June 01, 2013
To paraphrase some folk singer from Hibbing, Minn., the market, it is a-changing. One of the main reasons we started FERís Top Dealer Report three years ago was so we could track the dynamics of the equipment and supplies marketplace. An analysis of this yearís report, included in this issue, tells us a great deal about the changes that foodservice market evolution and technology are wreaking on the industry.
First, the market is consolidating. Big dealers, with size, scale and resources, are growing at the expense of middle-market and smaller dealers. The proof of this is in the numbers. The combined revenues of our Top Dealers, the 46 companies that verified their 2012 and 2011volumes this year, grew 11.4%. Revenue growth of 37 other dealers that reported but didnít verify or that we estimated was 5.8%. Both are significantly higher than our current estimate of total E&S market growth in í12 of 3.8%.
Reasons for the consolidation abound. Part of it is generational: Many dealerships are in their third or fourth generation and itís hard to keep going as ownership becomes more diluted. The outcome is usually a buyout of some kind, sometimes by big national companies, more often on a regional basis.
But a big part of it is the ever-growing dominance of multiunit operators and the need for regional and national reach to service these entities. And this isnít just a matter of chain-oriented dealers, who have benefited since the Great Foodservice Recession, as many chains have outsourced their E&S functions. Look closely at the list and youíll find a handful of bid houses dominate the market. Such entities went national even before more broad market distributors. It takes a lot of resources and wherewithal to float and service a $5 million project.
Second, online sales are growing rapidly. This is apparent in the rapid growth of a host of dealerships in the Top Dealer and estimated lists. But most dealerships of all sizes also are seeing more of their sales pass through electronic channels. Not that sales of E&S through the Internet is easy or cheap. It takes major investments in software and hardware and also creates some unexpected demands. Dealers who do well on the Internet tell us many sales involve phone time. Specíing equipment remains difficult for many operators and always will be. And as Amazon has found with its need to establish regional warehouses, logistics are always an issue.
Another key effect of the move to online sales is that such sales have no boundaries. Just as the growth of multiunit and chain operators broke up the territorial arrangements of distribution earlier, now anyone who can get their wares to come up on a search engine can compete nearly anywhere. And itís not only access that becomes national and international. So does pricing.
The Top Dealer list reminds us of two other realities of E&S distribution. It remains a dynamic, people-oriented business, with a fairly low cost-of-entry. Our Top Dealer list is full of companies that have emerged just within the last decade or two. Itís all about service. And it also remains a very diverse business: national dealers that serve chains, large regional dealerships with strong bases in major metro markets, cash-and-carry specialists and bid houses. And not least, folks who do it all, what we used to call ďfull-service dealers.Ē Because the foodservice market itself is so diverse, so are those who supply them. Distribution will always find its most efficient means.
We want to thank again all of you who participated in our Top Dealer Report this year. We wish both you and your customers another year of growth in 2013.