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www.foodlogistics.com FOOD LOGISTICS • OCTOBER 2014 17 a large and growing share of the foodservice market, the market continues to create opportu- nities for niche distributors specializing in fresh produce, locally-sourced foods, ethnic foods and non-traditional foodservice formats such as col- lege bookstores. In the meantime, several regional and local foodservice distributors have reported winning business from Sysco and US Foods as the merg- er proceeds. A Sysco official told The Wall Street Journal in late September the company expects its market share to suffer slightly as competitors win customers during the merger process. The number of foodservice distributors in the U.S. has actually increased in recent years, according to Technomic, the Chicago-based foodservice research firm. Technomic reports that the number of foodservice distributors has grown in the last seven or eight years. Bob Goldin, vice president at Technomic, says there are more distributors carrying fresh, local and ethnic foods. He further notes that the number of independent restaurants has also increased in recent years following a contraction during the recession, along with multi-unit chains. Market changes challenge foodservice distributors One reason foodservice outlets are expanding is that convenience, grocery and mass merchant retailers are adding foodservice, notes Richard Tracy, executive vice president of Dot Foods Inc., the Mt. Sterling, Ill.-based redistributor which resells products in less-than-truckload (LTL) quantities to distributors nationwide. From the consumer's perspective, food can be purchased in more locations than ever, such as electronics stores, hardware stores and others, Tracy says. "We are seeing more and more retail- ers like this offer things such as salty snacks and candy near their checkout stands," he says. Foodservice broadliners should pay attention to this growth since they have the expertise and products to help non-traditional food retailers succeed, Tracy says. "There are so many opportu- nities (for consumers) to buy food," he observes. In Tracy's view, convenience stores are work- ing especially hard in foodservice and see it as an opportunity to increase their profit margins. Convenience stores are sometimes serviced by convenience wholesalers that carry a lot of foodservice products and have the necessary expertise, Tracy says. However, not all c-store wholesalers are set up to do this, which presents an opportunity for foodservice broadliners. To Tracy's point, the National Association of Convenience Stores recently held a webinar on how to optimize the foodservice supply chain. Speakers Joe Chiovera, principal of XS Foodservice and Marketing Solutions; Chris Chila, senior category marketing manager for Hess Corp.; and Tim Barry, corporate director of foodservice and fresh food for Core-Mark all emphasized the importance of commitment and communication when it comes to implementing a fresh food program. Distributors invest in technology As already noted, small and regional food- service distributors have claimed the pending Sysco/US Foods merger has created growth opportunities since some foodservice customers want to explore alternative distributor options. The opportunity has encouraged a number of distributors to invest in new technology that will improve their operations and help them serve customers better. In the long-term, Sysco, a leader in ware- house management and transportation man- agement technology, will "raise the bar" for all foodservice distributors as it consolidates US Foods' facilities, industry observers note. Britt Wood, vice president of industry pro- grams and services at The International Food- service Distributors Association (IDFA), says IFDA members are investing more in technol- ogy in order to improve efficiency. He says they are investing in software, transportation moni- toring technology and driver training. IFDA recently began providing its members a quarterly financial report to help with busi- ness management. The association has members Broadline Foodservice Distributors Drive Efficiencies; Alternative Distributors Find A Place T he broadline distributors emerged in the early 1970s offering the concept of a "one- stop-shop" distributor, according to The Hale Group. By 2010, they accounted for nearly 60 percent of all distributor sales to operators. The broadline distributor services multi-unit operators with a streamlined and tailored set of services valued by these large operators. As broadline distributors improve operating efficiencies, they will increase the minimum pur- chase size per delivery and that will cause small- er operators to be unable to meet this require- ment, The Hale Group notes. Also, operators will realize alternative distributors offer lower prices for products because the alternative distribution outlets have a different business model and part of this model is lower gross profit margins. Alternative distributors are most often "cash and carry-like" distributors or wholesalers, according to The Hale Group. This includes club format outlets, classic cash and carries and a newer breed of restaurant depots and similar formats. This format is evolving to be more attractive and more popular with the small operator not purchasing through a centralized purchasing organization. The growth achieved by this set of distributors is well above industry growth rates because opera- tors are increasingly recognizing the value provided by these distributors, The Hale Group notes. Specialty distributors provide value by offering a set of specific categories of products that they assemble or manufacture and then distribute to the operator. ◆