The big keep getting bigger, as industry consolidation continues!
This provides some of our initial thoughts regarding implications for the announced Sysco/US Foods merger. A more comprehensive assessment will be presented in a whitepaper in early 2014. The announced Sysco/US Foods merger has significant implications for IFMA members, and underscores the consolidation trend that the foodservice industry has experienced over the past decade as represented in The Hale Group's body of work associated with Foodservice 2020 and IFMA's Strategic Issues Series.
As the following chart identifies, the Top 10 broadline distributors have gained almost 20 share points in the past decade, and now account for over one-half of all foodservice distribution sales. Should the Sysco/US Foods merger receive regulatory approval, the new entity will have a 35% market share.
INITIAL THOUGHTS ON IMPLICATIONS FOR MANUFACTURERS
There are a number of implications for manufacturers, should the merger proceed as announced including:
Strategy of One™
- An organization of this size will require a Strategy of One™ that is similar in structure to how manufacturers approach their business with Walmart, and will entail:
- Dedicated cross-functional teams aligned with Sysco/US Foods counterparts
- Integrated systems and transparency of information and data flow
- Category captains within key product groups to help manage the categories and drive demand creation plans
- Aligned go-to-market teams focused against strategic customer segments
- Embracing innovation and new products under their brand, or on a first-to-market basis
Market Access Beyond Sysco/US Foods
For manufacturers with less developed Sysco/US Foods businesses, or those who wish to have a more balanced distribution model, the priority will be to build a strong national distribution plan that incorporates distributors beyond Sysco/US Foods to ensure broad customer access to your products and services. Key elements will include:
- Market Development Analysis: Analyze and assess your distribution footprint relative to the size of the total market opportunity to identify where you are well penetrated versus under-developed
- Quantify the Size of the Opportunity: Identify the incremental revenue opportunity by market to prioritize growth opportunities
- Distribution Plan Development: Identify and prioritize specific distributors within each priority market and develop plans to increase penetration with these distributors.
As part of the merger, Sysco/US Foods will conduct a thorough review of all trade and marketing programs across both organizations. For those manufacturers with imbalances between their current Sysco and US Foods programs, expect pressure to transition the programs to the higher spend level.
This dynamic will require manufacturers to have well-defined distribution and trade management plans and analytical capabilities to make informed, fact-based business decisions relative to trade investment that drive ROI.
As we have identified in Foodservice 2020 and in numerous discussions, the marketplace continues to consolidate across the supply chain. As noted earlier, this is an initial summary of our first thoughts regarding the announced Sysco/US Foods merger. We will prepare a more comprehensive whitepaper addressing the merger and implications for manufacturers. In the meantime, we would welcome the opportunity to discuss the merger and its implications with you. Have questions or believe there are other implications manufacturers should consider? Login to tell us what you think in the comment field.