Howie Glickberg insists that he was misquoted. Sure. Every reporter knows the routine: The subject of a story says something mildly controversial, is embarrassed when the words appear in print, then blames the messenger. Glickberg, a co-owner of the legendary Fairway Market, is disputing the media’s rendering of his past statements about Joe Fedele, a former partner. Fedele’s bitter exit from Fairway led to the launch, twenty months ago, of FreshDirect, the online grocery store that’s fighting Fairway for customers. “What’s that orange newspaper?” Glickberg asks. “Last summer they quoted me saying, ‘I’ll only be happy if he dies.’ No! That’s not what I said! I was misquoted!”
Here it comes: the denial. The profession of deep admiration for a worthy adversary. Or maybe the rationalization that Glickberg meant the line as a joke and the reporter had no sense of humor. “What I really said,” Glickberg says, “is that when Joe Fedele dies, I’ll be the first in line to piss on his grave. And there will be a long line of people behind me.”
Oh. Always happy to set the record straight.
Fedele, for his part, is taking the high road. Sort of. “If I had respect for him, it would sting. But I don’t,” he says. “You can’t get deterred by stupidity. And everything that guy has said is a rap of shit.”
Two fierce rivals go after the same turf. Tempers flare. Names are called; sometimes even bad language is heard. On Wall Street, in politics, at the ballpark, it’s no big deal. In New York’s grocery industry, though, where the heat is usually limited to the habaneros and the high-end purveyors consider themselves members of a small, sophisticated club, the raw hatred between the owners of Fairway and FreshDirect is unusual. “In our business, everyone’s fairly friendly,” says Andy Arons, a co-owner of Gourmet Garage. “And we’ve all been at it for a while. Now you have this blood feud. They loathe each other. It’s hilarious.”
But Arons and his colleagues, the owners of small, independent fresh-food stores, watch the dispute with anxiety as well as amusement. Because while there’s a substantial amount of purely personal contempt between Glickberg and Fedele, the tension between Fairway and FreshDirect is really a by-product of the revolution in the way the city shops for food. For years, dowdy places like Sloan’s and Associated failed to keep pace with the clean, bright supermarkets sprouting up outside the city; now they’re finally being forced to modernize. Nobody’s complaining about that. Bill Buford, the New Yorker writer who is completing a book about working as an apprentice in Mario Batali’s kitchen, buys his beef at the Florence Meat Market, his quail from BoBo Poultry in Chinatown, and his whole pigs from the Violet Hill Farms vendor in the Union Square Greenmarket. “The virtue of being in a city like New York is that it’s a market city, and you can get the best of anything,” Buford says. “The supermarkets here are constrained by space and by the unspoken understanding that the only people who go there are losers.”
FRESHDIRECT ON ITSELF: “We make money doing this. Period. The end.”
Yet now many of the city’s distinctive grocers and speciality shops are newly vulnerable. Whole Foods, the Austin, Texas–based supermarket chain, opened its first New York store three years ago in Chelsea. That, however, was merely a bovine-growth-hormone-free toe in the water compared with what the company unveiled in February, in the lower level of the Time Warner Center: a 58,000-square-foot megamarket dispensing artisanal breads, wild Alaskan salmon, organic sirloin, and countless varieties of olive oil—not to mention a save-the-Earth-through-enlightened-eating philosophy. Whole Foods began as a hippie experiment, but over 25 years it has grown into a steely giant. One of its top managers at the Columbus Circle store—in company jargon, Rob Twyman’s title is an “associate store team leader”—goes on at length about how Whole Foods “isn’t just a grocery store that’s here to reap the profits. We’re giving back to the community.” Unless, of course, that community also happens to sell organic chicory, goat’s-milk yogurt, and cruelty-free cosmetics. “Our core values dictate that we must satisfy and delight our customers,” Twyman says. “If it puts people out of business to do that, sorry. But we’re doing what’s in our heart as a company.”
