A Major Shift in the Foodservice Distribution Hierarchy

Rob Levine

by Rob Levine

Partner / VP of Account Strategy

By now, we’ve all heard the huge news that broke on July 1. Performance Food Group is purchasing competitor Reinhart Foodservice for $2 billion. The new joint business will leapfrog US Foods to become the second-largest foodservice distributors by sales.

The irony is not lost on me that just the week before, I heard a foodservice distribution expert speak and hypothesize that we were at the end of major mergers and acquisitions in foodservice distribution. In fact, this expert offered the POV that Reyes Holdings, which owns Reinhart, generally buys companies, not sells them. Well, what a difference a week makes.

When the deal is official, PFG will have enhanced its footprint and purchased a relevant distribution brand that reflects the values of the Reinhart customer base. Full disclosure: Our agency helped develop the current Reinhart brand positioning, including the tagline, “Get it right from us.” In garnering insights for the positioning, we heard countless stories about the intimacy of the Reinhart-operator relationship and the company’s willingness to turn the world upside down to deliver for customers. As the company comes together, it begs a few questions for the manufacturer community:

  1. How will this merger impact assortment in the legacy Reinhart houses? Will the level of autonomy and local decision-making change? How soon will buying decisions roll immediately into the PFG model? This underscores how important it is for manufacturers to own the relationship at the operator level.
  2. What will happen to the already-delicate dynamic between private labels and brands? The Big 3 just added an additional $6–$10 billion in revenue, creating a massive opportunity for the new PFG to drive its own brand. And what will this mean for the future of IMA? Consolidations like this only serve to underscore the importance of manufacturers controlling their own destiny by creating demand for their brands.
  3. Will this create the e-commerce accelerant that foodservice so desperately needs? While 80% of operators we surveyed have made purchases for their operation online, the vast majority (62%) are using distributor ordering tools. Many of these tools are based on older platforms that lack the sophistication and seamless user interface of Amazon, which a little more than ⅓ of operators report using. Will the combined entity create a lane for e-commerce disruption in the handshake-driven foodservice business?

We have more questions than answers. And early predictions would be egregious. In investor calls, PFG is promising business as usual, but that’s to be expected at this early stage. Regardless of the path forward, history has proven that the best way for manufacturers to insulate themselves is by continuing to build in a strong brand based on a keen understanding of their evolving customer base.

For deeper conversation about how this could impact your brand specifically or to learn how Marriner’s Clarity CaptureSM process can add strength to your brand, contact VP of Strategic Partnerships David Melnick at 410.715.1500 or davidm@marriner.com.

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