Ways restaurateurs can select the right foodservice distributor: Op-Editorial
The food distribution game is changing rapidly and suppliers and distributors are preparing themselves for an ever-changing global market. As consumers look for better food and ingredients that are locally sourced, the future of the food market becomes a lot more malleable.
On one end, restaurants continue to find smaller, local supplier relationships attractive because they may access foods that may be grown or prepared locally. On the other end, broadline distributors, including U.S. Foods and Sysco, are investing more in solutions that reflect the most desired attributes of today—organic, natural and clean-label, to make sure restaurants have a breadth of menu selections that satisfy the needs of
Restaurant owners find themselves in a better bargaining position, but some of the biggest considerations in selecting the right distributor partnership have become more complex. Competitive pricing, reliability, distributor perks, convenience and industry know-how are reflective of some of the most important considerations to help decide which distributor is the right one.
A report by consultancy Pentallect found that independent restaurant growth is a big opportunity for distributors. Independent restaurants will outpace chain sales growth by nearly double (independents to grow +4 to +5 percent vs. chains’ +2 to +3 percent growth) over the next three years. Distributors are already focusing in on this opportunity and answering tough questions from analysts and investors on how they plan to capitalize on this. The threat of the likes of Amazon and Webstaurant Store, for example, is a way in which the future is changing and a top trend and game changer in foodservice logistics, according to foodservice consultancy Techonomic, Inc. and publisher Winsight. How will independent restaurant owners make their decision on how to pick distributors as national and regional supply chain players battle for their business?
One of the biggest pieces of the equation is definitely pricing. At what cost will product come into the restaurants and who has the better price on the goods and supplies a restaurant needs? Many restaurateurs have relied on moving from distributor to distributor, and supplier to supplier,to get better pricing and to take advantage of special rebates and incentives when they sign up as new customers. To bounce back and forth between distributors is a tricky strategy. Although these “new customer” incentives may be enticing,the longer-term relationship with the distributor could be jeopardized upon every change.
The converse can also be true. Restaurant owners can cling to a distribution that appears to offer the lower possible pricing. Some restaurant operators are so focused on price that a move to other distributors is considered almost impossible. In the D.C. area, bargain distributors have appeared and have started to gain market share, as in other markets. They have appeared and are winning over many customers due to the rock-bottom invoicing restaurant customers are seeing.
But what is true for consumers as grocery customers applies also to foodservice: No one player can possibly have the lowest price for every item every single week. Prices fluctuate based on supply and demand and also depend on the leverage a distributor has in negotiating with key suppliers and manufacturers. Warehouse distributors have also been able to provide attracting pricing due to lower distribution, storage and logistics costs, although a share of transportation and stocking costs are passed on to the restaurants in less transparent ways.
Price is also reflective of how a distributor makes investments. If margins are tight, what are ways distributors are using to save on their own costs? Are they investing less in technology, customer service, food storage imperatives or the condition of their own fleets? If low pricing isn’t derived from a distributor’s leverage, how is it being achieved and can it signal there is cost-cutting on the part of that distributor in other key areas?
For restaurants, a single, razor-like focus on pricing may not be a viable long-term strategy. What about the information that distributors can provide to restaurants regarding the forecast or outlook of changing prices, particularly for seasonal food products, which can have spiking prices? Being familiar with what future pricing might look like can be valuable to a restaurant company. Restaurants that can employ a more predictive approach on pricing can manage their menu better. This, combined with smart purchasing behavior in the restaurant can help some operations rise above others.
A recent example of this is chicken wings. The restaurants that were able to respond to spiking chicken wing prices because of the short supply situation and manage their menus better were most likely those who were better informed and had better partners in distribution. During a period of higher prices,these restaurants were able to eliminate certain specials on chicken wings and better manage portions and menu offerings to
Offset the higher cost of the wings.
Distributor perks and efficiencies
Another area that restaurants may want to look at is how a distributor will be able to help restaurant owners save time and create efficiencies. One way in which this is done is through perks and referral services. Some distributors are able to provide certain services to restaurants either free of charge or at lower cost. US Foods, for example, has a set of value-added services, ranging from menu costing software to sales tracking tools,
reservations, website design and more.
