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HomeGrocer crops up in Southern California

Setting itself up for a possible showdown with Webvan and other online grocers, the Seattle-based company says it has made its first move into California, expanding its service into Orange County.

Setting itself up for a possible showdown with Webvan and other online grocers, HomeGrocer announced today that it has made its first foray into California, expanding its service into Orange County.

Jon Landers, vice president of marketing for HomeGrocer, said the company began offering service in 37 zip codes in the Irvine area Thursday. The Seattle-based company will open up service to another 46 zip codes in northern Orange County and southern Los Angeles county next month, he said. The company originated its service last year in Seattle and expanded into Portland, Oregon, in May.

HomeGrocer's move comes as competitor Webvan rolls out its own ambitious expansion, with plans to enter the Atlanta market early next year. Webvan currently serves the San Francisco Bay Area. The company also has placed a $1 billion order with engineering firm Bechtel to build up to 26 automated warehouses around the country over the next three years.

But HomeGrocer is not deterred by these plans. Instead, the company is securing locations for distribution centers in the San Francisco Bay Area and plans to be in "all of the major metropolitan markets" nationwide by the end of next year, Landers said.

"We have very aggressive expansion plans now," Landers said.

Landers said HomeGrocer's move into Orange County was not influenced by Webvan's $1 billion expansion plans. The company chose Orange County because the market has a high percentage of online shoppers, high density, and, according to the company's research, many consumers who would be interested in home-delivered groceries, Landers said.

Last week, Foster City, California-based Webvan said in a regulatory filing that it planned to raise up to $374 million by selling some 28.75 million shares of stock for $11 to $13 per share. For the six months ended June 30, Webvan, which filed for its IPO last month, had lost $33.5 million on $395,000 in net sales. bought a 35-percent stake in HomeGrocer for $42.5 million in May. The two firms share an allegiance to venture capital firm Kleiner Perkins Caufield & Byers, which holds stock in Amazon and is backing HomeGrocer.

Unlike Webvan, Landers said Homegrocer had no immediate plans for a public offering.