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6 FEDA News & Views Industry Insights There's Still Opportunities for Differentiation— Even in a Maturing Market Tim Schrack Vice President, Purchasing Hockenbergs Foodservice Equipment & Supply L ike many other vertical markets in the past few decades, our indus- try is experiencing a higher rate of consolidations due to a variety of factors. Many mainstream dealers (both national and local) are closely-held or family-owned businesses reaching into the second and possibly the third gen- eration at this point. The largest have grown by capitalizing on those family businesses that either feel the need to be part of a larger com- pany for competitive reasons or have decid- ed it's time to pursue other life opportuni- ties. The medium to smaller dealers are concerned, yet have survived because of their unique ability to quickly adapt to this rapidly changing mar- ket. We all would like everyone to share equally but the market is changing the distribution equation. Many of the larger dealers chase larg- er deals to support the infrastructure they have built. Most of them are well equipped to handle national chains whose owners and franchisees benefi t from their magnitude. But here's the Catch 22: Those larger dealers might benefi t from better deals with suppliers but the jobs they are chasing often over- shadow the margins. In other words, they need big volume but sacrifi ce mar- gin dollars to get it. The good news is that the industry has seen continued growth over the past number of years, and the new fast-casu- al concepts continue to show a bright future. The medium to small dealer exists today because they have found a niche or have demonstrated their ability to serve the local markets with world-class customer service. That service compo- nent is their value add to the customer that is looking for quality products, fair pricing, expertise and a quick response. For many customers, overnight just isn't fast enough so the small local dealer fi lls in where the bigger ones or the Internet providers can't. Restaurant owners know them by name and have trusted them with providing every- thing they've needed for many years. That relationship isn't eas- ily replaced by placing an order electronically. The buying groups of yesterday are chang- ing rapidly, too, trying to adjust to market forces. The phrase "all for one and one for all" just doesn't fi t given today's environment. Every buying group that still exists is morphing into something much differ- ent. New players have joined and old players have left. The group's equity partners might now compete in more territories than ever before, putting a potential strain on the members them- selves. However, the strongest buying groups are being led by industry players who have been through a few trials and tribulations in their business lives. Manufacturers might be the most concerned because they, too, have developed long and strong relation- ships with various dealers. That rela- tionship has been fi nancially bene- fi cial to both parties for many years. However, if one of their larger dealers is acquired by another dealer, what hap- pens to the relationship, the volume The good news is that the industry has seen continued growth over the past number of years, and the new fast-casual concepts continue to show a bright future. continued on page 39