Investors with appetite for risk bail out Bon appétit’s LeShop

CEO Christian Wanner says LeShop can be profitable Christian Wanner

Facing financial insolvency when its majority shareholder, the Bon appétit Group, decided to back out of its investment, LeShop, one of Europe’s first high-profile dotcoms, has been given another chance by new investors to increase its sales to profitability.

LeShop, based in Chevannes de Bogis near Nyon, was one of the first online grocery stores in Europe.

It received tens of millions of venture capital backing from a number of investors, including the investment bank Morgan Grenfell, now part of Deutsche Bank, which eventually sold its shareholding to Bon appétit in 1999.

Bon appétit, traded on the SWX, held the majority of shares in the firm. It spent more than SFr30 million on LeShop and finally announced in December that it would be writing down its entire investment in the Swiss startup company and halting further financing of the endeavour.

“Bon appétit had the financial strength to back the company to profitability but its investors were pressuring it to be rid of the loss making online grocer,” says LeShop CEO Christian Wanner.

With tenacity and perseverance, LeShop’s management searched for shareholders that had a larger appetite for risk than Bon appétit’s and found it in the shape of ShoppingNet Holding, a special purpose company established to invest in LeShop by three business partners.

Two are former entrepreneurs, namely, Philippe Thévenaz and Jacques Delafontaine, who built up a company called Fotolabo, now turning over some SFr245 million a year, to Valora Group, owner of the KIOSK and Merkur chain.

The third, Daniel Salzmann, comes from luxury good retailing, according to Wanner.

The reason LeShop is still losing money after more than four years of selling groceries online is that it, along with dozens of Internet analysts, managers, and bankers, underestimated the difficulty of introducing a new sales channel for the food industry that not only uses a new medium but requires a change in consumer behavior too.

Major retailers

Furthermore, the retreat of Migros and Coop, the two major supermarket chains, compounded the problem because of lack of competition meant lack of marketing efforts which would have contributed to creating a larger pool of potential shoppers.

“Some competition in the market would have been good to help create the market,” says Wanner.

ShoppingNet has agreed to put up the SFr10 million to help LeShop triple its customer base.

It will not be easy because the pool of potential shoppers is fairly small – the population of Switzerland is only equal to that of Greater London.

Growth means converting non-online shoppers to Internet shoppers.

It cannot take its growth of the Swiss who are already buying groceries online because it already has two-thirds of that market, it says.

The private equity financing is meant to cover fixed costs for the upcoming 24 months.

“Over the past four years, LeShop has come to understand its fixed and variables costs.

The new investors are funding the fixed costs, while cash flow covers variable costs,” says Wanner.

The third investors have acquired a debt free business with a valuable infrastructure that cost millions to build and they may reap the rewards if LeShop’s management can execute on its experience and enthusiasm.

by Valerie Thompson