After Gristede’s threatened to sue and Fairway took to posting signs in its stores attempting to discredit Fresh Direct, the embattled online grocer (www.freshdirect.com) is now trying to rumble into new territory. Currently delivering to high-income-bracket ZIP codes in Manhattan and Riverdale, Fresh Direct recently tried to follow its posh clientele to their weekend homes on Fire Island. But the move has only expanded the grocers’ war that has raged since Fresh Direct launched its Web site last July. The owners of Fire Island’s biggest grocery store, Pioneer, can now count themselves among those who have had to use creative tactics to counter a move by Fresh Direct chief executive Joe Fedele.
Fresh Direct’s provocative advertising, in which it names well-known Manhattan grocers and boasts that Fresh Direct can beat their quality and prices, has already caused numerous high-end food fights, most prominently with Mr. Fedele’s former business partners at Fairway, who are incensed by Mr. Fedele’s claim on his web site that he is a “co-founder of Fairway Uptown.” New York’s gourmet institutions, which usually co-exist relatively peacefully, can’t seem to find a way to include Mr. Fedele in their community.
A tour of Fresh Direct’s “plant” in Long Island City offers some clues as to why. The large industrial-yellow space couldn’t be a bigger contrast to the bustling interiors of Zabar’s, Citarella and Eli’s. Walking through the plant’s pristine, seemingly vacuum-sealed rooms, each kept at a different temperature, visitors must wear hairnets and bright orange Fresh Direct bomber jackets to keep warm. “We physically can do things that they can never physically do because we don’t have shoppers walking through, and all of our space is dedicated to production and food handling,” Mr. Fedele said as he swept his hand toward the green-suited men who were meticulously spraying down the warehouse’s machinery and floors. When workers step between two rooms kept at different temperatures, or from a room where raw food is prepared to one in which cooked food is prepared, they step into a sort of futuristic one-man bath. Every surface sparkles; every piece of fish, fruit and fowl has been sanitized, Mr. Fedele said. “Where else can you completely debacterialize a store and spray it down each night with 180-degree water?” he asked with a grin.
So when New York’s traditional grocery stores learned that this new service with no shoppers, no Manhattan rent and no résumé was bragging about better food and better prices, and seemingly glomming on to the Fairway name, blood boiled. “I’ll only be happy if he dies,” Fairway owner Howard Glickberg said of Mr. Fedele. Gristede’s chief executive (and potential Mayoral candidate) John Catsimatidis said, “Fresh Direct is an accident waiting to happen.” “Why would you want to buy from an online grocer?” asked Grace’s Marketplace manager Rusty Pacheco. Mr. Fedele’s response to all the bashing: “I love this fight.”
Gristede’s tried to sue when Fresh Direct put signs on buses and phone booths saying its prices were 35 percent cheaper than Gristede’s and Balducci’s, but the suit was dropped when Fresh Direct pulled the ads. “The Fresh Direct model doesn’t work,” said Mr. Catsimatidis. “They lied to us when we were about to sue, but then they stopped lying, and now I believe they stopped making those allegations.” And in the most publicly waged battle so far, Fairway owners David Sneddon, Howard Glickberg and Harold Seydert have been up in arms over Mr. Fedele’s claim that he was a co-founder of Fairway Uptown. Mr. Fedele, they said, was only a partner and, later, an operational manager. When signs appeared in the 74th Street Fairway store that read “Fairway Is in No Way Affiliated with ‘Fresh Direct,’” Fresh Direct retaliated by sending staffers dressed as giant fruits and vegetables to pass out flyers in front of Fairway. The Fresh Direct Web site now sports a page-long explanation of Mr. Fedele’s role in the Uptown Fairway headed: “Hey Fairway, what are you afraid of?”
Now the fight has spread eastward, with new accusations and new tactics.
Just before Memorial Day weekend, Fresh Direct tried to make a deal with the owners of the Fire Island Ferry: The ferry would allow Fresh Direct trucks on board, and the company would distribute its goods to the island’s residents from the barge, since no cars or trucks other than emergency vehicles are allowed on land. But the Ocean Beach by-laws got in the way. According to Fire Island Ferry president George Hafele, the town law allows commercial vehicles to dock only before 6 p.m. Monday through Saturday. Fresh Direct wanted to deliver after 6 p.m., thinking it wouldn’t profit early in the day, since its customers wouldn’t be coming out from Manhattan until Friday evening. The ferry owner, Ed Mooney, asked the town to waive the by-law and allow Fresh Direct to sell in the evening. However, local businesses-namely the two families, the Whitneys and the Littles, that control most of the grocery stores on the island-reacted vehemently. The businesses went so far as to threaten the ferry owner, saying that if Fresh Direct trucks were allowed on board, they would use an alternate ferry service. Frank Whitney, who owns Pioneer, Saltaire and Kismet markets, said, “Why wouldn’t I protest Fresh Direct? I’ve been here 35 years. Do you think I want them here? They’re a joke.”
