Breaking news this morning revealed that U.S. leading food distributor Sysco has acquired one of its top rivals, US Foods. The acquisition comes in the form of a $3.5 billion cash-and-stock deal today – $3 billion in stock and $500 million in cash.
What does this mean for the restaurant landscape and operators? Anytime you have a centralized supply source, even though some people may argue it will reduce costs, it will be interesting to see whether the shift of the restaurant landscape in 2013 may prove that price is not the issue. Modern food caters toward transparency, customization, localization and sustainability. Our society has become more tuned in to the food scene because of its approachability and transparent knowledge of things like value, quality and ambiance (thanks to food-related shows, a heavier stress on branding, and social media).
If Sysco and US Foods are teaming up to leverage power and numbers, and to take down other competition, as usually is the case, we can't help but wonder: is their main competition now smaller companies in the form of local cash and carry services? As operators, chefs, and consumers become more locally aware, distributors like Smart Foodservice and Smart & Final may now get more of a spotlight, with similar companies popping up all throughout the nation. With a heavy light shed on mass producers through this acquisition, some chains may choose to go the way of smaller channels in order to align with new foodservice morals (if they're not already doing so), as well as have the ability to customize orders and not worry about minimum required spending.
This is especially true for independents and scalable small kingdoms, restaurant groups helmed by up-and-comers that specifically focus on local markets, but are open to branching out with similar flair. We predict these small kingdoms will become more progressive in numbers throughout the next couple of years, adding to this local, less is more mantra.
Customization, to no surprise, is a huge key factor for both consumers and operators alike these days. Just look at the rise of the fast casual segment within the U.S. restaurant industry – the now $60 million segment boasts itself on quick, fresh food with decent prices, and best of all, the ability to customize for each individual consumer.
So, who's the real winner here? Only time will tell, but as foodservice providers recalibrate their distribution needs, perhaps bigger is not always better.