Distributorsproactiveonmargins

Foodservice distributor executives report that business is okay and that they are working hard to widen the margins that have been shrinking over the past few years.

In fact, nine out of 10 foodservice distribution businesses had dollar sales that were the same or better than last year, according to executives who responded to ID's 32nd annual executive survey. There was a drop in the percentage of those reporting that sales and gross profits were up, however a larger percentage reported that these indicators remained the same. (Note: These responses represent broadline distributors or product specialists only. This year, no systems distributors responded to the survey. Two-thirds of the respondents were broadliners, one-third were specialists.)

Eight out of 10 reported that gross profits were the same or better. The percentage of respondents who reported that gross margin percentages had widened jumped from 24.7 percent in last year's survey to 40.2 percent this year. Fewer reported that margin percentages had narrowed. With four out of 10 reporting that gross margin percentages were better and another three that they were at least the same, this year's report suggests that, on average, executives are working hard on the bottom line and it's getting results.

This assumption was borne out in open-ended responses to the survey question asking what are the top challenges to face in the coming year. By far, the top challenge reported was a concern with margins. Rather than the traditional complaint that margins are shrinking, however, responses indicate a proactive approach to improving margins through cost controls, keeping good selling margins and withstanding margin pressure from competitors.



The second biggest challenge executives face is labor related. Between sales reps and drivers, turnover is a problem. Concerns ranged from "the ability to hire and hold effective sales staff" to training and motivation of all employees to "just getting enough qualified drivers."

The third top challenge reported focuses in on customers, with concerns balanced almost equally between the threat to independent operators by chain growth and growing demands for increased service. As one respondent put it, it is a challenge to "find some fun in this tough, demanding buyers' market."



While foodservice distributors are consolidating, the foodservice market is diversifying, creating the need for specialized marketing attention. Categories covered are: seafood (with 41 percent of respondents reporting they use specialists for this category); healthcare and chain accounts (each 40 percent); disposables (31 percent); schools and equipment and supplies (each 30 percent), with cleaning supplies mentioned separately (30 percent). Other categories mentioned were bakery, cash and carry, center-of-the-plate, contract feeders and frozen foods. Addressing the new home-meal solutions market, 10 percent of respondents reported using specialists for those sales.