Foodservice Equipment Reports

The Impact Of National Dealers And The Internet On E&S Distribution

We’ve just finished tallying and writing up our annual Top Dealer survey. Now that we’ve seen all the numbers, two trends are very clear. The biggest dealers, those in the Top 30 or so, continue to grow rapidly, often through acquisition of smaller dealers that fill in regions or niches for them. And many of these dealers have in essence become national. The combination of TriMark USA and Strategic Equipment last year is an obvious case in point, propelling TriMark toward $1 billion in annual sales and the clear position as the largest dealer in America.

But many other dealers are also growing through acquisitions. Other deals having a major impact on the Top Dealer lists this year include Chef’s Toys purchase of Star Restaurant Equipment, Wasserstrom picking up parts of PrimeSource Foodservice Equipment, and Kittredge Equipment buying Northeast Food Services. Late in 2013, The Sam Tell Cos. bought the assets of Paramount Restaurant Supply. The full impact of that deal won’t be apparent until next year. And since the beginning of the year, Bargreen Ellingson and Hockenbergs have picked up regional dealers located on the edge of their core territories.

But many of these larger dealers are also posting good organic growth as well. If I’m calculating correctly, TriMark and Strategic grew revenues 11% on top of the effect of the merger.

We’ve all been talking about the impact of online sales on E&S distribution. And it is profound. The growth of Clark Associates, Tundra, KaTom and Burkett, among others, is very apparent. The growth of Clark, which has seen its sales explode by more than 300% since 2009, is truly one of the most remarkable stories in the history of E&S distribution. It is now the fourth largest dealer in the country. And we’re not even counting everything happening on the Internet. The Pride Marketing-backed FoodServiceWarehouse.com, which redistributes for Pride members as well as selling directly, is doing an estimated $60 million a year. It bought Loubat Food Service Equipment in November.

These “national” distribution entities appear to be taking share from mid-tier and smaller regional dealers. Eleven of the 18 dealers ranked 35 through 52 in this year’s list of verifying dealers saw sales decline last year. As a group, the combined sales of those 18 were down 5.4%.

But I would argue that it’s the growth of the big national dealers as much as that of Internet sales that’s driving these dynamics. I’m going to guess that somewhere between $500 million and $1billion of E&S sales have migrated online. (We have the problem of defining an Internet sale, so forgive me the wide spread). Yet the volume of just our 52 Top dealers exceeds $5.1 billion. Add in the volume of the other 37 big dealers that report or that we estimate and we’re at $6.4 billion. There are a pile of non-Internet sales there, and a lot of it is controlled by 25 or 30 dealers.

And what’s driving this nationalization of E&S distribution? As we’ve been saying since we founded Foodservice Equipment Reports 18 years ago, “It’s a multiunit world.” The structural impact of that is unmistakable.

The full Top Dealer Report will be published in the June issue. We want to thank all who verified and reported their sales this year, especially those brave souls who reported volume declines. Your participation helps us all better understand what going on in this business.

Cheers,



Robin Ashton

Publisher

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