Top distributors may face slowing demand from independent restaurants
According to a study by Technomic, Inc., a Chicago-based foodservice consultancy, Amazon was recognized as a leading source for online purchases from foodservice operators. The 2018 E-Sourcing Impact Study indicates that over 40 percent of foodservice operators indicated using e-sourcing at least once per month. E-sourcing will not become the primary source of purchases for operators, unless e-sourcing (3ES) can compete beyond price and offer some of the same conveniences and services that distributors provide. Foodservice distributors have been evolving in their use of technology, providing online ordering platforms and apps that mirror Amazon’s interface, notes Technomic.
Another finding: While operators may not make a final purchase using e-sourcing, they are using the price data to negotiate better pricing and deals. This report comes on the heels of third quarter 2018 financial results for distributors that provide a glimpse into headwinds. According to consultancy Pentallect, the top broadline foodservice distributors posted sales growth of 2.9 percent during Q3 and operating profit was down 0.3 percent. This composite comprises Sysco, US Foods and Performance Food Group.
Foodservice distributors have been keen on independent restaurant business and that was evidenced in independent case volume growing 4.4 percent, compared to total case volume growth of only 2.8 percent during the quarter. But now, it appears that the independent restaurant market may be slowing down, says Pentallect, creating additional concerns for distributors beyond fuel and labor costs. Labor shortages will continue to impact foodservice distributors, in addition to their restaurant operator customers—a situation in which their customers are further scrutinizing cost of goods sold while distributors have their own pressures on margins.
This environment creates an opportunity for an e-source behemoth, like Amazon. “Our research suggests that street restaurant operators are bullish on the future of third-party e-sourcing,” said Joe Pawlak, Technomic managing principal. “Today, operators are most inclined to purchase products in the non-foods and shelf-stable space but are reluctant to source frozen and perishables from 3ES. However, they can envision a giant like Amazon developing a solution to make operators comfortable purchasing these products online.”
Photo credit: fancycrave (Unsplash)
About the publisher.