What You Can Do About Food Industry Consolidation

 
Oct. 30, 2010 | by Ed Zimmerman

When I got in the pizza business, there were 25 legitimate Mozzarella producers in the country. Many were old-line Italian families with deep roots from the old country. They had unique products, served local or regional markets and provided pizzerias clear choices of flavor, melt, stretch and color. As the years went by, there was consolidation and mergers, which forced the closing of smaller plants that had tons of character but lacked efficiencies. I had the privilege to tour many of those plants and see the differences first hand. Today there are less than 10 companies generally producing from very large plants in order to provide the lower prices pizzeria operators demand.

Same in the olive industry, California had 50 plants, now two. Tomato canners slimmed the ranks from 70 companies to 15, witness flour, pepperoni, pizza boxes etc., you have seen it too. Food distributors followed, where once the country had dozens of small family companies, consolidation occurred in order to serve the needs of price conscious independents and growing regional and national chains.

I offer this view not to judge the efficiency of markets, but to point out that the choice of products has shrunk dramatically. The ability to differentiate your pizza by unique ingredients is disappearing. Most distributors sell pretty similar products.

In my days as a manufacturer, I once called on an independent restaurant in a small Indiana town. I sold unique desserts and was drumming up business to attract the dominant distributor in the region to buy. This Hoosier manager shook her head and said, “There are three restaurants in town, we all buy from the same distributor and the only thing that makes us different is the day we change the fryer oil”. This was the beginning of the homogenization of foodservice. We have seen the “American” restaurant scene dominated by the large chains, Chili’s, Friday’s, Hard Rock; we cannot let this happen, America needs independent pizzerias. Your customers need a choice.

Consolidation resulted from the demand for lower prices; we placed downward pressure on profit margins and received lower prices, but at a higher cost, the cost of freedom and choice.

I believe the way back from the brink for the independent pizza operator is to boldly offer better and unique products to their customers. Here are some ideas:

  • Aggressively seek great products, not great prices.
  • Look for slow moving items from your distributor. Don’t ask, what are the top sellers? instead ask, what’s the most unique?
  • Buy local items where possible. This supports smaller manufacturers, offers interesting products and improves the local economy, so locals can buy YOUR pizza.
  • Dig in to regional flavors and taste profiles, trumpet what makes Indiana pizza, Indianan.
  • Demand imports that promote a REGION … not just Italian, but Tuscan.

You can win, not through buying price but by promoting a unique experience for consumers. When the choice is between pepperoni pizza and veggie, price wins. Ask a consumer to pay 75 cents more for an EXPERIENCE and they will visit more often and tell their friends.

Wishing you success in pizza – Ed

Ed Zimmerman is a pizza industry veteran and President of Pizza.com, the number 1 web portal that connects consumers to pizzerias. His almost four decades of foodservice experience includes food manufacturing and distribution leadership, food industry technology, marketing services and restaurant and grocery operations management.

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Topics: Business Strategy and Profitability , Customer Service / Experience , Independent Operation , Trends / Statistics


Ed Zimmerman / Ed Zimmerman is a pizza industry veteran and President of The Food Connector. His almost four decades of foodservice experience includes food manufacturing and distribution leadership, food industry technology, marketing services and restaurant and grocery operations management.
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