For Fairway, there’s a particular irony to the Whole Foods invasion: About six years ago, Fairway’s owners discussed selling out to the Texas retailer. Now Fairway is staring at a smart, spacious new competitor in its backyard. And when Glickberg walks out the front door of the original Fairway store at 74th and Broadway, he can’t help but see FreshDirect trucks chugging past, making deliveries.
The modern history of food shopping in the city can be divided into three rough epochs, with many of the players overlapping. The Local Chain Period (ca. 1960–1975) was dominated by Key Food, Pioneer, Red Apple, Sloan’s, and Gristede’s. The size was around 4,000 square feet; the décor was heavy on linoleum, large refrigerator cases, and fluorescent lighting. D’Agostino and Food Emporium, in the late seventies, offered a more upscale alternative, but the real revolution began in the early eighties. The Korean Market Era (ca. 1981–1992) brought fresh produce to virtually every corner, particularly in borderline neighborhoods, 24 hours a day. This emergence coincided with the growth, in more yuppified precincts, of the gourmet stores (Dean & DeLuca, Petak’s, Gourmet Garage, Balducci’s, Grace’s Marketplace) and the solidification of the gourmand’s row of upper Broadway—Zabar’s, Citarella, and Fairway.
As tastes grew increasingly sophisticated through the nineties, and the vegetarian and organic ethos spread, the city’s mainstream stores lagged. But after prolonged stagnation, the city’s supermarket sector is suddenly hyperactive. The recession lowered commercial real-estate prices slightly. Chains like Gap, Target, and Borders chipped away at the long-standing suburban-retailer fear of New York. So we’ve entered the Age of the High-End Supermarket Chain. “There’s a vacuum,” says Dave Lannon, president of Whole Foods’ North Atlantic region. “The regular supermarkets in New York are pretty crappy. And the gourmet sector is dead. Balducci’s is gone. There’s the legends, like Zabar’s, which still has great prices for cheese, and Citarella does a great job. But there’s not a lot of growth there. With our store and Fairway now, why would you overpay for the same product in a small gourmet store?”
With his round glasses, unruly gray hair, and unbuttoned flannel shirt, the 57-year-old Howie Glickberg looks as if he could be Larry David’s groovier brother. Taped to the wall of his office is a handbill from the late thirties, when Glickberg’s grandfather opened Fairway. He smiles, reading aloud: “Rolls, 1 cent each; eggs, 27 cents a dozen; sirloin, 37 cents a pound!” Then the smile disappears and a Larry David–like scorn rises as Glickberg steers the conversation back to his nemesis Fedele. “I despise him more than anyone I’ve met in my life,” Glickberg says.
In 1994, Fairway had a single, thriving store. Glickberg and longtime partners David Sneddon and Harold Seybert saw the grocery industry mutating rapidly outside the city. They began exploring ways to grow Fairway, but zoning restrictions and real-estate prices in the city narrowed the options. A store called By Choice had opened on the extreme western end of 133rd Street, in a former refrigerated meatpacking plant beneath the West Side Highway. By Choice was the brainchild of 51-year-old Brooklyn native Joe Fedele, a food broker to club stores like Costco, who thought he could cut his former profession out of the equation and bring meat, fish, and produce directly from producers to the public. “Joe is not squeamish about just barging ahead,” says Richard Lipsky, a veteran supermarket-industry lobbyist who attempted to help Fedele with city permits. “When he has partners, that becomes a problem. His personality is hard to take.”
According to Fedele, By Choice was a hit, and Fairway felt threatened. In Glickberg’s version, By Choice was a bomb and all he desired was Fedele’s location. However the union came to be, Fairway Uptown was, and is, a tremendous success. Cars from New Jersey crowd the parking lot on weekends, drawn by the high-quality goods at chain-store prices. Who gets the credit? Glickberg says the only thing Fedele contributed was the building. “Well,” he allows, “Fedele put up a billboard, but like everything he did, he put it up as cheaply as possible, so it had to be replaced.”