In the end, Fresh Direct agreed not to expand into Fire Island, at least for the time being. Using the ferry during normal business hours didn’t work with Fresh Direct’s high refrigeration standards, Mr. Fedele said, because the food, if delivered too early, would be unrefrigerated for more than two hours.
Both Mr. Fedele and his business partner, Jason Ackerman, think that Fairway blocked their business on the island. “We got permission to open in Fire Island,” he said. “We were putting all the food on a barge. An interesting thing occurred: [Fairway] got all the stores together to oppose us. They told all the store owners we’d put them out of business. They got all the city owners to threaten to not use the ferry if we used it. So we got shut down by the town. Then Fairway, the nice honorable guys that they are, said ‘We’ll deliver to Fire Island’ and put ads in the local paper.” Mr. Fedele and Mr. Ackerman blame Mr. Sneddon, a resident on the island, for rallying the two families to persuade the town of Ocean Beach to oppose them. But Mr. Glickberg denied that his partner had anything to do with Fresh Direct being blocked. He said that Fairway had been advertising in the Hamptons and Fire Island for the past year and didn’t deliver there, only loading the orders into the customers’ cars at the Plainview store on the way out to Long Island. In Mr. Glickberg’s view, Mr. Fedele chose to open on Fire Island just to irk Mr. Sneddon. “We have Fedele crazy because we’ve revealed all his life,” he said. “We have this suspicion that they did this because he knew David Sneddon lives out there. My partner doesn’t care about that.”
Mr. Fedele said he came up with the idea of delivering to Fire Island because his customers requested it. He wouldn’t say whether he was planning on delivering to the Hamptons. When asked, he said, “I’m not saying a word right now. But let’s say this: I don’t get beat easy.”
When asked about his conflict with Fairway, Mr. Fedele said, “They’re full of shit. They’re not truthful people.” But Mr. Glickberg, whose family has owned Fairway since just after World War II, sees Mr. Fedele’s use of his company’s name as “a personal thing. It’s my family’s business. We don’t want our reputation dirtied by him,” said Mr. Glickberg.
Mr. Fedele sees another story. He says his opponents are just afraid, and shocked that he has come as far as he has. “No one thought another dot-com would succeed,” especially after the demise of sites like Webvan and Urbanfetch. But Mr. Fedele discussed his Web site confidently. “Ninety-nine-point-nine percent of the dot-com world was run by people who had no knowledge of their industry. It’s not about technology; it’s about food. I have 37 years of experience in the food industry. Technology just makes us more efficient,” said Mr. Fedele.
Does Fresh Direct stand a chance, then, or will Mr. Fedele’s shopper-free paradise go the way of Kozmo.com?
Mr. Catsimatidis said, “I’m sure we’re losing some business when people are giving $50 of free food,” he said, referring to Fresh Direct’s offer of $50 worth of free food to new customers. But Mr. Glickberg said that Fairway only suffered an initial loss of 1 to 2 percent when Fresh Direct started delivering to their area, and they soon recovered. Mr. Glickberg described Mr. Fedele as a “lowlife” who ran one of his previous businesses, By Choice, into the ground and has picked up numerous lawsuits along the way.
Mr. Fedele admitted that much. “What business doesn’t have lawsuits?” he said. “I have lawsuits. I don’t know of a business that doesn’t have lawsuits.”
Mr. Fedele is undaunted by the array of grocery powers mobilizing against him. He stands behind his model. “You’ve seen for three years, when we’ve been building this thing, what’s on NBC, ABC and CNN: It’s all about food contamination. Grocery stores all fail,” said Mr. Fedele in a gruff, tough-guy voice. “We expect to turn a profit by October. We started with 80 employees, and now we’re at 500.” He denies the rumors that he has downsized his staff, and while he did say Fresh Direct wasn’t breaking even yet, he added positively, “If anything, we’ve been upsizing.”
Mr. Glickberg, naturally, isn’t buying any of it. Now he says that Fairway is contemplating going to court to dispute his using the Fairway name. “But I don’t know if that’s the best idea,” he said. “It could take years-and in two years, Fresh Direct won’t be around anymore.” And Mr. Pacheco dryly added, “It’s not the future of Manhattan.”