Blog June 11, 2019

Preparing for the Future: What a Foodservice Distributor Should Do

By Charles Fallon
June 11, 2019| 4 min read


With foodservice distributors losing market share, what should an independent broadliner do?  Several factors specific to each distributor will shape their answer such as the market they serve (e.g., rural vs. urban) and customer mix (e.g., institutional vs. specialty restaurants).  Succession plans matter here too:

  • If the ownership plans to remain a viable, independent distributor a decade or more from now, then the company will need to adapt to the transforming foodservice industry
  • If the ownership wants to become an acquisition target, preparing for the future of foodservice can increase a company’s attractiveness as an acquisition target

Consciously or not, the last factor in determining what an independent broadline distributor will do is the Sysco/US Foods dichotomy: do you see the millennial disruption as a business risk or an opportunity?

All of the above might lead a foodservice distributor to do nothing, cross their fingers and hope for the best.  While new distribution channels are developing, they will not completely wipe out consumers’ desire for pizza and chicken tenders, fries and a soda.

However, should a company decide to take action and seize the opportunity, here are 6 approaches it should consider:

#1 – Seek Out New Kinds of Customers

The simplest adaption is to have your sales team expand the definition of target customers and become the supplier of choice to non-traditional foodservice clients.

Like Farmer’s Fridge, many food tech companies have central kitchens that support meal kit, ready-to-eat and heat-and-eat solutions delivered to customers in non-traditional ways.  These central kitchens need suppliers.

#2 – Review and Expand Product Offering

The expansion of SKU offerings will be both flavor and health driven:

  • Gluten-free, vegan, plant-based protein alternatives as well as organics will proliferate product catalogues across all temperature zones
  • While global ingredients have been traditionally confined to specialty distributors catering to specific “ethnic” restaurants, the mainstreaming of these ingredients means restaurants of all kinds will seek them out. (For example, Pizza Hut now sells a pizza with butter chicken.)

Product catalogues cannot expand infinitely without causing chaos in the warehouse.  The exercise of crafting the optimal assortment will include a de-listing exercise that responds equally to the new dietary preferences of consumers.

#3 – Transform “Special Orders” into an Online Marketplace

The bane of many DC managers, broadline distributors have always accommodated special orders through their supply chain.  However, the process can be cumbersome and often treated like a nuisance to be managed rather than an engine of customer engagement.

Foodservice distributors should create an online marketplace, a portal that allows their customers to do business with any supplier and execute purchase and delivery transactions through the distributor.  Rather than have their customers seek out specialty distributors or work through the “one-off” special order process, an online portal allows the distributor to remain the node connecting producers to their customers while giving their customers the freedom to seek out differentiating foodstuff for their businesses.

#4 – Develop a Hyper-Local Supplier Base

Restaurants know that the highest margin, most frequent diners seek out locally-sourced, ingredient-driven dining experiences.  In response and agreement, restaurants must build networks of local suppliers and work with them to keep a steady flow of product available.  Foodservice distributors can greatly simplify this task by creating a hyper-local supplier base and offering restaurants one-stop shop access to it.

There will be challenges to overcome:

  • Communication channels between the end customer and local suppliers, particularly for produce, to broadcast what’s abundant and what’s at its peak
  • Standardization of inbound goods into unitized units of sale (e.g., 25 lb cases)
  • Inbound logistics

#5 – Implement Direct-to-Customer Capabilities

Become the distributor who can provide your customers with D2C fulfillment services.  These services are in demand and there is no clear segment of the food supply chain that has established a solid footing here.  Foodservice distributors have an opportunity to be that segment.

It will be important to properly cost the services out but setting up a pilot project would be relatively easy to do.  Once a proof-of-concept is in hand, there would be technology, process and warehouse adjustments to make.

#6 – Field-to-Fork Food Transparency

The vast majority of foodservice distributors do not provide an adequate level of food transparency to meet consumer expectations.  Your foodservice customers will favor those suppliers who can provide accurate, detailed information on the source and condition of the food that makes it onto diners’ plates.

While many argue that technologies like blockchain will ultimately provide the complete, trustworthy transparency to address this issue, many foodservice distributors already have the basic technology infrastructure required to go much further towards reaching this goal than they currently do.

Reach out to the LIDD team to learn more about warehouse slotting and optimizing your warehouse operations.

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