(Nov. 27) A major foodservice distributor is expanding its territory and diversifying its clientele from fast-food to upscale chain restaurants.

Food Services of America, Seattle, announced Nov. 25 it will buy Marriott International’s food distribution business. The purchase will allow Food Services of America to expand into California and other Western states. Terms of the deal were not announced.
Services Group of America, the privately held parent company of Food Services of America, said ownership of Marriott Distribution Services, its West Coast customers and customer service territories will move to McCabe’s Quality Foods Inc., Portland, Ore., its fast-food restaurant supply division.

The move will add more than $450 million in annual revenue to McCabe’s, which provides fresh-cut lettuce, onions and tomatoes to Burger King, Wendy’s, Arby’s and other fast-food companies in Washington, Oregon, western Idaho, Alaska, Mexico and a variety of Pacific Rim countries. McCabe’s will expand into California, Arizona and Idaho by running Marriott’s distribution operations in Los Alamitos, Calif.; Milpitas, Calif.; and Salem, Ore.

The deal, which will add Red Lobster, Olive Garden, Boston Market, Black Angus and other chains to its roster, will triple McCabe’s sales to nearly $650 million yearly. Services Group’s yearly revenue will increase to $2.2 billion, the company’s chairman Thomas Stewart said in news reports.

Services Group bought McCabe’s in 2001. Food Services of America serves customers in the northern tier of the U.S. from Minnesota and Iowa west to Oregon and Washington.

According to news reports, Marriott officials said the company had planned to exit its money-losing distribution business by closing some units and selling or transferring others. Though Marriott Distribution had more than a third of Marriott International’s $3.2 billion in sales, the distribution business lost $42 million during the first nine months of 2002, according to a Dow Jones Business News report.

Marriott’s food division, which supplied Marriott’s hotels and other customers, had $1 billion in sales, or 10% of Marriott’s $10 billion in yearly revenue, according to news reports.

On its Web site, Marriott says its distribution unit is one of the largest U.S. limited line distributors.

Neither Marriott nor McCabe’s officials returned telephone calls for comment.