Fedele sees it a little differently. “They stayed in one store on Broadway and 74th for twenty years!” he rages. “Then, what, in his mid-fifties, Glickberg got an epiphany to work more hours on bigger operations? Excuse my language, but bullshit. I taught them how to make a better product at a better price and made them a higher amount of money than they ever did. ”
FAIRWAY ON FRESHDIRECT: “When Joe Fedele dies, I’ll be the ﬁrst in line to piss on his grave.”
The uptown Fairway quickly split into two seething ownership camps. Finally, in 1998, Fedele left. “I got a lot of money to be bought out as what they claim was just an ‘operations manager,’ ” he says with a laugh. “Can somebody do that again for me, please?”
During the negotiations, Fedele was introduced to Jason Ackerman. Now 37, Ackerman is nearly as brash as Fedele. After a decade as an investment banker at Donaldson, Lufkin, & Jenrette, where he specialized in the merger, acquisition, and financing of supermarkets, Ackerman was looking to switch sides. “There were not a lot of great supermarket operators in the Northeast, and many of them were in big financial trouble,” Ackerman says. “And consumers were becoming less interested in canned corn. They were more interested in organics, more interested in natural, more interested in cooking at home. But the chain stores weren’t able to give it to them. So New York became littered with small independents, people who were one or two stores. We said, ‘Let’s deliver quality fresh foods, like a Fairway or a Balducci’s, but do it at a great price point.’ It was Joe who said, ‘Let’s look at going online.’ And it was me who responded with a profanity.”
As Ackerman and Fedele schemed, an Internet grocer called Webvan was in the process of blowing through $1 billion. But the pair thought they could avoid two fatal flaws: expanding too quickly and going public. Ackerman raised $100 million, Fedele cut deals with suppliers, and FreshDirect was born in a former paper plant in Long Island City. The FreshDirect headquarters is a complicated combination of FedEx distribution center and industrial-size kitchen. Two miles of conveyor belts, twisting three stories high, weave through and past twelve different temperature zones ranging from 58 above to 36 below zero, each room, according to Fedele’s calculations, providing the perfect sanitary environment for the handling of everything from pineapples to 200-pound tuna. Plastic tubs—some bought at auction and still bearing the Webvan logo—rattle along the conveyor belts as 550 workers use scanners to read bar codes that tell them who gets a box of Wheaties and who gets a half-dozen fresh croissants. Outside the warehouse, 90 trucks idle, ready to make deliveries.
After test runs in Battery Park City and Roosevelt Island in the summer of 2002, FreshDirect started with regular service in Murray Hill, then expanded up the East Side, across the park, and arrived on the West Side in March 2003. “We slowed the rollout because we did more business than we expected,” Ackerman says.
It wasn’t slow enough for Glickberg. The FreshDirect posters blaring that the company was BROUGHT TO YOU BY A CO-FOUNDER OF FAIRWAY UPTOWN and featuring a photo of Fedele made Glickberg furious. He posted signs inside the 74th Street store reading FAIRWAY IS IN NO WAY AFFILIATED WITH FRESHDIRECT. FreshDirect jabbed back by sending staffers dressed as giant fruits and vegetables to pass out flyers in front of Fairway. Then the FreshDirect Website added a lengthy description of Fedele’s role in the uptown Fairway, headlined: HEY FAIRWAY, WHAT ARE YOU AFRAID OF? Fairway threatened to sue. Ackerman says Fairway also told suppliers that if they did any business with FreshDirect, Fairway would yank their product lines from the shelves. Glickberg denies using any such tactics.
“I just professed my history,” Fedele says. “Why do they go out of their way to try and besmirch somebody? Typically it’s because of fear.”
Ackerman says FreshDirect now does 25,000 orders per week. Many customers are attracted by the $50 worth of free food that comes with a first order; others by prices that can be 10 to 15 percent lower than neighborhood stores. FreshDirect says it retains about half the customers who try the service, and that the company began turning a profit this January. “We make money doing this. Period. The end,” Ackerman says. “We’ve got lots of money in our bank account. We’re not burning it.”
