The Hidden Economics of Food Distribution
Two restaurants on the same block, buying from the same distributor, can be paying very different prices for the exact same products. It isn't a mistake; it's just how food distribution works, and it pays to understand it.
Distributors have to make the numbers work too.
A food distributor is sending trucks, paying drivers, running warehouses, and managing hundreds of accounts at once. When they price an account, they are thinking about how much it costs them to service that account versus how much revenue it brings in.
An account that orders a lot, takes fewer deliveries, and pays reliably costs less to service. An account that splits its spending across multiple distributors, wants deliveries five days a week, and pays by credit card costs more to service. Those two accounts are going to get different pricing, and it makes sense when you look at it from that angle.
Splitting your spending across distributors can work against you.
It feels like it should help. More competition means better prices, right? In practice it usually does not shake out that way. When a distributor is only getting a small piece of your business, they cannot afford to give you their best pricing. There is not enough volume to justify it. The accounts getting the best deals are usually those that provide a distributor with enough business to make it worthwhile.
The optimal structure tends to be one main distributor handling the bulk of purchases, with maybe one or two specialty vendors for specific categories.
Delivery frequency plays a bigger role than people expect.
Every stop costs the distributor money. Driver, truck, fuel, time. If you are getting five deliveries a week, that is five times the cost of one. Distributors know exactly what each stop costs them, and that goes into how they price accounts.
Weekly price shopping has a real limitation.
A lot of operators check prices across multiple distributors each week to find the best deal on each item. That said, since any given distributor doesn't have enough of the business to do their best on pricing, you'll often just end up comparing two inflated numbers.
How you pay matters too.
Credit card processing fees are real, and some distributors factor them into account pricing. Paying by ACH takes that cost out of the equation.
These are just the conditions that make good pricing possible.
But knowing what fair pricing actually looks like for your volume and your market, and understanding how your distributor is making money on your account, is where the money is. That conversation with your rep is worth having, and it is not as complicated as it sounds once you understand what is driving their decisions.
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Ethan Opdahl is the Founder and CEO of Angel, a purchasing agent for restaurants (angelpurchasing.com).