In its second-largest acquisition, Amazon buys the company for $970 million.
The gourmet food and cookware category isn’t overstocked with Web merchants yet, but the kitchen is filling up fast.
Until recently there were no Internet stores offering the depth and range of high-end food and kitchen goods that consumers are accustomed to finding through such print catalog staples as Williams Sonoma and Chef’s Catalog.
But sensing that gourmet foods and fancy cooking gadgets will be among the Web’s next blockbuster sales categories, more merchants are beginning to fill the void. The gourmet kitchen catalog business is already a multi-billion dollar market and with predictions that online sales could top $400 million by 2002, food industry consultants say that the category may become so filled with competitors that no single store could-or should-aspire to dominate it totally.
Nevertheless, that’s precisely what Kevin Appelbaum, chief executive officer of Digital Chef Inc., St. Helena, Calif., says he intends to do. Digital Chef’s mission is to be the Web’s most comprehensive source of online shopping for gourmet food and kitchenware.
“Delivering on the promise of delivering everything a cook desires on the Web-that’s what we’re going to do,” says Appelbaum.
That’s a tall order. But with a corporate strategy that includes the venerable Culinary Institute of America as a joint-venture partner and marketing relationships with big search engines, Applebaum insists that Digital Chef is up to the challenge
Indeed, with $13 million in new funding from venture capitalists, Digital Chef is expanding the size of its Web store and rolling out an even more aggressive electronic commerce strategy. Key elements of the strategy include:
• Capitalizing on its relationship with the Culinary Institute of America and increasing its profile with serious gourmet cooks.
• Buying prime shopping space on America Online and Yahoo and linking to high-profile Internet food sites.
• Hiring new executives with extensive backgrounds in gourmet food marketing and merchandising.
• Expanding into kitchenware.
Site content rich enough to maintain the interest of serious gourmet food fans and cooks is a central element of Digital Chef’s marketing plan.
Today, food aficionados can click on the site’s Gallery Chef page and print out recipes supplied by 46 top chefs from upscale restaurants around the country. Likewise, Digital Chef works with leading cookbook publishers such as Random House, Alfred A. Knopf, Doubleday and others to constantly update Cookbook Showcase, a search function that enables cooks to look for individual recipes by type of food, region or author. Applebaum is convinced that content-wise Digital Chef is already the top Web site in its class. But to turn itself into the category’s most successful Web store, Digital Chef must achieve an even higher profile with gourmet food lovers. And for that Applebaum is counting on Digital Chef’s relationship with the Culinary Institute of America.
Applebaum approached the institute about two years ago to see if the cooking school would be interested in providing access to the deep content on its Web site and its famous reputation in return for more Internet exposure and an equity stake in Digital Chef. The two parties formed an instant liaison.
By linking its site to Digital Chef, the culinary institute accomplishes a key goal: growing its reputation beyond just professional chefs and reaching out to more mainstream amateur and student chefs. In return, Digital Chef gets to feature the Culinary Institute of America on its Web page and obtains exclusive Internet access to the school’s chefs, recipe files and indepth index of cooking articles.
“Putting the CIA logo on the Digital Chef page is like getting the Good Housekeeping seal of approval,” Applebaum says. “It makes us more viable in the market place.”
Digital Chef went live in April 1998 and began selling in October. Since then Digital Chef’s staff has worked hard to make the site’s content lively and detailed enough to hold the interest of serious gourmet cooks. But rich site content is only one aspect of Digital Chef’s corporate strategy. Equally important is drawing and retaining customers by purchasing prime retail space on Yahoo and America Online.
Digital Chef is a premier retailer on Yahoo’s online shopping service and is featured prominently in the search engine’s various cooking categories. Likewise, Digital Chef is paying America Online $7.5 million and a share of sales to draw business from AOL’s more than 13 million users. Under the two-year agreement, Digital Chef receives top placement in the gourmet, grocery, home, kitchen and garden categories on AOL’s shopping channel. Additionally, Digital Chef is featured on AOL in such popular areas as the Food Channel, The Influence Channel, People Connection, Digital City and other life style-oriented Web pages.
Today, the AOL and Yahoo deals generate 80% of Digital Chef’s site traffic and Applebaum believes that number will rise substantially once more gourmet cooks start finding digitalchef.com on the Web. “There are only a set number of shoppers on the Internet and we have to go to where the people are,” Applebaum says. “The portal deals enable us to do that.”
Building a brand
It’s still too early for Applebaum to discuss Digital Chef’s financial picture, including sales and when he expects the Web store to become profitable. For now, Applebaum says his primary mission is building up Digital Chef’s brand name. And he’s doing that by constantly looking for new places to show off Digital Chef’s gourmet food expertise. A good example is Food Central, a heavily visited section of CNN.com.
CNN is big on giving its TV viewers and its site visitors lots of lifestyle information on topics such as food and health.
Food Central offers the latest food and nutrition news together with recipes, restaurant reviews and more than 75 message boards that allow Internet users to swap cooking tips and other tidbits. As a contributor to Food Central, Digital Chef provides exclusive daily recipes and step-by-step teaching guides written by prominent chefs.