Yet food-industry veterans who admire FreshDirect are dubious. Even if the company is turning a daily profit, they say, it will be a long time before FreshDirect begins recovering its startup costs, which Fedele admits were north of $60 million. “Remember the old story about the guy who sold stuff for less than he paid for it? He’d make it up in volume!” Arons says. “That’s what I think they’re doing. They have these incredible overhead costs, with trucks and fuel and tolls and towing. I know this business inside and out, and at the prices they’re charging, their story doesn’t make sense to me.”
The company announced in February that Fedele’s responsbilities were being reduced. “Joe is still a large shareholder; he’s on the board,” Ackerman says. “People’s roles change as organizations grow.” Fedele’s version is more pointed. “I think the final words were, ‘You’re fired,’ ” he says. Fedele disagrees with Ackerman’s plans to add national delivery services, and says he’s exploring his legal options. “My lawyers are in discussions,” he says. “If things don’t change, yes, a lawsuit will occur.”
WHOLE FOODS ON ITS COMPETITION: “Our core values dictate that we must satisfy and delight our customers. If it puts people out of business to do that, sorry.”
And Fairway isn’t FreshDirect’s only sworn enemy. John Catsimatidis, who began with one grocery store in 1968, now owns 50 Gristede’s stores. Five years ago, seeing the changes in the supermarket industry outside New York, Catsimatidis began renovating his stores and adding pharmacies, spending $70 million in the process. He claims the strategy is paying off: After losing $11 million in fiscal year 2003, the company’s net loss in the first quarter of this year was “well under half a million.”
From behind a mountain of papers on his desk, in a battered building amid car dealerships on Eleventh Avenue, Catsimatidis discusses his own run-ins with Fedele: When FreshDirect ads claimed its prices were 35 percent lower than Gristede’s, Catsimatidis threatened to sue, and FreshDirect pulled the ads. Five months ago, Gristede’s started its own home-delivery Website. “We don’t project it making a profit,” Catsimatidis says. “We just want to put one more nail in FreshDirect’s coffin.”
As for Whole Foods, Catsimatidis sees hard times for it as well. “The ‘experience’ of shopping there can take you just so far,” he says. “They’re paying $4 million a year in rent at the Coliseum! What happens if we deliver organic food at a lesser price than they do? The other places they’ve gone, they haven’t had any competition. Ninety percent of Gristede’s shoppers come from within a five-block radius of each store. And Whole Foods doesn’t have enough people living in that kind of radius to do well.”
Perhaps. But Whole Foods appears to be creating its own, very wide radius. “We’re doing 10 to 20 percent better than we expected at Columbus Circle,” Lannon says. Industry sources translate that into weekly revenues of around $1 million.
In the mid-nineties, just as Fairway and Joe Fedele were beginning their brief, unhappy marriage, Whole Foods was calculating its entry into New York. John Mackey, the company’s co-founder, had started with a small Austin health-food store in 1978. Two years later, he opened the first Whole Foods, stocking a 12,500-square-foot store with local salsas, fresh fish, whole grains, even nutritious dog food. He preached a “team member” system of management, where employees who didn’t carry their weight could be voted off, say, the dairy squad. Pay was based in part on productivity results, and the salaries of all staff, including Mackey, were listed in a book accessible to Whole Foods employees. By 1997, Mackey, riding the natural- and organic-food wave, had 76 stores spread across the country, and cracked $1 billion in revenues. New York was the last frontier.
“We look at demographics, what percentage of the population will accept our concept,” says Lannon, the Whole Foods executive. “Density of college graduates is our top indicator, and New York is off the charts.” In 2001, Whole Foods debuted on 24th Street in Chelsea, becoming an instant sensation. “It’s changed my life,” says the chef Bobby Flay, who lives near the store. “I can get up in the morning and get whatever I want.”
