Food Distributors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 27,600 food distributors in the US consolidate products from multiple suppliers for delivery to retailers, foodservice providers, and other customers. Distributors may offer a wide variety of food products or specialize in one or more categories. Major categories include dry grocery, frozen and refrigerated foods, dairy, poultry, seafood, meat, fresh products, or baked goods.

Direct Selling And Buying

Major food manufacturers, looking to optimize their own supply chains, are selling directly to large retailers and eliminating food distributors’ role as the middleman.

Volatility In Manufacturers’ Prices

Food distributors act as a “middleman” between suppliers and retailers, leaving companies vulnerable to changes in manufacturers’ prices, which can change as much as 9% in a single year.

Industry size & Structure

A typical food distributor operates out of a single location, employs 27 workers, and generates about $24 million annually.

    • The food distribution industry consists of about 27,600 companies which generate over $675 billion annually and employ about 757,000 workers.
    • Most food distributors are small, independent operators; 78% have a single location, and 65% employ fewer than 10 workers.
    • Customer segments include retailers (grocery stores, convenience stores, drugstores), foodservice (restaurants, hotels, schools, hospitals), and military commissaries.
    • Large food distributors include SuperValu, Sysco, C&S Wholesale Grocers, Wakefern Food Corp., and Associated Wholesale Grocers.
                                    Industry Forecast
                                    Food Distributors Industry Growth

                                    Coronavirus Update

                                    Nov 11, 2021 - New COVID-19 Cases Increase
                                    • Food distributors face uncertain demand from the hospitality industry because the drop in the number of new COVID-19 cases has largely ceased. The daily average of new COVID-19 cases increased from about 73,000 infections for the 14-day period ending on October 31 to about 77,000 for the seven-day period ending on November 10 as outbreaks smolder, particularly in the northern half of the country. That's down 58% from the most recent high mark of 172,500 average daily cases on September 13, however. Case counts have fallen from the September 13 high in every region, most sharply in the South, where the delta wave hit hardest over the summer. Vaccination rates have also risen in recent months, albeit more slowly than when the shots were first rolled out. Nearly 58% Americans were fully vaccinated by the end of November, according to the Centers for Disease Control and Prevention. Many experts initially suggested that herd immunity would occur when 60-70% of the population gained immunity, that estimate rose to 85-90% after COVID's delta variant took over this summer. Some experts say that herd immunity isn't possible at all.
                                    • Large customers like Walmart and Sysco are fining food distributors for late or incomplete orders, according to The Wall Street Journal. Distributors say that labor shortages, supply constraints, and high freight costs are making it difficult to deliver complete, timely orders. Distributors' large customers had excused such penalties for months during the pandemic when surging demand led to widespread shortages.
                                    • Many analysts say that food distributors should prepare for an upcoming pandemic-related spending shift that is increasingly referred to as revenge shopping. Consumers will sweep through sectors as pent-up demand is unleashed, according to management consulting firm McKinsey. That has been the experience of all previous economic downturns. One difference, however, is that services have been particularly hard hit this time. The bounce back will therefore likely emphasize those businesses, particularly the ones that have a communal element, such as restaurants and entertainment venues. A significant portion of food sales may shift from grocery stores back to restaurants as a result.
                                    • Kroger, the largest supermarket chain in the US, said that it expects sales at stores open for at least one year (comparable sales) to decline by 3% to 5% year over year in 2021. Sales increased 14.1% year over year in 2020. Kroger cited the end of consumer stockpiling and the availability of coronavirus vaccines, which makes it possible for consumers to shift back to eating more meals at restaurants and outside of their homes, as a key cause of expected lower sales growth.
                                    • Other grocers have also forecast year-over-year sales decreases. Discount grocer Grocery Outlet said that comparable sales in the first quarter of 2021 are likely to decline into the high-single digits. Sales rose 12.7% last year. Sales at Sprouts Farmers Market increased 6.9% year over year in 2020, but the chain said that sales growth will decline to low-to-mid-single digits this year. Walmart projects comparable sales to grow by low single-digits in 2021 after 8.6% growth last year.
                                    • The Food and Drug Administration (FDA) has issued a blueprint that the agency said outlines the approach it will take over the next decade to improve food safety. Core sections of the New Era of Smarter Food Safety Blueprint address enhanced traceability, smarter tools and approaches for prevention and outbreak response, new business models, and a culture of food safety. The FDA says that enhanced traceability, coupled with advanced analytical tools, may help the FDA spot potential problems in advance and prevent or lessen the impact of recurring outbreaks of illnesses associated with the consumption of certain foods.
                                    • Wholesale grocery sales increased 1.8% in value month over month on an adjusted basis and 16.1% in value year over year on an unadjusted basis in July, according to the US Census Bureau. Year over year changes may be abnormal due to the large pandemic-related decrease in sales during April 2020.
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