioning to computer equipment and even food. The dot-coms – offering paperless trading, logistics services, and 24-hour access to information – have taken the place of trading pits and auction houses. Foodtrader.com, the brainchild of CEO Frank Tomasino, has emerged as one of the most avant-garde and successful sites targeting the estimated $2.3 trillion global food products sector.

A native of Guatemala, Mr. Tomasino began his career as a trader in precious metals and foreign currencies. But a desire to change his profession, coupled with a trip to Central America in 1989, laid the foundation for what would become Foodtrader.com. “On this trip I met growers who needed help marketing their spices and finding interested buyers,” he remembers. “I developed relationships and kept in touch with them. Then in 1991, I started a company called Generic Brands International, and began importing ingredients. Over time I realized that 80 percent of my time was devoted to looking for product and in contacting my sources in India, Turkey, and Guatemala. My idea was to create a Web site where suppliers would register with me and advise me of their inventories, and then I could concentrate on selling. It would be a site for my own trading needs.”

After proving that the concept worked for himself, Mr. Tomasino extended it to other wholesalers, buyers, and sellers. “From that original concept, we expanded it to include market information about crops, prices, logistics, and so on – everything that I did on a manual basis. It’s time-consuming to identify commodities and maintain up-to-date information. The niche we saw was to get all of this on one screen, not just from one country but from many countries that produce a particular product. Gradually we realized that’s what our customers wanted.”

Mr. Tomasino’s site at www.FoodTrader.com offers commodity reports for different products, historicals over the last five years, country profiles of total imports and exports, industry news, and even live chats with experts.

“Foodtrader.com is changing long-established traditions in the food industry to such an extent that companies everywhere will gain a competitive advantage by using our system,” says Tor Boswick, vice-chairman of the Miami-based company. “This Web site allows growers in the most remote corners of the world to find new buyers and do business as never before. The sheer size of the site, combined with our advanced technology, global reach, personalized service, and team of in-house commodity experts, ensures buyers and sellers unprecedented choice, efficiency, and confidentiality.”

Ejnar Knudsen, CEO of vTraction.com, the Internet branch of Netherlands-based The Rabobank Group, made the initial $2 million investment in the agricultural site.

“Foodtrader.com’s groundbreaking role in the world of food and agriculture e-commerce made it an obvious choice,” he explains. “The vTraction.com e-cooperative cultivates an e-business environment in which its portfolio of companies can share expertise and resources, enhanced by Rabobank’s know-how to grow. And Foodtrader.com is a powerful addition to our family of agribusinesses.”

At press time, FoodTrader.com was closing its second round of venture capital financing, estimated at $40 million. Investors include New York investment bank Allen & Co. and New River Capital Partners, a Fort Lauderdale private equity fund. With that money secured, Foodtrader.com’s management team is considering taking the three-year-old company public.

Foodtrader.com follows the transaction-fee business model. Essentially, the site gives clients a one-stop shopping space, where all their research, buying, selling, shipping, and distribution needs can be met. It also delivers value-added support, such as providing users with trade specialists who can locate and pre-qualify global suppliers, conduct research, qualify bids, track food product categories, and secure logistics. “You earn money by getting people discounts on various components of the trade,” Mr. Boswick says. “The transaction fee itself will always be a value-added service.”

New users can register on the site for free. Transaction fees range from 0.5 percent to 3 percent, charged at the point of sale.

Foodtrader executives can’t say whether they will change their transaction fee model into an annual membership fee. But Mr. Tomasino states that “eventually the company will change to fit the demand of what the clients want. And what they want now seems to be e-procurement. Clients need help with procurement. They need to streamline existing relationships. Buyers and sellers have been driving the site since its inception in 1997.”

Advertising forms a secondary source of revenue for Foodtrader. An advertiser can buy a word, such as “ginger,” and anytime someone types that word, the company’s banner or storefront comes up.

Currently, Foodtrader.com has more than 9,000 members, comprising growers, packers, processors, brokers, exporters, importers, distributors, retailers, foodservice distributors, and food manufacturers. It features more than 5,000 products from about 170 countries. The company maintains 12 offices worldwide.

Although think tanks and economists predict a shakeout among dot-coms, Mr. Boswick notes that FoodTrader.com ranks as the first and largest site in its niche. “I expect Foodtrader will be one of the consolidators,” he says. “Announcements made by the Grocery Manufacturers Association and other key industry associations suggest that they are taking e-commerce seriously. Some businesses in this industry are very inefficient, and they are responding to their profit needs.”

Users applaud how the site has streamlined operations in the tradition-ridden agricultural industry. “We completed one large sale to a single buyer in only three days with just a few clicks of the mouse. Without Foodtrader.com, it would have taken a team of six brokers eight to ten hours each just to prospect potential buyers,” says Mel Robinson, a partner at poultry wholesaler Steele Distributing. The sale, valued at $1.6 million, consisted of 260,000 cases of canned vegetables.

“Foodtrader places the purchase orders for our deals, tracks the shipment from beginning to end, and handles the notification of shipments,” explains Henry Baybutt, sales manager at Sparrow Industries, a distributor of food and agricultural products. “They notify us what line they use, when the ship has left, and when it will reach the destination.”

To market its services, FoodTrader aggressively attends international and domestic trade shows in its industry. “We have two trade-show teams in-house,” says Mr. Tomasino. “We participate in 30 to 40 shows a year in different industry segments. Many of our people spend 200 days per year on the road. Our participation at these shows gives us the opportunity to find out exactly what [buyers] are looking for. Some people actually register on our site at the trade shows.”

Agriculture goes beyond regional and bi-national trade to span a complete global marketplace. As a service provider, Foodtrader deals with the language and cultural differences that accompany international trade. Its management team consists of experienced industry professionals, many of whom are multilingual. The company has established affiliate offices to facilitate communication. “Through our foreign offices in Brussels, London, Warsaw, Paris, and Hamburg, we handle the European Union members or visitors,” says Mr. Tomasino. “Our office in Colombia also oversees operations in Venezuela. Our location in Peru services Chile and Argentina as well, and our office in Guatemala addresses Central America.”

While English generally serves as the international language of business, and many FoodTrader.com sales are transacted in U.S. dollars, “you still need local representatives who can speak their language and know their culture,” Mr. Tomasino says.

Online, Foodtrader.com uses English as its core language. However, some windows are available in a variety of languages. For example, the registration areas are translated into Spanish, German, and Japanese. Mr. Tomasino reports that Japan accounts for about 20 percent of U.S. agricultural exports, so catering to its culture makes good business sense.

In an industry dominated by time-honored traditions, where a handshake still seals a deal, FoodTrader has altered the landscape in a revolutionary way. By adapting its technology to suit all interested users, and offering a quick way for food companies to streamline their operations, FoodTrader has earned a seat at the table among successful e-commerce sites in the global economy.

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