Three years later, Whole Foods opened uptown, in Columbus Circle. Lannon says Whole Foods quickly discovered that the hype about the difficulty of doing business in New York was overblown. “There were all these assumptions, like, ‘Oh, people won’t cook, they’ll only buy deli and takeout.’ ” he says. “We sell tremendous amounts of cooking and baking ingredients. And we heard, ‘Oh, New Yorkers don’t want big aisles. They want that rushed, crowded New York experience.’ ”
The showpiece Whole Foods store in the Time Warner building is a revelation to anyone accustomed to Fairway-style shopping-cart gridlock. Fresh fish is laid out on ice to create an eye-catching red-and-white pattern; the smell of roasting coffee beans wafts through the store. “Whole Foods is the JetBlue of grocery stores,” gushes Bari Meltzer, a 29-year-old Barnard administrator who travels from her 116th Street office to shop there. Behind her, a large sign hovering over the produce section lists reasons to buy organic, from PROTECT FUTURE GENERATIONS (No. 1) to SUPPORT A TRUE ECONOMY (No. 8). When you’re paying $1.99 for a single Whole Foods doughnut, it helps to feel like you’re fighting the Man.
Twyman, the manager, is relentlessly excited about the food, describing a display of strawberries as “a freshness statement.” Suddenly he pauses in his evangelical narration of the Whole Foods culture, and his ice-blue eyes glare at a cluster of four men carrying clipboards. Probably competitors, he says; all the rivals have been in to snoop. “As long as they’re not taking notes or taking pictures, we’re fine,” Twyman mutters. “Otherwise, we ask them to stop.”
Twyman, 37, grew up outside Boston, and has moved all over the country while working his way up the Whole Foods ranks. The only time Twyman’s cheeriness cracks is when he’s told that New Yorkers are wary of losing their neighborhood stores to an out-of-town chain. He mentions stopping for lunch one day. “I ordered two hot dogs and a specific kind of juice,” he says. “The guy looks at me and says, ‘You see mango juice? I don’t see mango juice. You see mango juice?’ I walked out. If we bring anything to New York City, it is this: We’re providing great product and great quality of service. And I think every New Yorker can benefit from that. More important, I think every retailer can benefit from that. It’s going to raise the standard.”
As a fellow newcomer to the city’s grocery wars, Twyman says he wishes FreshDirect well, but he follows with a dig. “We’re more about the theater, a passion for the food,” Twyman says. “FreshDirect, you get the product, but there’s no passion behind it: You open a box and, ‘Oh, there’s my broccoli, there’s my can of beans.’ For us, it’s about telling the story about that can of beans. Letting you taste that can of beans. Letting you smell in this recipe we just created how those beans mix with cumin and coriander and cardamom.”
“If I were going to be a big chain, I’d emulate them,” says Fairway’s Glickberg. “But I don’t think a family of four can afford to shop in a store like that regularly.” Fairway’s main response, he says, is to offer ever-better quality while keeping costs down—a tactic highlighted in signs hanging in the uptown Fairway that scold Whole Foods for its prices. “Our same-store sales are up dramatically—dramatically,” Glickberg says. Fairway is also growing beyond its base. In 2001, Fairway went suburban with a store in Plainview, Long Island, and Glickberg is now considering launching Fairway’s own garbage company, to cut waste-hauling costs. The forthcoming Red Hook Fairway, scheduled to open in summer 2005, will include 45 apartments or condos atop the 50,000-square-foot store, and will have ferry service to the East and West sides; the entire facility will draw its electricity from a Fairway-built power plant. And Fairway is seeking an investor that can pump tens of millions of dollars into the war chest.
The battle will keep spreading. FreshDirect, which recently entered Queens, says it should have the metropolitan region covered in the next couple of years. In 2007, a 46,000-square-foot Whole Foods will open at the edge of Park Slope, with a promenade along the lovely Gowanus Canal, to provide a challenge to the new Fairway in Red Hook. First, though, in February 2005, Whole Foods will open a tri-level, 50,000-square-foot store on 14th Street, with only a statue of George Washington to separate it from the city’s pioneering Union Square farmers’ market. After 28 years of having downtown mesclun shoppers pretty much all to itself, the famously, endearingly dysfunctional Greenmarket might, like the city’s sclerotic supermarkets, get a kick in the asparagus.