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In December 2008, just as the crisis on Wall Street was raging, Sam Klepfish was staring at another financial disaster.
The firm in which he was a leading investor, Naples-based Innovative Food Holdings, had run out of cash in September of that year. “We had to put up money to make payroll,” Klepfish recalls.
After scrambling for cash over the holidays in 2008, Klepfish found an investor who on Dec. 31 agreed to give the company a $200,000 loan. Without it, Klepfish says the company likely wouldn't have survived the New Year.
Today, it's a different story. Innovative Food has $1.3 million in cash on its balance sheet, it has made strategic acquisitions that boosted revenues 60% last year and it recently purchased a new headquarters building in Bonita Springs for its rapidly expanding operations. The company reported it earned $2 million on revenues of $18.6 million last year, compared with net income of $1.5 million on revenues of $11.6 million in 2011.
Innovative Food distributes 7,300 gourmet foods to thousands of upscale-restaurant chefs around the country and to gourmet-food aficionados via its online store ForTheGourmet.com. Products range from Kobe beef to heirloom tomatoes, fresh morel mushrooms and French cheeses.
The unassuming headquarters of the company is tucked away in a nondescript office building near the last exit in Naples before Interstate 75 turns into Alligator Alley and into the Everglades.
Klepfish, 41, seems a bit out of place on the edge of the swamp. The Brooklyn native and resident commutes to Naples regularly, but otherwise delegates the day-to-day operations to Justin Wiernasz, Innovative Food's president and a veteran of the food-distribution business.
Wiernasz says the top question investors and others want to know is how he and Klepfish work together. “It's based on trust and respect,” says Wiernasz. “One of Sam's strengths is when he hires someone he trusts, he lets you go.”
Klepfish is quick to help in a pinch, even answering the phones when he's in Naples. “Sam will jump in for me,” says Z. Zackary Ziakas, better known in the office as Chef Z. Ziakas oversees the retail website, ForTheGourmet.com.
But Klepfish says working from New York keeps him from slipping into micro managing. “If I was here all the time it would not be as effective,” he says. “I'm not the type of guy who pulls out the boss card.”
When he does visit Naples, Klepfish brings a dry sense of humor to the office. “We've been growing so quickly, he brings levity to the situation,” says Wiernasz. “I don't have to stress all the time.”
Banking background
Trained in finance, Klepfish was working for law firm Phillips Nizer in New York City helping companies raise capital and make acquisitions. He joined the board of Innovative Food in 2004 as the company was about to acquire a pasta manufacturer.
The pasta-company acquisition didn't happen, but Klepfish remained on the board and became its CEO after the founder, Joe DiMaggio Jr., a Naples resident and relative of the famous baseball player, resigned. Klepfish now owns about 15% of the shares of the publicly traded company.
At Phillips Nizer, Klepfish bridged the worlds of entrepreneurs and lawyers. “My approach is analytical and that's how this business is run,” he says. “A good decision is if you have all the facts,” he says, because outcomes are often out of your hands.
The risk-averse Klepfish says he often recalls his grandmother's admonishment: “If you do something stupid and nothing bad happens, it doesn't make you smart.”
Klepfish was confident of Innovative Food's business model, which is to provide artisanal foods to upscale-restaurant chefs around the country. To do that, the company hires chefs who have grown tired of the kitchen. They answer the phones, help customers with their orders and make suggestions on how to use the products.
“It gives you the ability to talk food without the grueling hours,” says Todd Carrell, a trained chef and executive vice president of sales and procurement.
For example, edible hibiscus flowers are among the company's hottest items. Chefs at Innovative Food explain how to use them to adorn champagne flutes, slices of cheesecake or even skewers of shish kebab. “They're looking for ideas,” Carrell says.
Of course, few people go hungry in an office full of chefs. The company budgets for Fun Food Fridays when each chef at the company takes turns making a meal for everyone on the last day of the week. A recent breakfast included egg souffle, coffee cake and bacon, and lunch was chicken chili soup and couscous salad.
Everyone always tastes the new products that arrive. “Even on the finance side they love food,” Carrell chuckles.
The company goes to great lengths to secure gourmet foods for its customers. For example, when the U.S. slapped a 300% trade tariff on Roquefort cheese from France in 2009, Innovative Food stocked up with 2,000 pounds of the pungent cheese so it could keep its customers supplied at reasonable prices while the trade dispute was resolved.
“It's a great concept they have, bringing food from around the world and making it available to restaurateurs,” says Lou Haley, a veteran of the food distribution business whose consulting firm, The Haley Group, was recently acquired by Innovative Food. “Everyone is becoming foodies.”
Klepfish is passionate about technology and the Innovative Food has automated its systems to track more than 100,000 shipments it makes every year, by FedEx and through giant distributor US Foods. For example, Innovative Food can create an order, arrange for a FedEx shipment and notify the customer in five minutes, says John McDonald, the company's CIO.
Shipments quadrupled, but the same two employees can manage the increased work because of automation technology. “It used to be a full-time job just to load orders,” McDonald says. “That's the only way to survive.”
Focus on growth
Wiernasz says Klepfish's strength is developing long-term strategy for the company. “I'm more in the minute detail,” says Wiernasz. “He's more at the 50,000-foot level.” While Wiernasz knew more about the food business, Klepfish brought the accounting and financial acumen. “That's been a really strong relationship,” Wiernasz says.
As Wiernasz grew sales, Klepfish scouted acquisitions as the company became more successful. “What I liked about him was that he was pretty up front about his strengths and weaknesses,” Wiernasz says. In May 2012, the company acquired Artisan Specialty Foods for $1.2 million, an Illinois gourmet food distributor to high-end restaurants around Chicago. “That gave us a big shot in the arm,” says Wiernasz.
As its business continues to grow, there will be more opportunities. Most recently, for example, Innovative Food acquired Haley Group, an advisory firm that helps food producers with manufacturing and product placement. “We're always on the lookout for acquisitions that make sense,” says Klepfish.
To accommodate future growth, Innovative Food acquired a 10,000-square-foot building in Bonita Springs. The company paid $770,000, which was below the building's $2 million estimated replacement value, Klepfish says. What's more, the company financed the new building with a loan from Fifth Third Bank.
And the company arranged for a reverse-split of its stock last year (symbol: IVFH), which increased the price of its stock. Klepfish declines to say whether it might use its stock as a currency for future acquisitions. “It could only be a good thing for the stock to be higher,” he says with a smile.
Hatching the next idea
The technology industry has its business incubators and accelerators, so why not the food industry?
Naples-based Innovative Food Holdings provides 7,300 gourmet-food items to chefs all over the country, and many of them are made by budding entrepreneurs looking for help to market their products. Over the years, Sam Klepfish and Justin Wiernasz, the CEO and president of Innovative Food, respectively, have successfully advised and nurtured some of these entrepreneurs.
“The entrepreneurial spirit is always alive in food service,” says Wiernasz. “People have great ideas, but they don't know how to take it from the kitchen to manufacturing. There's a huge need for guidance in that realm.”
So Klepfish and Wiernasz recently co-founded Food Hatch, which will invest between $18,000 and $35,000 in a food business in exchange for an equity stake of up to 8%. Food Hatch hasn't invested in any companies yet, but the duo say they've had a lot of interest, especially via their website.
The company initially plans to invest in no more than five early-stage or startup food companies. Food Hatch has arranged for a group of experienced food-business executives to advise budding entrepreneurs. “We have a model of performance doing just that,” Wiernasz says.
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