These partnerships are some of the examples that many of the large national and regional foodservice distributors offer to their customers. Website and marketing services are particularly helpful as we are seeing the restaurant landscape become increasingly more competitive and saturated. Marketing is an area in which restaurants can get skimpy. In fact, a TripAdvisor study indicated that half of restaurants spend less than 10 percent of their time on marketing activities, (Street Fight magazine). Only 17 percent of restaurant respondents indicated having a dedicated marketing staff and only one percent of respondents had hired an external marketing consultant.
To this end, distributors continue to add new programs and services. Distributors are also forming partnerships with a variety of vendors to enable a longer-term relationship with restaurant operators much in the same way that restaurant associations have been able to partner with vendors to provide their members with discounts and meaningful services. With more than 80 percent of restaurants telling TripAdvisor they could be doing more to market their businesses,these types of relationships that distributors are offering are very comprehensive and can lead to an overall increase in profitability and the creation of certain efficiencies.
In the D.C. area, FoodPro has its Core Advantage program. It offers certain benefits to members who pledge “allegiance,” according to its website. “FoodPro is proud to offer a distinctly different approach to fair and equitable pricing, as well as a consultative sales approach and additional marketing and business resources for our partners.” This is another example of how distributors can help restaurants expand access to services and programs at low cost and increase efficiencies in finding solutions for their customers’ businesses.
Reliability and consultation
The reliability of a distributor is often measured by how punctual food products are delivered and it is an essential part of the restaurant-distributor relationship and is one of the most important to those who manage a restaurant. Having reliable, on-time deliveries can help a restaurant stay efficient and manage food & labor costs. As I have continued to work with businesses in the foodservice industry, I have come to discover that this is an area in which restaurant owners and managers can be very vocal and one in which they put a lot of emphasis.
Consultation is an important feature that distributors are emphasizing, and from which restaurateurs can benefit. U.S. Foods and Sysco are making big investments in their websites, converting them into resource guides and knowledge-based tools. Additionally, U.S. Foods has recently been favoring and seeking sales teams and partners that offer a more consultative approach and have a more long-term customer relationship perspective.
Distributors can help guide restaurant owners to successful food management and menu management strategies. In the end, itis an important part of a strategy to build long-term business. Group purchasing organizations, or GPOs, are part of the changing distributor landscape and highly meaningful in the supply chain business. While certain facets of foodservice distribution are at maturation, GPOs and power buyers are starting to gain ground, according to a Pentallect Go-to Market 2025 report. GPOs are part of the future, and can offer more than just reduced pricing to customers (as a result of heir huge buying leverage)—they can also provide a consultative approach. Axis Purchasing is an example of a GPO that employs a comprehensive, consultative approach to help restaurant owners lower the overall cost of food products and supplies.
So, what’s the best strategy?
Restaurants that focus on a strategy that considers lowest food prices alone is not the right approach. Not that a distributor that provides low pricing will not have “perks” or loyalty benefits; but a sole emphasis on pricing may prevent restaurateurs from the discovery of significant set of resources, vendor referrals, and hands-on
assistance. And chasing the lowest price or the latest incentive every year can be disruptive to a restaurant’s operations.
In the age of digital revolution, many of the bargain-price distributors may also see market share slip in the future as new, larger players with business leverage enter the arena. Gen Y and Z—the new generations of restaurant owners— will respond favorably to a changing and disruptive distribution landscape. They are certainly more willing to adopt digitally-based solutions for their businesses, particularly as they offer not only
lower prices but some competitive advantages.
And the younger generations expectthe kind of price transparency that the digital disruptors will bring. The most appealing solution is the one that offers owners and managers the most support and best available financial, long-term incentives. Choosing a distributor for the overall relationship profitability, including resources, access to technology solutions and marketing services, is a smart play, and one that should be adopted by restaurant owners. Time and staff are quite limited in the world of restaurants and having a balance of competitive pricing and access to additional technology and marketing can go a long way in delivering to a restaurateur the most value.
Author credit: Rick Zambrano
Photo credit: Jonathan Pease