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9.22.98  
The Corner Kosher Grocer Goes Global
What's not to like about a nice Jewish company from Brooklyn?

Need matzo in Missoula? Brisket in Biloxi? For Jews who observe strict dietary laws, or people who are just plain fans of Jewish cooking, finding kosher food outside major U.S. cities is a problem. But, thanks to modern technology, Jewish provender can now be spirited just about anywhere, almost overnight.

Armed with little more than a few computers and phones, Deborah Alexander and Craig Diamond, the owners of the online Kosher Grocer in Brooklyn serve 1,100 regular customers -- including Jewish travelers who order food sent to hotels -- as far afield as Japan, Alaska, England, and Colorado. Tapping his experience as a Web graphics designer and hers as a marketer of kosher wines, the two started www.koshergrocer.com in March, 1998, with $125,000 from investors and their own savings. They expect this year's revenue to hit about $500,000.

Diamond and Alexander have found a niche within a niche within the immense grocery business. The best-known online grocers -- NetGrocer, Peapod, and eGrocer -- generally serve customers in a specific area who hate grocery shopping or have no time for it. But Alexander, who worked for Royal Wine Corp. for eight years, says she got the idea by watching her orthodox Jewish colleagues prepare for business trips. "These guys are traveling with cans of tuna in their suitcases," she says.

Clearly, the entrepreneurs are on to something. Recently, Kosher Grocer sent enough food for a week to a family of five traveling to DisneyWorld in Orlando, Fla., from England. The order included kosher TV dinners, frozen turkey, roasted chicken, Sabbath wine, and candles. The total cost, including shipping, was $190, Alexander says.

UPSCALE MARKET. Alexander says in the U.S. alone, 250,000 people use kosher products on a fairly regular basis. She'd be happy with 8,000 of those. Then there's 2,000 more she calls "casual users," people who don't keep kosher, who may not even be Jewish, and who are often vegetarian. Diamond says their customers fit "a gourmet type, upscale image and are not necessarily concerned about price as the driving point."

Their target, 4% of the kosher market, doesn't sound overly ambitious. An Andersen Consulting study done early this year said online grocery stores in the next 10 years could capture as much as 12% of the $720 billion in annual retail grocery sales in the U.S. But, so far, most are still struggling to figure out how to capture the potential. "While there is demand that could be tapped into, the currently available alternatives don't really meet the needs of the consumer," says Steven J. Johnson, co-director for the E-commerce program at Andersen Consulting in Chicago. Consumers are still suspicious about buying fresh food sight unseen.

For now, Alexander and Diamond's main competitor in the online kosher grocery universe is the larger, more-established Kosher Supermarket, which has been in operation about a year longer and has a bricks-and-mortar existence. It has 15 employees and a warehouse in Lakewood, N.J., where most of its products are stored. "We don't really consider them competition," says Alex Schleider, vice-president for operations at Kosher Supermarket. "We carry far more products and a bigger selection, and we were in the game before them." Alexander counters that Kosher Grocer is more of a gourmet service, a point Schleider acknowledges.

SMALL KNISHES. Alexander and Diamond's business doesn't have much of an earthly presence, and they don't have much reason to expand it. They have orders shipped directly to customers from suppliers in Los Angeles and Teaneck, N.J. A busy day for them is still only 10 orders, though they do sell to 22 retirement homes in the Midwest and to Jewish centers on a number of college campuses. In addition to kosher supplies, they also send entire meals.

As much as people appreciate the service, some find the cost hard to swallow. Steven P. Ritter, an executive for Adolph Coors Co. in Denver, says Kosher Grocer has helped assuage his nostalgia for the food he ate growing up in the South Ozone Park section of Queens. He's ordered twice in the last two months -- "corned beef, pastrami, knishes, kishke [stuffed entrails], pickles, salami, and halvah." He'd buy more if it weren't for the shipping cost. His last $100 order cost $50 to deliver via Federal Express.

Alexander says there is no way around the expense. Perishables, which are cold-packed in Styrofoam, have to be sent by two-day express at a maximum.

Meanwhile, as the Jewish holidays get under way, the company is heading into one of its busiest seasons. Tradition calls for eating something sweet on Rosh Hashanah, which started Sunday, Sept. 20, and Alexander says she's had a run on honey cakes. The Internet isn't a very spiritual medium, but for some Jews in isolated places this year, the holiday would be emptier without it.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com


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