“In the 50 years that I have been involved in foodservice distribution, I have never experienced such a challenging atmosphere for our industry, which also includes our customers and vendors,” said Stephen Horowitz.

The closest period I can remember is when we had price controls, which caused great problems.

Restaurants are facing far higher costs of product, ever increasing labor and other operating costs, and lower revenues. With fewer customers, restaurants are reluctant to adequately pass along their cost increases.

In this business climate, you are going to see the following categories of responses:

• Many will do nothing, and hope for the best.
• Some will either sell, merge or buy a competitor with the hope that the business combination will make them better able to cope with these challenging conditions.
• There will be more strategic alliances where two companies will combine or work together in certain parts of their operations with the idea of reducing costs, increasing revenues, or both of the above.
• Some will attempt to get more market share from their competitors.
• Some will try to dramatically lower operating costs as a way to get through tough times. Companies need to be careful about cutting so deep that they can’t sell or service their accounts as before the operating reductions.

While all of the five approaches have merit, I believe in a more aggressive sales effort, and I look at this difficult period as a great opportunity. Some distributors tell me it costs approximately $100 per delivery. If you only deliver a $500 order, that is a +20% cost just for the delivery. If the order is $3,000, it might cost $140, or less than 5%.

Hopefully, both you and the customer can share in the savings. If there is ever a time the customer should be open to consolidation, to cut costs, it should be now. Of course, with consolidation, your customer will place fewer orders, process fewer deliveries, and have more time to build his business. This is the time to tell this story to customers who have multiple vendors.

Look for more acquisition activity. My own company is presently involved with 10 transactions.

No doubt, the times are challenging, but if you attack the market aggressively, you will be far better positioned when business conditions improve.

- Steve Horowitz is principal of Stephen Horowitz & Associates of Beverly Hills, CA, and a member of the ID Editorial Advisory Board.

By Stephen Horowitz