Foodservice Distributors: If You Eat Out, You Know Us

Millions of meals are eaten away from home each day in America and foodservice distributors help make it possible — from your favorite local restaurant or a national chain location to a college campus or hospital.

by Caroline Perkins

If you enjoyed dinner in a restaurant last night, you contributed to the sales of the foodservice industry. If your child had a school lunch, a daughter or son had dinner at college, your grandmother had breakfast in a nursing home, your spouse had coffee at a company cafeteria, your cousin ate supper in a military mess hall, or your uncle—unfortunately—had lunch in prison, they were being served by some segment of the foodservice industry.

By definition, foodservice is the industry that serves food that is not prepared in the home. As one of the largest private sector employers in the U.S., restaurants and other operators represent more than $660 billion in estimated 2013 sales and employ nearly 13 million people (source National Restaurant Association). A complex supply chain helps make this industry possible, including a distribution network of independent companies that supply a broad range of products and services that help the food away from home industry flourish.

When U.S. consumers eat in one of the nation’s nearly one million foodservice locations, the food on the plate—and possibly the plate itself—has been brought there by a foodservice distributor. The menu in a restaurant may have been printed a restaurant's foodservice distributor and a consultant chef at a distributor may have helped shape the menu items.

Every day, foodservice distributors make sure that products are delivered safely to foodservice operators — from fresh fish, meats, and produce to dry goods and refrigerated and frozen products.

Modern foodservice distributor operations include multiple temperature zones to protect product during storage and selection. The above photo shows a dry goods area in a foodservice distributor warehouse. Product is normally received during the morning to early afternoon timeframe. Order selection then takes place in the afternoon and evening, trailers are loaded systematically by stop, and drivers depart for deliveries to customers as early as 3:00 a.m. The cycle then starts over, normally six days a week.

This largely behind the scenes industry includes more than 2,500 companies operating thousands of warehouses and massive transportation fleets. A typical broadline foodservice distributor may serve anywhere from 1,000 to 6,000 accounts from a single distribution center and offer their customers more than 10,000 items to meet specific operator needs. In 2012, estimated distributor annual sales in North America exceeded $200 billion.

The Evolution of a Specialized Industry
Founded by entrepreneurs who plied their trade from small stores and warehouses as far back as the mid-1800s, a pioneering spirit still exists in the third, fourth, and even fifth generation of family-owned businesses that make up a large portion of the foodservice distribution industry.

The evolution of the foodservice distribution industry is directly linked to the growth of the restaurant industry. Following World War II, a typical food distributor served any market need — from a small local grocery store to hotels. One of the growth drivers in foodservice was The National School Lunch Act, passed in 1946, which began providing a mass market for “institutional” products. Because of that, the distribution role within foodservice was at first known as “institutional distribution.”

Through the 1950s and 1960s, the industry continued to expand. Our trade group, the International Foodservice Distributors Association, was formed to address the needs within this growing supply channel.* Distributor purchasing groups were formed and non-food products such as equipment and supplies were added to distributors’ product lines. The fast-food industry was born and Americans were spending more and more of their food dollar away from home.

By 1955, as restaurants proliferated and consumers ate out more frequently, foodservice distribution began emerging as a separate business from retail grocery distribution. At that time, only 25 percent of an average family’s food dollar was spent on “food away from home.” Today, that share is 49 percent.

In 1970, ten independent distributors joined together to form Sysco Corporation to create a company with broad geographical scope. The new company instantly became the largest distributor in sales volume with sales of $415 million. Sysco, the only publicly traded foodservice distributor, remains the largest industry company to this day with $42 billion in 2012 sales. In a competitive landscape, all foodservice distributors had to raise the bar in meeting customer needs with increased efficiency.

As distribution grew through the 1980s, warehouse efficiency became a key element in competitive success. Operations and transportation today are supported by highly sophisticated technology. Examples include voice picking of products in the warehouse, computerized routing of transportation fleets, and monitoring systems for multi-temperature warehouses and tractor-trailers that assure safety and quality of foods.

Above right is a temperature controlled dock that adjoins refrigerated space that can include five to six temperature zones. These zones accommodate products from ice cream (-20 degrees Fahrenheit) to humidity and temperature controlled rooms for ripening bananas and tomatoes. Above left is a view down an aisle in freezer space, which is approximately a football field deep. Foodservice distributors operate multi-temp trailers to protect product integrity on the way to the customers.

In the 1990s, added focus came to other areas of the business, including sales and marketing. Along with being an important conduit for new product information, distributors created a number of value-added services for operator customers from menu planning and food-safety programs to trend and market information and business analysis. Foodservice Distributors have become, in many cases, a true partner to their customers in helping them profitably meet consumer needs.

The foodservice industry touches the lives of every consumer and foodservice distributors are critical partners in making “food away from home” possible. Whether you’re enjoying pasta with your family at a favorite “Mom & Pop” Italian restaurant, grabbing a quick lunch at a national chain, enjoying Black Angus beef during a business dinner at a premium steakhouse, or dining at a resort while on vacation, the enjoyable meal away from home was made possible, in part, by a foodservice distributor.

A Snapshot of Today’s Foodservice Distribution Industry
(source for distributor metrics: Technomic, Inc.)

Annual Distribution Industry Sales (U.S. 2012): $226 billion

Customer Segments Served:
• Limited service restaurants
• Full service restaurants
• Bars and taverns
• Retail hosts (supermarkets, c-stores)
• Travel and leisure (recreation, lodging, airlines)
• Business and industry
• Education
• Healthcare
• Other (military, corrections, vending)

* The “Institutional Food Distributors of America” began as part of the U.S. Wholesale Grocers Association. In 1969, that association merged with the National American Wholesale Grocers Association, and IFDA (renamed International Foodservice Distributors Association) retained its separate identity as well as a distinct Board of Directors. When a decision was made by the retail food distributor membership to merge with another retail focused association in 2002, IFDA’s Board of Directors made the decision to establish IFDA as a freestanding trade organization, which took place on January 1, 2003. The group is located in the Washington, D.C. region and provides research, education, industry forums, and government relations.