Last
year saw the publication of a landmark study, by McKinsey &
Company, Inc. USA. The study, "Foodservice 2010: America's
Appetite Matures", revealed many predictions and implications
for both foodservice and retail. The study analyzed demographic
shifts, attitude and values changes and how these factors will
impact eating habits over the next 10 years.
The study suggests that sales will grow in the food industry from
$699 billion in 2000 to $822 billion by 2010. Of this $123 billion
in incremental growth, retail will only capture $47 billion with
foodservice picking up the remaining $76 billion. Total food dollars
spent will shift to over 50% in foodservice for the first time
ever.
As the IDDBA gets underway in Minneapolis, the foodservice vs.
retail battleground goes on display. It appears that the battle
heats up along old lines from the distribution perspective. From
the foodservice side, the retail deli offers opportunity for growth.
Many foodservice distributors have created an offensive strategy
to gain market share. They are playing to win. Many retail distributors
still view the retail deli as their "turf" and are wagging
a defensive strategy, playing not to lose.
The lines are blurring between foodservice and retail. The acquisition
this past year of U.S. Foodservice by Royal Ahold signals a sea
change. The retail industry, having lost foodservice 50 years
ago, is taking the steps to get that volume back. I have heard
many complaints over the past few years from my foodservice manufacturer
contacts that, "Foodservice is becoming more and more like
retail." The reference is to the increased cost of doing
business such as slotting fees and advertising. Foodservice is
tired of being the redheaded stepchild and the retail side has
heard the term "shelf-dusters" quite enough.
Food distribution, be it foodservice or retail, is the business
of buying product, storing it at the proper temperature, merchandising
it through the customer base and then delivering it at the proper
temperature, billing it and following up. At the end of the day
it is business that creates value by bulk breaking and satisfying
the unique needs of customers.
Arguing over who "owns" a customer is counterproductive.
I would guess that if you asked the customer who "owned"
them, both the foodservice and the retail distributor wouldn't
like the answer. The truth is of course that neither one does.
Foodservice evolved away from retail because the nature of the
customer changed. Bigger cans and smaller drop sizes created inefficiencies
for the traditional food distributor. Our dual industries continue
to evolve. The truth is that both sides of the debate can and
should learn from each other.
It is ridiculous that bar coding is not standard operating procedure
in foodservice. Foodservice could also benefit from the discipline
that slotting allowances force on the manufacturer. Too many marginal
new products are developed and forced through foodservice systems.
The retail distributor could learn a few lessons from their foodservice
counterparts. Chief among them are nimbleness and a greater sense
of entrepreunership.
American consumption of cheese, in particular specialty cheeses,
is on the rise. The retail distributor is far superior in the
merchandising of cheese. In this category the traditional roles
are reversed. Foodservice becomes the truckload buyer and seller
while the retail distributor becomes the specialist. The retail
side has learned how to source, merchandise and deliver small
quantities of slow turning items. The foodservice distributor
has the opportunity to offer specialty cheeses to their customer.
Menus today are proliferating with appetizers, salads and entrees
built with specialty cheeses and yet most foodservice distributors
are stuck in the cheddar, mozzarella, jack and sliced American
mold. On the other side, the retail distributor, hasn't seen the
opportunity to market themselves to the white tablecloth and hotel
segment with this category of product?
This debate will go on for some years to come. Both sides taking
pot shots at each while ignoring the opportunity to service new
customers. The traditional lines are blurring. Customers are changing
and exploring new avenues and the consumer is looking for healthy,
fresh, safe and fast alternatives to satisfy their hunger in an
increasingly fast paced lifestyle. What is either distributor
doing to work with their customer to satisfy those needs?
Our customers need solutions to their customer's problems. This
needs assessment and needs satisfaction will not be served by
debates between foodservice and retail distributors. It is much
like the Middle East. An endless war between cousins who have
more in common then they want to admit. We are both food distributors
who must increasingly share a consolidating industry.
As you walk the aisles this week in Minneapolis, now would be
a good time to see the industry anew. See it as a food distributor
not as a foodservice guy or a retail guy. How can the offerings
of the manufacturers, systems and logistics benefit your customer,
whoever that customer is?
The implications of the McKinsey study are that our aging population
is changing its habits. Boomers will spend more time assembling
pre-prepared products into meals. Generation X, the young marrieds,
will be driven by convenience. They are building their careers
and their families and take out food purchases will solve their
problem. Gen Y, the youth, will continue to depend on QSR's and
takeout. Only the older matures will rely primarily on the traditional
grocery store.
This
demographic shift leaves opportunity for both the retail and the
foodservice distributor. The key is to "look around the corner"
and see where consumers are going for their food choices. Then,
assist your customer to get there to catch them.
My
prediction is that 50 years from now, the difference will be gone.
Foodservice and retail will have merged back into one. It will
happen slowly as most evolutions. The lessons learned by each
have value and offer opportunities for the other. In life there
are two times…now and too late. Don't wait for the opportunity
to pass you by.