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By Sean Adkins and George Bishop
Confronted by the economic slowdown and rising prices, foodservice distributors find themselves caught in the middle of the food system value chain—pressured by both suppliers and buyers.
Manufacturers increasingly are passing on higher commodity and product prices, while restaurant operators, responding to consumer demands, are adjusting their buying habits in favor of lower-priced food items. At the same time, foodservice distributors face increased competition from new and stronger distribution organizations.
In October, 2008, Chicago-based West Monroe Partners conducted an analysis of the foodservice distribution industry using publicly available research and information. The results spotlight the key trends affecting foodservice distributors’ operations today and the opportunities they have to cut costs, improve productivity, and increase competitiveness. In particular, foodservice distributors have a significant opportunity to counteract market pressures and improve operations by focusing on one of their largest expenditures—labor.
FOODSERVICE DISTRIBUTION INDUSTRY TODAY
Three primary types of organizations comprise the $225 billion foodservice distribution industry:
• Broadline foodservice distributors—companies that traditionally have purchased a wide range of food products from manufacturers. Most broadline distributors offer value-added services designed to meet the needs of single-store restaurants and small chains.
• Specialty distributors—companies that do not stock a wide range of products; instead, they operate in niche markets in which it is necessary to have specialized knowledge about the product(s) handled or the operator(s) served.
• System distributors—companies that serve a customer base consisting primarily of chain restaurants with centralized purchasing and menu development functions; thus, these customers typically don’t require specialized services.
The industry is relatively concentrated, with the top 20 organizations accounting for 34 percent of revenues in 2007.
