( Photo courtesy Tim York )

In 1985, the year Markon was formed, you could flip through ID Magazine — the foodservice bible at the time — and read about foodservice distributors making their mark on the industry. Many were evolving to include kitchen equipment and supplies, and fresh produce into their product mix. But the foodservice marketplace today looks much different than it did in 1985, as waves of consolidation and acquisitions continue to hit the industry, providing both opportunity and new pressures on suppliers. 

Why all the change? Like many aspects of the agri-food chain, distributors are driven to control costs, increase efficiencies and meet growing marketplace demands, including the desire among operators for distributors that have a national footprint and can serve as a one-stop-shop for purchasing needs.

What was once forward thinking is now table stakes. In 1986, for example, Markon was recognized as Innovative Distributor of the Year for the novel concept of hands-on quality control, branding, direct purchasing, and representing the discrete needs of distributors and operators. Ice-free, pre-cut, staple-less, small-pack products were (and continue to be) priorities.

Look back at the Top 50 Distributors (by dollar sales) in 1985, and only six exist as stand-alone businesses today. Sysco hit sales of $1 billion in 1979, and bought dozens of businesses throughout the ’80s — reaching sales of just under $7 billion by 1990. Today it is a $60 billion industry powerhouse. 

Markon, a membership cooperative, continues to add new members, and lose some to acquisitions. Ritter Foods, Miller Cascade, American Fruit and Produce, all founding members of Markon, ceased to be members by 1993 when Sysco added Ritter. As Markon’s reputation grew, additional distributors joined. Today, Markon’s seven members serve operator customers throughout all 50 states and 10 Canadian provinces. 

Sysco attempted to acquire US Foodservice in 2013, a plan rejected by the Federal Trade Commission in 2015. Since that time, US Foods purchased Services Group of America, Sysco purchased J. Kings Food Service and Performance Food Group announced the acquisition of Reinhart Foodservice (a Markon member), among others. With these acquisitions, there will be three large public players — Sysco, US Foods and Performance Food Group. Markon members Gordon Food Service, Shamrock Foods, Maines Paper, and Ben E. Keith are privately held fast-growth mega-regional distributors.

Strategic growth enables these companies to create greater scale, drive down costs, and improve profitability. Today’s foodservice market is extremely competitive, with operators looking for ways to reduce costs, adding pressure on distributors. Higher wages have forced operators to reduce food costs, once benchmarked at 30%, and now closer to 25% of total spend. 

Savvy distributors are looking for ways to cut operational costs as well as product costs. Where does this leave suppliers? While it can be easy to focus on increased pressures in areas like pricing, sustainability, food safety and quality, consolidation can also mean opportunity. Those who build strong relationships with major players in the foodservice distributor space could be handsomely rewarded. 

Thus, it becomes critical to understand the needs and desires of distributors and, ultimately, their operators and consumers. Growers and shippers who work with foodservice distributors should have conversations with their buyers. Discuss what’s working, what’s not and — most importantly — how you can grow together as the marketplace continues to change.

Tim York is CEO of Salinas, Calif.-based Markon Cooperative.

Related content:
Keep walking the talk
Telling our story again and again
People still matter

Submitted by Doug on Mon, 09/23/2019 - 17:29

Maines is struggling to stay afloat!!!