More Big Dealer Consolidation, And What It Might Mean For The Distribution Landscape

Two weeks ago, we wrote about dealer consolidation and growing internet sales of equipment and supplies, and how they might affect smaller dealers, buying groups, and the entire distribution landscape. If you missed it, it’s here. That column prompted several of you to write us with your thoughts, and we want to share some of that.

But in the meantime, the big dealer deals kept coming. We’ve now seen six major deals involving big and biggish dealers and distributors in the course of four weeks. Bargreen-Ellingson bought Denver-based The Restaurant Source. TriMark USA closed its second large deal in a month with the acquisition of ESOP-owned R.W Smith & Co. And late last week, Sysco Corp. exercised an option and acquired Instawares Holding Co., the internet E&S distributor that serves as the backbone for Sysco’s Supplies on the Fly. Two of these deals involved billion-dollar companies buying companies with sales north of $100 million.

As we said a couple weeks ago, this isn’t the big fish gobbling up the little fish. This is the large dealers continuing the nationalization of the distribution landscape. With its acquisitions of Adams-Burch in the mid-Atlantic and now R.W. Smith in Southern  California, TriMark filled in two huge regions of the country. The only part of the country it now doesn’t have much coverage is the Northwest, where Bargreen is the big kahuna. We use “kahuna” deliberately as Bargreen also dominates the dealer market in Hawaii. Meanwhile, Bargreen continues to expand east of the Rockies. Recall it bought Knapp Supply in Cheyenne, Wyo. a couple years ago. Boelter’s purchase of Premier in Minneapolis can also be seen in light of a more national footprint, as Premier’s contract sales and chain orientation is already national. And, of course, Instawares, as an internet player serving Sysco, is already national, too.

As we’ve said many time before, what in part drives this movement toward national dealers is the dominance of multiunit operators and the need to serve them nationally. The internet has made it possible to serve small operators nationally. And the bid business for the largest projects has long been dominated by a relative handful of specialists working nationally.

So does this mean smaller dealers are doomed? We don’t think so and that’s just what a number of you wrote to tell us in response to our last column. “Smaller dealers are continuing to find ways to stay alive, especially since the larger dealers leave plenty of holes in their territories as they focus more and more on chains and leave the rest for others,” wrote a well-informed friend, who asked to remain anonymous. “The internet has forced most to change the focus of services they offer and customers they serve,” he added. And he speculated that the consolidation of the buying groups serving mostly smaller dealers will continue to help such dealers compete.

The things to bear in mind as we watch these dramatic events unfold is that the dealer business is made up of many parts: product, product availability and product knowledge; price, yes, always; but perhaps most important, service and people. It remains to be seen whether national dealers can maintain the levels of service that brought them to the fore. And while multiunit operators dominate foodservice in America, the market is so big and diverse, there is always a customer whom no dealer is serving well. Finding those customers and making them yours is part of the game.

Cheers,

Robin Ashton

Publisher