Woolworths purchase of a 65% stake in PFD is the biggest shake up in Australian Foodservice Distribution in living memory.
Undoubtedly, a very significant development in our $20 billion Australian Foodservice wholesale market.
Undoubtedly, the most significant development this food distribution market has seen for many decades.
However, for whom and why is this such a significant development? What are the ramifications for food manufacturers & suppliers, the other general distributors, specialist distributors & wholesalers and the foodservice operators themselves?
The answer is that for most stakeholders nothing much will change or be impacted by today’s
We all know that the Australian Foodservice market, as any other foodservice market around the world, has a fragmented and diverse distribution landscape in sharp contrast to the retail side of the total food industry. Here in Australia there are six established foodservice distribution channels; all six with varying degree of dominance and share of the total market. That is not taking into account a new emerging foodservice distribution channel which online procurement platforms with the likes of Amazon Fresh and Ordermentum represent. These online procurement vehicles, using available and fast-changing technology to its full, will not only represent real change in the foodservice distribution landscape, it will constitute a revolution, and it will happen in the not too distant future.
What is in it for Woolworths?
This is why Woolworths’ purchasing a controlling share in PFD Food Services, is so significant – for Woolworths. It gives the retailer immediate and direct access to a 10% share of the foodservice distribution market, and no doubt, it will grow this market share through leveraging its existing online ordering platform as well as improved logistics and supply chain efficiencies. In this respect, we can expect PFD Food Services to take market share not only from the other three general distributors, but also the numerous specialist distributors and wholesalers – who still remain the most significant foodservice distribution channel here in Australia. It will also position PFD to meet the competition from, for example, Amazon Fresh when they decide to enter the foodservice market in earnest.
How will it impact Food Manufacturers and Suppliers?
I can only see this as a positive development in many respects. There is no secret that numerous suppliers, large and small, have always complained about how the two supermarket giants in the retail market have always pressured them on price and delivery terms, well, there is also no secret that the same is happening by the general distributors in the foodservice market. So, what is new? It will be very interesting to see whether food suppliers will find PFD more or less attractive as a route to market after Woolworths’ purchase of a 65% controlling stake.
With PFD’s distribution to the Convenience market together with the other three general distributors, Woolworths is also in a position to give Metcash/Campbell’s a run for their money.
What about the foodservice operators and outlets?
Firstly, it is very interesting to read in media reports that institutional foodservice operators will be in focus. Food Industry Foresight has said for the last decade that, in particular, nursing homes, schools and long day-care centres are under-serviced. We know from our research and data that long day-care centres already obtain the majority of their food and beverage supplies from supermarkets.
Among the commercial restaurants, cafés, hotels, motels, QSR independents, pubs, clubs and function caterers across this vast continent, the operators, and often owners, and chefs now use technology like never before within this industry. The new generation of operators and chefs grew up with everything digital, it is a natural part of their work and private life. They are partly driving real change in the Australian Foodservice distribution market, and Woolworths’ digital capabilities and experience could help PFD gain market share.
At the end of the day, the Australian Foodservice market is made up of independent commercial foodservice operators, we are not even remotely a chain market like the US and UK markets, and we will never be such a market. These independent foodservice operators/owners welcome efficiency improvements in the supply chain, however, they will also continue to support their local and independent specialist distributors and wholesalers for the foreseeable future. The Australian Foodservice market still operates first and foremost on a personal relationship basis.
On a final note, there is no doubt PFD Food Services will draw great benefits from Woolworths’ sophisticated systems and infrastructure as well as the critical mass that Woolworths brings to the table. This includes Woolworths’ significant marketing expertise and advanced marketing strategies – something foodservice distributors are not exactly known for.
Managing Director - Food Industry Foresight
A detailed analysis of the Australian Foodservice Distribution Channels is available in our report "Foodservice Dsitribution in Australia". Click here to find out more.