Trends in Wholesale Food Distribution
First, we need to consider that wholesale Food Distribution has two branches:
- One buying in large quantities and selling to big retailers and more local food wholesalers.
- And a second one distributing to collective and independent restaurants, called Wholesale Food, that I will discuss today.
Wholesale food is still a scattered market, and in most countries, you can be considered as significant, with a 5% market share in a local market where a distributor is strong in one area only, and very few of them are international.
A Growing Market:
- With a population to be multiplied by two in 50 years, this market is naturally growing at
2.5% per year
- Wholesale Food distribution is also naturally increasing as chefs value their time and want to minimize the number of trucks delivering to them daily, which is a value-added service that wholesale distributors can provide.
A Growing Catalog
To provide an even better service with a larger assortment, the Wholesale Food market is consolidating horizontally and we have recently seen several offer a wider assortment of products and/or shared services in larger areas.
Even with very specific product delivery requirements to meet the needs of diverse menus, chefs do not hesitate to ask their preferred wholesaler to insert inside the catalog, especially for them, the premier products that they like. For example, a specific cheese, like Mozzarella from a remote Italian region.
Market Places, Not Yet a Threat But …
The future threat in wholesale distribution is market places like Amazon Business, with an operation that already offers over 100 million business-to-business (B2B) products including food, as specific as Sirloin Steak. Even though Amazon’s margin in this market is very thin, the saying “your margin is my opportunity,” makes it a favorable margin for Amazon to capitalized upon.
Even if the Amazon Business threat is more targeted toward high tech and industrial distribution, the food segment is still at risk for traditional wholesale distributors, who can respond in several ways.
First, they now really launch an e-Commerce strategy. Food wholesalers have been laggards in leveraging this channel due to their very active outbound call centers. Additionally their customers have preferred to submit direct orders through in-person sales representatives, which allows them the flexibility to change orders quickly and throughout the day.
At the same time, Wholesale Food Distributors are known for the customer intimacy between their customers and sales representatives. This allows them to be trusted advisors in menu consultations and new product introductions.
Wholesale Food Distribution is also improving their track and trace capabilities, down to the source and area of production. It is not only a question of knowing the place where a product was contaminated, but being able to source the area of production.
Another value-added service area of differentiation as pure food player is to equip the trucks with T° Internet of Things (IoT) temperature controls to prove the maintenance of the cold chain and avoid any contamination; a major quality innovation that can insure the loyalty of the restaurant chef.
Food Wholesalers look for guidance on products they should sell to their customer and those that do not sell. The time of interaction between a sales representative on the road and the chef is typically less than 30 minutes, for a call center, that time is even less. In that transaction time, trained sales representatives can leverage Big Data & Predictive Analytics to understand the products the chef is most likely to purchase.
Collecting loyalty card data, can be a huge effort for Food retailers and only provide partial results. Wholesale Food Distributors can access more compressive data from their database from years of collecting sales data and invoices. Food Wholesalers are now thinking about how they can resell that data to their suppliers as well.
And finally, and to protect against future competition; there is a trend of vertical integration where we see some wholesale Food Distributors acquiring their suppliers, providing them with product exclusives and a stronger position in the value chain.
With population growing, and consuming an average of 2300Kcal to 2900 Kcal per day, Wholesale food distribution will continue to thrive. But even inside this natural growing market, Distributors are under pressure. We can see both horizontal and vertical consolidation, increasing the pressure to innovate and differentiate against new competition, serve more demanding customers and decrease that time to serve them.