PUBLISHER'S VIEWPOINT
September 2002
Eyeing the Future of Distribution

I created a controversy back in 1987. I was invited to speak at the annual meeting of the Foodservice Equipment Distributors Association. I looked around the ballroom and prognosticated that a third of the companies in the room would no longer exist in 10 years. I based this wild assumption on a few simple realities: Multiunit operators were increasingly controlling foodservice (even then). There were too many dealers and rep groups and manufacturers for what I saw as a maturing market. I was wrong. And I was right.

I said the distribution channel would consolidate, that a few dealer-fabricator specialists would serve the big chains and strong regional houses, allied with buying groups, which would handle smaller multiunits and big independents. That there would be niche specialists and bid houses. And that there would always be folks working out of their garages, selling used equipment to small independents. This structural arrangement is the part I was right about, more or less.

I was wrong about the market maturing, or at least maturing the way I imagined. After the hiccup of the recession of 1990-91, foodservice ramped up growth again. And while chains continued to take increased share, a lot of the U.S. growth was driven by smaller casual-dining operators. This kept many middle-market dealers (and smaller manufacturers) in the game. Not that some didn’t sell out. The broadliners have been especially aggressive about consolidating. We also witnessed the “roll-up” consolidation of a number of those strong regional dealers. But according to Lebhar-Friedman’s <i>Directory of Foodservice Distributors<i>, the number of E&S distributors has remained at around 1,100 to 1,200 for the past 15 years. We may lose a few in this downturn, but who knows.

So overall, the channel doesn’t look that different than it did in ’87. And that has me wondering whether maybe distribution looks the way it does because it works this way. After all, domestic kitchen design and supply is highly fragmented. And as I and the market have gotten older, I realize that a lot of what happens comes down to the personal relationships. A chain buyer does business with a particular dealer because she knows she can count on him to do it or fix it. A consultant always prefers to award the contract to a certain bid house because they do the fab right and get the job in. And ultimately, this is what it’s all about.

Cheers,

Robin Ashton
Publisher