SECTION 4 Understanding the Foodservice Distributor

Transcription

1 SECTION 4 Understanding the Foodservice Distributor 1

2 Understanding the Foodservice Distributor Distributors Are a Key Link in the Foodservice Supply Chain In the grocery retail channel, distributors are only a factor when it comes to smaller grocery chains and independents. For the most part the grocery retail business is consolidated under five companies. Each company has a variety of brands. These companies have their own internal distribution systems and, therefore, distributors are not an allencompassing link in the grocery retail supply chain. Conversely, in the foodservice industry, the distributor is a key link in the supply chain. Distributors are vital to all but a few large foodservice chains which have sufficient scale to operate their own distribution systems. Evolution of the Foodservice Distributor s Role The role of the foodservice distributor has been evolving over the years. Traditionally, distributors were in the business of logistics procuring and warehousing goods, taking orders and shipping to restaurant customers. Distributor sales representatives were focused on gaining new restaurant customers and ensuring service was meeting the restaurants needs. The role of selling products was left largely to the sales representatives of food processors. Several factors have contributed growing control of the customers by the foodservice distributors: Food processors have had to reduce the size of their sales forces to reduce costs. Some are relying more on brokers to represent their lines; others are relying on the distributors sales forces. The foodservice distribution sector has consolidated to the point where there are just two large national broadline distributors (Sysco and Gordon Food Service ( GFS )) in Canada. While there are some regional broadline distributors in Central Canada, with the exception of some smaller independent distributors, in the east and west, the two large players dominate. As a result, competition is fierce. Distributors have evolved their services to differentiate themselves and build customer loyalty. Distributor margins have become thinner. Distributors have sought out ways to be more efficient and add value and, in doing so, grow margins. In recent years, distributors have evolved their services, with a view to taking a larger role in managing the customer and assisting in improving margins. To do this, the major national and regional distributors have: Improved internal systems to streamline logistics: - On-line ordering. The exposure of products of food growers and processors may be limited to a brief 2

3 on-line description on the order guide, making it harder to differentiate such products from those of their competitors. - Bar coding of cases and pallets. Food suppliers are, in many cases, required to adhere to such bar coding practices. - Just-in-time deliveries by food growers and processors. Food growers and processors must be aware that warehouse delivery time slots are often highly controlled. On-time delivery is as important as fill rate. Development of suites of value added services such as: - Corporate chefs who can provide foodservice operators with assistance on menu planning, recipe development and kitchen operations. - Recipe costing systems. - Nutritional data systems. - Distributor food shows in each region of the country. Some distributors require and charge food suppliers for participation in such shows as a condition of having listings. - Monthly promotions in which food suppliers may be asked to participate. Types of Distributors There are various types of foodservice distributors: Development of distributor private label lines in many categories. While this strategy is not adopted by all distributors, it is significant enough that food manufacturers must be aware that they can be competing against the distributor s own products. Distributor private label products are generally more profitable for the distributor and distributor sales representatives are often paid higher incentives to sell the distributor private label products. Broadline distributors distributors that carry a broad range of products in all categories. This not only includes food but paper supplies, sanitation supplies, equipment and smallwares as well. Examples include Sysco, GFS, Flanagan Food Service and Summit Food Service Distributors. 3

4 Closed distributors distributors that are dedicated to one or a few foodservice operator companies brands and not to the open foodservice market. For example, Martin-Brower Canada services all McDonald s Restaurants in Canada. Specialty distributors distributors that focus on a limited range of product categories. Examples include meat, produce or dairy distributors. Direct store delivery distribution by food growers or processors of their specific product lines direct to restaurants. While this practice has declined over the years, direct store delivery is still provided in some cases by dairies, specialty meat purveyors and others. Cash and carry outlets distribution through warehouses which foodservice operators visit and pick up their supplies. Broadline distributors have pick up services for local customers. Other outlets include Costco and Sam s Club. Cash and carry outlets typically appeal to smaller independent restaurants. Farmers markets and direct from the farm in some cases, fine dining restaurants may chose to shop for ingredients on a daily basis from farmers markets or direct from growers. This is a very limited market. Restaurant customers tend to be very discerning about the products they buy. Key Players in the Foodservice Distributor Sector National Distributors Key national players in the foodservice distribution sector are shown in this table. Key national players in the foodservice distribution sector are shown in this table. Distributor Head Office Branch Locations Website Sysco Canada 21 Four Seasons Place Suite 400 Toronto, ON M9B 6J8 (416) Vancouver, BC Victoria, BC Kelowna, BC Edmonton, AB Calgary, AB Regina, SK Winnipeg, MB Thunder Bay, ON Milton, ON Mississauga, ON Toronto, ON Peterborough, ON Kingston, ON Montreal, QC Moncton, NB Dieppe, NB Halifax, NS St. John s, NL Gordon Food Service 1300 Gezon Parkway SW Grand Rapids, MI Delta, BC Edmonton, AB Calgary, AB Winnipeg, MB Milton, ON Montreal, QC Quebec City, QC Amherst, NS 4

