“Speculation that South African-based conglomerate Bidvest has received approaches for its food distribution arm 3663 hails the beginning of what is likely to become further consolidation in the traditionally fragmented foodservice supply business,” says leading foodservice analyst Peter Backman, managing director of Horizons.
“Already the major players – Brakes and 3663 – have been acquiring foodservice distribution businesses throughout Europe in growth markets such as Sweden and Poland, as well as smaller-scale strategic acquisitions in the UK to fill in their geographic or sector gaps. There is also much potential growth in the sector in countries such as China and other countries in the Far East. The fact that margins are extremely tight in the food supply business means that profitability favours the large-scale operators who can operate on a high volume of sales. There is also much potential growth in the sector in countries such as China and other countries in the Far East.
“In 2009 3G, a significant frozen food distributor based in the north east was closed down, and a number of smaller distributors have also failed. The recession has forced the foodservice supply chain to become increasingly lean and competitive, and while margins are tight, cash flow makes the sector a promising one for investors who can pick off the distributors with strong management, efficient warehousing and logistics, economies of scale and the ability to reach a wide range of customers.
“The balance of the business is also changing. Sales through delivered wholesalers in 2010 accounted for 53.5% of the market but the fact the foodservice sector has been flat since 2008 has put pressure on all stages of the supply chain with a relentless search for lower prices and cost savings. As a result many smaller, independent customers have been switching their allegiance from delivered wholesalers to cash and carries so they can make smaller purchases. Foodservice sales through the two leading cash and carries have improved by at least 5% over the past year.
“However, it is in the supply of larger, national contracts that make food delivery businesses profitable with typical margins of around 3%. Contracts such as those to supply food to the likes of contract caterers Compass, Sodexo and Aramark, which operate big catering operations in the private and public sectors, are the deals that make or break supply companies.”
For further comment or to interview Peter Backman please contact: Linda Pettit at Tilburstow Media Partners on +44 17 3782 3721 or +44 79 7378 9853 or email Linda@tilburstowmedia.co.uk.
Website: horizonsforsuccess.com
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EDITOR’S NOTE
Horizons is an analyst and specialist information consultancy for the foodservice and hospitality sector. Its manager director, Peter Backman, is an expert on the structure and dynamics of the foodservice sector, and its supply chain, in the UK and internationally. Horizons helps its clients make better business decisions by providing accurate and detailed information about the foodservice market, its trends, and opportunities. The company provides consultancy services, workshops and statistical information based on its model of the sector and database of key accounts across Europe.
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