Food delivery’s untapped opportunity

0
877

Investors may have already placed their orders in the consumer food delivery space, but there’s still a missing recipe for solving the more than $250 billion business-to-business food service distribution problem that’s begging for venture firms to put more cooks in the kitchen.

Stock prices for Sysco and US Foods, the two largest food distributors, are up by more than 20 percent since last summer, when Amazon bought Whole Foods. But, these companies haven’t made any material changes to their business model to counteract the threat of Amazon. I know a thing or two about the food services industry and the need for a B2B marketplace in an industry ripe with all of our favorite buzz words: fragmentation, last-mile logistics and a lack of pricing transparency.

The business-to-business food problem

Consumers have it good. Services such as Amazon and Instacart are pushing for our business and attention and thus making it great for the end users. By comparison, food and ingredient delivery for businesses is vastly underserved. The business of food service distribution hasn’t gotten nearly as much attention or capital as consumer delivery, and the industry is further behind when it comes to serving customers. Food-preparation facilities often face a number of difficulties getting the ingredients to cook the food we all enjoy.

Who are these food-preparation facilities? They range from your local restaurants, hotels, school and business cafeterias, catering companies, and many other facilities that supply to grocery markets, food trucks and so on. This market is gigantic. Ignoring all other facilities, just U.S. restaurants alone earn about $800 billion in annual sales. That’s based on research by the National Restaurant Association (the “other NRA”). Specific to food service distribution in the U.S., the estimated 2016 annual sales were a sizable $280 billion.

How it works today

Every one of these food-preparation facilities relies on a number of relationships with distributors (and sometimes, but rarely, directly from farms) to get their necessary ingredients. Some major national players, including Sysco and US Foods, mainly supply “dry goods.” For fresh meats, seafood and produce, plus other artisanal goods, these facilities rely on a large number of local wholesale distributors. A few examples of wholesalers and distributors near where I live in the San Francisco Bay Area are ABS Seafood, Golden Gate Meat Company, Green Leaf, Hodo Soy and VegiWorks.

[Read More]