5 Regional Distributors Selected regional players in the foodservice distribution sector are shown in this table. Selected regional players in the foodservice distribution sector are shown in this table. Distributor Head Office Branch Locations Website Eastern Meat Purveyors 4 Dominion Crescent Lakeside, NS Lakeside, NS B3T 1M1 (902) Rolly s Wholesale 10 Macnaughton Moncton, NB n/a Avenue Moncton, NB E1H 3L9 (506) Dubord & Rainville 4045, boul. Poirier Saint- Laurent, QC H4R 2G9 (514) Saint- Laurent, QC Bertrand, a division of Colabor Group Inc. Bruno and Nick Inc. Delicana Nord- Ouest Summit Food Service, a division of Collabor Group Inc. Flanagan Food Service Reliable Food Supplies Stewart Foodservice Inc. Tannis Food Distributors Golden Fleece Distributors and Wholesalers Pratt s Foodservice Medicine Hat Wholesale Foods Copperside Foods 820, Alphonse- Desrochers St- Nicolas, QC G7A 5H9 (418) Marconi Street Montreal, QC H2S 3J7 (514) Av Chausse Rouyn- Noranda, QC J9X 4B9 (819) Industrial Road London ON N5V 1V1 (800) Sasaga Drive Kitchener, Ontario N2C 2G7 (519) Rexwood Road Mississauga, ON L4V 1L8 (905) Saunders Road Barrie, ON L4M 5E1 (705) Stevenage Drive Ottawa, ON K1G 3W3 16 Baker Road Brampton, On L6T 4E3 (905) Hutchings Street, Winnipeg, MB R2X 2V4 (204) Industrial Road SE, Medicine Hat, AB T1A 3L8 (403) Kalum Street Terrace, BC V8G 2N7 (250) Quebec, QC Chicoutimi, QC Montreal, QC Rouyn- Noranda, QC London, ON Toronto, ON Ottawa, ON Kitchener, ON Owen Sound, ON Sudbury, ON Mississauga, ON Barrie, ON Ottawa, ON Brampton, ON Regina, SK Dauphin, MB Winnipeg, MB Medicine Hat, AB Terrace, BC n/a Note: This table is not intended to be inclusive of all regional distributors. We have identified some of the distributors in each region. For more distributors, see the website references in the table in Section Distributor Affiliations n/a n/a 5

6 Distributor Affiliations In Canada, there are two major distributor affiliations which represent many independent distributors. These organizations use their buying power to source products for smaller regional and independent distributors. Affiliation Head Office Members Website Colabor Group Inc. (1) 1620, De Montarville Blvd Boucherville, QC J4B 8P4 (450) Check Distributors tab on website ITWAL Limited (2) 440 Railside Drive Brampton, Ontario L7A 1L1 (905) Check Members tab on website (1) Colabor does not have direct clients. It warehouses and supplies a variety of distributor partners. It also has ownership in a number o operating partners. Colabor is a member of ITWAL. (2) ITWAL also distributes to retail drug store operators. Typical Operating Structure Broadline and closed distributors typically manage their business by category. Categories may include: Meat poultry, beef, pork, lamb, veal, etc. Dairy Cheese Eggs Bakery bread, cookies, pastries, proof and bake Vegetables fresh, frozen Potatoes fresh, frozen Fruit fresh, frozen Etc. Who Makes Purchasing Decisions? The chart on the following page demonstrates the structure of a typical foodservice distribution company. While the illustrated hierarchy exists, food growers and processors generally deal only with Purchasing. For efficiency, distributors want one voice to service suppliers. That one person is responsible for all aspects of service to suppliers throughout the distributor s organization. Purchasing has various category managers and category buyers. These people make decisions about what to list in consultation with sales managers and representatives. Suppliers are generally assigned to a buyer and manager according to the specific products they sell. Food growers and processors should identify the category manager(s) and buyer(s) who are responsible for their products and develop a strong working relationship with them. 6

7 What Drives Purchasing Decisions? Key information that your category managers and buyers need to make purchasing decisions include: Specifications on your product Targeted foodservice operator categories for the product prequalified operators interested in the product will help be achieved, product guarantee if the product does not sell, agreement to take the product back, etc.) Hold harmless agreement (i.e., agreement to indemnify the distributor for all claims regarding product deficiencies, food borne illness, etc.) How the product can be used by and help the foodservice operator Shelf life Nutritional data on your products Value added services you provide products support, point of sale merchandising materials, etc. Minimum requirements to obtain listings may include: Signed service agreement (e.g., products, payment terms, minimum fill rates to Best before dates where applicable For products that are government inspected (e.g., meat), federal inspection level (including HACCP certification) Performance is assessed by product movement and margin within each category. Food growers and processors need to be aware that their products will be continually assessed against competing brands. A major 7

