MATCHMAKING IN THE KITCHEN FIRM CONNECTS AGENCIES WITH FOOD FIRMS TO SAVE CASH.

Byline: Pam Park Staff Writer

Families may use online grocers for convenience, but to feed its thou- sands of hungry inmates and school children, government shops the Internet for bargains.

Prisons, schools and other govern- ment entities are increasingly using the Internet to find name-brand food at a discounted price, and LA Foods of Canoga Park is on the front line of this emerging business niche.

Through its spinoff, Direct2Govern- ment.com, LA Foods connects gov- ernment entities with food manufac- turers who want to unload excess inventory. The Web site serves city, state and local governments, school districts, hospitals and prisons around the United States.

``We basically use the Internet to provide the customer with the ability to buy direct from manufacturers - cutting out the normal distributors and thus creating double-digit cost savings for the customer,''said Da- vid Fox, president of Direct2Govern- ment and a partner in LA Foods.

``It's like creating a food mall for government buyers,'' he said.

For example, if a buyer needs sliced apples, he or she could log on to Direct2Government.com using a se- cure password; search by food type or manufacturer; click on sliced ap- ples; check the availability and price; type in a purchase order and a gov- ernment credit card number; and leave the rest to Direct2Government and the manufacturer.

Prices quoted on the site include freight direct from the manufacturer to the customer. There are no middle- man shipping or warehousing charg- es, and Direct2Government handles all the paper work. Manufacturers like this arrangement because they're willing to sell to the government on a no-frills basis at rock-bottom prices to dispose of excess inventory or discontinued items, Fox said. Each manufacturers' pricing remains con- fidential and its retail price list un- compromised because only member buyers can sign on to the Web site.

Government buyers like it because it saves money and staff time.

``I think anytime you can reduce function, it's good and will create savings - especially in staff time,'' said Dennis Watkins, regional food service administrator for the Federal Bureau of Prisons in North Central Kansas.

The site is secure and easy to use and although it is too early to be sure, it should save some money, Watkins said.

Since Direct2Government went on- line May 1, it has signed 400 govern- ment entities, including 90 percent of Bureau of Prisons and many of the nation's medium- to large-size school districts, including New York City, Fox said.

About 75 large manufacturers partic- ipate. Fox says he screens manufac- turers before he posts their products.

``We don't want a reputation as a junkyard. We want this to be an industrial tool for busy buyers,'' he said.

Direct2Government has 10 employ- ees and is a separate venture, but it draws on the resources and 10 years food service experience of LA Foods, Fox said.

Fox, who lives in Encino, Mark Da- vis of Malibu, and Max Gold of Tarzana are partners in LA Foods. Direct2Government includes the LA Foods partners, plus Chiquita Pro- cessed Foods, a distributor of pro- cessed and canned foods and fresh fruit and vegetables, and Agrilink Foods, a marketing cooperative of more than 800 growers who process fruits, vegetables and popcorn.

Fox had projected Direct2Govern- ment would break even in 18 months. At its current rate of growth, it may be profitable by the end of the year, Fox said.

Nothing in his history at LA Foods has come close to the customer base this new venture attracted in its first three months, he said. Eventually Fox wants to set up a similar site for health, beauty and cleaning supplies for institutions, he said.

``We're food guys. The Internet is just a way to deal with a lot more customers and manufacturers,'' Fox said.

Surplexnet.com of Newport Beach went online in February. Surplexnet auctions surplus goods by e-mailing potential buyers, but the company recently added a program for institu- tional buyers who want a catalog- shopping, direct-delivery approach.

Its first sale to the prison system was 1,500 cases of Jalapeno peppers.

``It was a hot sale,'' CEO Garnet Pigden said.

Surplexnet is entirely a virtual com- pany, but its five employees have a food service industry background, Pigden said.

Another potential competitor in this market is Good Source, a San Diego- based seller of surplus inventory and cosmetically damaged products for 17 years. Good Source plans to have what it calls an online catalog and order guide on the Internet in Sep- tember, but the site will be part of its internal customer service rather than a separate company.

Other companies are jockeying for a dominant position in this field as well.

New sites are showing up on the Internet daily, but most of them don't have food service background, Fox, Pigden and Betsy Harrison of Good Source agreed.

``They're technology people. We're food service people using technology to our advantage,'' Harrison said.

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David Fox and partners at LA Foods run Direct2Government.com that connects prisons and schools with food companies.

Gus Ruelas/Staff Photographer