Food Giants To Sell Groceries Via Webvan

Five high-profile food firms reportedly will announce today an alliance with online grocer to promote their products into virtual shopping carts.

Pillsbury Co., a unit of Britain’s Diageo PLC, Kellogg Co. (NYSE:K), Quaker Oats Co. (NYSE:OAT), General Mills Inc. (NYSE:GIS), and the U.S. unit of Nestle SA of Switzerland, are forming marketing alliances with Internet grocery store Webvan Group Inc., (Nasdaq:WBVN), according to a report in today’s Wall Street Journal.

The report stated that executives at Webvan and the partners feel that the pacts could open new channels for exchanging information helpful in gaining new online customers.

The report cites Pillsbury’s e-business director Chuck Tryon as saying, “We clearly see online-grocery shopping having explosive growth. We want to work with Webvan to understand how to relate to consumers that buy online.”

New Marketing Ideas

The partners are reportedly anxious to try out new marketing ideas specifically applicable to online shopping. The Journal said one such idea is to change the configuration of Web pages so young families can see different promotions than those displayed for single shoppers.

Another prospect is the delivery of free samples of new products to households known to be buyers of various products. Tryon told the newspaper, “An online retailer like Webvan can let us offer something to individual customers, without us even knowing who they are.”

He added that highly targeted marketing will have to be accomplished without being intrusive.

Nestle official Don Sokolnicki told the Journal that, “It’s a very delicate balance, regarding the whole issue of privacy. It has to be treated with a great deal of expertise.”

Webvan CEO George Shaheen told the Journal that his company does not intend to sell data on individual shopping habits and will not permit food companies to send e-mail directly to Webvan users.

No Opt-Out

The report added that Webvan doesn’t plan to give users an interactive option to sidestep the marketing pacts, as many e-commerce sites do. The company said users wanting out of the marketing scheme will have to write or e-mail them asking to be excluded.

Webvan officials reportedly declined to disclose the dollar amount that the partners will spend in the alliance, but the Journal said first-year outlays should be “in the multimillions of dollars (US$).” The paper added however, that the investments will mainly cover Website enhancements and consumer discounts, and will not directly impact Webvan’s overall revenue. The company has reportedly not yet shown a profit.

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