Foodservice operators are changing the way they procure their products. The phenomenon known as “distribution channel blur” is altering the way operators source their products, and it’s changing the industry’s distribution landscape. In this blog post, I will illustrate the challenges of this transition and explore data-driven solutions.
What is Channel Blur?
Distribution channel blur refers to the blending or overlapping of traditional procurement avenues. Traditionally, non-commercial operators primarily relied on broadline distributors. Now we’re witnessing a diversification in distribution sources. Operators are branching out to specialty distributors, convenience and vending distributors, and even warehouse clubs like Sam’s Club and Costco. For instance, while a hotel’s restaurant may be serviced by broadline giants like Sysco, its lobby market may not be.
Consider the following nuances in the Operator Procurement Processes:
- Tailoring Purchase Quantity: Manufacturers may offer larger case counts than required by smaller operators. While broadliners don’t break cases, Vistar, a significant vending distributor, does.
- Independent Restaurants: Small independent restaurants are turning to warehouse clubs for certain staples, choosing to drive down the street rather than order from a large distributor.
- Complex Institutions: Take large-scale operators, like universities. They might use a mix of channels. One university might buy from broadline, c-store, and vending distributors, or more.
The Broader Impact:
- Relative Growth: As the traditional boundaries blur, other distribution channels are seeing relative growth.
- Sales Performance Challenges: Historically, sales teams were segmented by channels. One focused on vending, another on foodservice, for example. However, as operators diversify their sourcing, tracking these specialized channels becomes more complex. For instance, if foodservice sales appear to decrease while vending sales increase, it poses performance management issues. Sales personnel could potentially be unfairly penalized, and this channel blur makes it challenging to discern genuine performance drops from mere channel shifts.
- Unintended Trade Spend: Trade rates can vary based on the chosen distribution channel. If an operator procures from an unanticipated distributor, suppliers might inadvertently offer a trade rate that wasn’t intended, impacting profitability.
Solutions to Navigate Channel Blur:
- Comprehensive Location-Level Analytics: Leveraging location-level data analytics tools with all of your distributor data loaded can provide comprehensive insights, ensuring that sales teams get a complete picture of performance. For instance, a sales rep can gain a clear picture of different distributors servicing more complex operators like colleges & universities. This visibility mitigates the risk of unfair penalizations for sales reps if volume shifts from one distribution channel to another.
- Monitor Changes in Distribution Channels: To ensure sales performance tracking is consistent and you are paying trade to operators as you intended, it’s critical that you monitor the channels being used by your key operators.
- Provide Widespread Access to Insights to Go-to-Market Teams: Providing a holistic view of an operator’s total purchases across distribution channels allows for data-driven customer management and more effective identification of sales risks and opportunities.
In conclusion, as the foodservice industry continues to evolve, adaptability and a keen understanding of the changing distribution landscape are vital. With the right tools, strategies, people, and data insights, businesses can capitalize on the challenges posed by channel blur, and get one step ahead in the marketplace.
Want to learn more about distribution channel blur and how to manage it? Schedule time with one of our experts.