8 category review is generally conducted annually by distributors. Food suppliers should determine when their category is planned for review and when they should organize an annual presentation to the distributor on their product performance, new features and plans for the coming year. Programs Distributors may seek program money from suppliers to support marketing and service to their restaurant customers. Program money requirements vary from category to category but, if they are requested, they are generally a few percentage points of selling price to the distributor. Programs may take the form of price discounts or rebates. Examples of programs include: Truckload allowances price discounts on volume Payment discounts price discounts for payment within a specified time period (e.g., 14 days) products or stock keeping units ( SKUs ) that they offer. While DPL products may appear to be a challenge to food suppliers, they may also be an opportunity. Production of DPL products for distributors will likely come with tighter margins for the processor; however, because of promotion of such products by distributors, they could represent significant volume. Operator Private Label Products Some foodservice chains require that their restaurants utilize some products that are prepared according to the chain s specifications and labeled as that chain s products. These are known as operator private label ( OPL ) products. Distributors are prepared to carry OPL products if there is sufficient product movement (sometimes referred to as velocity ). Food growers and processors that have identified a sales opportunity with a chain can rely on the chain to require the distributor to carry such products, provided the anticipated volume meets the distributor s requirements. For more information on the DPL and OPL opportunities, see the Canadian Foodservice Private Label Industry Guide at www. saskvaluechain.ca. Contributions to the distributor s cooperative marketing fund Distributor Private Label Products Distributor private label ( DPL ) products have been developed by a number of the large broadline distributors in order to improve their margins and reduce the number of brands of 8

9 For additional information pertaining to the Foodservice Guide, please contact: Bryan Kosteroski Value Chain Specialist Agriculture Council of Saskatchewan Downey Road Saskatoon Saskatchewan Canada S7N 4L8 Office (306) Cellular (306) Website The Agriculture Council of Saskatchewan (ACS) Inc. has developed this electronic guide for the Canadian Foodservice Industry as part of its continuing efforts to support the agriculture and agri-food industry and develop the capacity and tools for food growers and processors to enter the Foodservice Industry. The purpose of the guide is to provide food growers and processors with a better understanding of the Foodservice Industry and how to tap into business opportunities within it. To that end, ACS has engaged fsstrategy Inc., consultants to the Foodservice Industry, to help create this powerful reference tool. fsstrategy is an alliance of senior consultants focusing on business strategy support research, analysis, design and implementation for the Foodservice Industry. Their team has extensive consulting experience in Foodservice across Canada. Acknowledgements Geoff Wilson, B.Comm., CFE, CMC, ISHC - President fsstrategy Inc. Andrew Waddington, BPS, M.B.A., ISHC - Vice President fsstrategy Inc. DISCLAIMER WHILE EVERY EFFORT HAS BEEN MADE TO ENSURE ACCURACY, NONE OF THE SPONSORING AGENCIES OR AUTHORS ACCEPTS RESPONSIBILITY FOR ERRORS OR OMISSIONS. THE PUBLISHER, EDITORS, AND ALL CONTRIBUTORS TO THIS PUBLICATION CANNOT BE HELD RESPONSIBLE FOR PUBLICATION ERRORS OR ANY CONSEQUENCES RESULTING FROM THE USE OF THIS PUBLICATION. THIS PUBLICATION IS INTENDED AS A GUIDE ONLY. THE USER AGREES TO BE RESPONSIBLE FOR ITS OWN ACTIONS, AND INDEMNIFY HOLD HARMLESS, THE PUBLISHER, EDITORS, AND ALL OTHER CONTRIBUTORS TO THIS PUBLICATION FROM AND AGAINST ALL CLAIMS AND LOSSES OF ANY TYPE. ALL RIGHTS RESERVED. NO PART OF THIS PUBLICATION MAY BE REPRODUCED, STORED IN A RETRIEVAL SYSTEM, OR TRANSMITTED IN ANY FORM OR BY ANY MEANS, ELECTRONIC, MECHANICAL, PHOTOCOPYING, RECORDING OR OTHERWISE, WITHOUT WRITTEN PERMISSION FROM THE AUTHORS. COPYRIGHT 2013 Funding for this project has been provided by Agriculture and Agri-Food Canada through the Canadian Agricultural Adaptation Program (CAAP). In Saskatchewan, this program is delivered by the Agriculture Council of Saskatchewan.

10 10