Break The Rules to Win in Food Service Distribution

Over the last ten years, sales in the American foodservice industry have roughly doubled. The same period has seen significant consolidation among upstream food processors and mid-stream wholesalers. As a result, the largest players have generated top-line revenues outpacing U.S. economic growth. Yet competition and commoditization are rampant. For most players, profitability dismal. What kind of moves will help aggressive incumbents break free from the pack – and from a legacy of conventional, uninspired industrywide strategies?

Our answer: Disrupt the industry’s traditional pattern of distribution to hit a powerful home run.

When it comes to distribution, most vendors concentrate on surface-level improvements, shying away from the deeper problems. That foundational weakness shackles them. Consequently, they aren’t set to take a full swing at what is arguably their biggest market opportunity: small and mid-sized food service enterprises. SMEs, as these operators are known for short, represent a huge segment of suppliers’ market. And it is a virtual greenfield of demand.
It’s true that SMEs are being serviced now. However, aside from some notable exceptions, these service levels remain distressingly low. Granted, SMEs are an operational nightmare to serve, hundreds of thousands of unconsolidated accounts tucked into every conceivable nook and cranny of America. Simply converging with other players gains a company little or no field advantage, and costs much in the process. A hard-dollar business rationale no longer justifies underservice. With competition overheating in the national-accounts space, vendors have to look elsewhere to relieve pressure on their margins. They have to deliver. They have to hit the optimal SME go-to-market model, exactly.

There is a right way to develop that new model. It starts with understanding – first, small operator customers, then go-to-market channels, and finally strategic alternatives – and then on this basis resolves tough SME market issues:

• How to set aside the large-account sales mindset


• How to scale and augment capabilities to reach thousands of small outlets


• How to differentiate within a sea of commoditizing distribution channels


• How to gain share in the rough-and-tumble small operator market


• What mix of go-to-market channels to use (What’s hot and what’s over?)


• Whether to invest massively and integrate into distribution activities


• How to ensure exciting customer experiences (How does online fit?)

Planned disruption to the go-to-market landscape can widen margins, drive up market share, and eliminate competition. The supplier or wholesaler willing to work with key distribution partners and present a unified—and dramatically improved—value delivery system to SMEs can make convert this ‘alternative market’ into a ‘core growth market.’