Monday, May 5, 2008

Food Broker Memo: U.S. Grocery Wholesaler Unified Grocers Gives 'Props' to Independent Food Brokers in Internal Survey of Company Personnel

From the FMI Convention, Las Vegas, Nevada

U.S. independent food brokers scored highly regarding the quality of services they provide, according to an internal survey of 200 Unified Grocers' buyers, category managers and advertising specialists which the grocery wholesaler, the largest in the Western U.S., recently completed. This included numerous independent food brokers who specialize in the natural, organic, specialty, gourmet and ethnic foods' sectors.

Phil Smith, the wholesale grocer's executive vice president and chief procurement officer presented the results of the internal survey to a group of independent food brokers attending the Independent Food Brokers of America Top-to-Top Executive Business Conference over the weekend in Las Vegas, Nevada.

The annual independent food brokers conference, which took place on May 2-4, was held as part of the Food Marketing Institute's (FMI) annual convention, which this year is taking place in Las Vegas rather than its regular venue in Chicago, Illinois.

In his presentation to the independent food brokers, Smith said more than 80% of the grocery wholesaler's buyers, category managers and advertising specialists polled, gave the independent brokers they deal with grades of good, very good and excellent, in terms of the services they provide to Unified Grocers and in their respective market regions.

Unified Grocers

Unified Grocers is the largest wholesale grocery distributor in the Western U.S. Its corporate headquarters and largest distribution facility is in Southern California. The wholesaler also has operating divisions and distribution facilities in Northern and Central California, Oregon and Washington state.

The wholesale grocer also has a specialty and natural foods distribution division called Market Centre, Inc. That division has operations in all of the above regions, as well as in Phoenix, Arizona. The specialty and natural foods division supplies stores in California, Alaska, Nevada, Hawaii, Colorado, Idaho, Utah, Montana, Oregon and Washington.

Unified Grocers distributes dry and perishable grocery products, as well as non-foods and general merchandise items, to multi and single-store independent grocers throughout the Western U.S. The company also provides marketing, advertising, retail merchandising and financial services to its member-retailers.

The Market Centre specialty and natural foods division not only supplies these member-independents with specialty, gourmet, ethnic, natural and organic food and grocery products, it also supplies major regional chains such as Modesto, California-based Save Mart supermarkets, which has over 400 stores, and Sacramento, California-based Raley's (129 stores) with specialty products, along with a number of other chains in the Western USA.

Unified Grocers had sales of $3.13 billion in its 2007 fiscal year. The grocery wholesaler's sales for its most recent quarter topped $1 billion for the company's very first. This was due largely from the wholesale grocer's recent acquisition of Seattle, Washington-based Associated Grocers, which operated for decades in the Pacific Northwest region of the U.S. Unified is in the continuing process of integrating Associated's operations into its own.

As part of his presentation over the weekend in Las Vegas at the independent food brokers meeting, Unified's Smith said the grocery wholesaler is seeing a blossoming of independent grocers in all niches, from discount to upscale, in the Western U.S.

He suggested one of the reasons independent food retailers are thriving even in today's bad economic times is because they are agile--they can turn on a dime and make changes as needed without lots of debate and long decision making time lines.

Smith told the independent brokers he believes that's one of the reasons Unified Grocers' buyers, category managers and advertising specialists rated them highly. Like independent grocers, independent brokers also are agile and able to adapt to external conditions rapidly, Smith said. As a result, he predicted the independent brokers will see continued and even greater success based on these attributes.

A renaissance in the independent food brokerage sector

Independent food brokers have had a renaissance of sorts in the last decade. Beginning in the late 1980's, a massive wave of consolidation started in the U.S. food brokerage industry, and didn't end until about 7 years ago. Essentially, this consolidation found three brokerage firms controlling the majority of overall business--at least in terms of major accounts--in the U.S.

However, as is often the case when any industry has too much consolidation, mass layoffs at these acquired brokerage firms occurred, as well as a general unhappiness on the part of many principles that they weren't getting the type of service or coverage for their brands they expected because of this massive consolidation.

As a result of the mass layoffs, lots of talented food brokers were out of jobs. This fact, combined with the growing demand from principles for smaller, regional or niche brokers beginning in about the late-1990's to the present, there's been a flourishing of sorts in the U.S. of smaller, regional brokerage firms.

In fact, this is one reason the Independent Food Brokers of America (IFBA) was formed as a division of the National Association For Retail Marketing Services (NARMS) in 2004. The new independent food brokers' association offered a collective home to all the new independent brokerage firms started up over the period of time we described above.

Many of the current 84 IFBA-member food brokerage firms are specialty and natural foods category brokers or include numerous category lines in their portfolios. Even during the wave of consolidation, independent specialty and natural foods niche brokers did well, although many of the more successful firms sold their companies to mega-brokers like Acosta, Inc. and Advantage Sales & Marketing Co., for example

Since by their very nature and design, specialty and natural foods' are niche categories, independent brokers have historically tended to do better than the large, national mega-brokers, even though they've set up separate divisions for the categories as a way to be "smaller", because of the importance of regional and local marketing knowledge and other important variables which in the main independent food brokers are generally better at than the mega brokers are.

Were also seeing a growing of independent brokers in the specialty and natural categories for basically the same reasons as in the larger, overall food and grocery sector.

For example, although it's appealing for a principle to be able to go with say one large, national specialty or natural foods brokerage firm across numerous regions of the U.S., unfortunately the needed local marketing knowledge and expertise--as well as the attention to the lines--just isn't there in most cases.

This is why you are seeing many specialty and natural foods companies--nearly all of which use brokers rather than the mix of direct sales forces and brokerage firms you see in the mass market--increasingly fire their national mega-firms and go with local independent brokerage firms once again in many instances. Further, this is one reason why many new independent food brokerage firms serving the specialty and natural products' sectors have been started up in the last few years once again.

Food broker trends in the U.S.

Trends run in cycles in the food, grocery, natural and specialty foods industries.

Right now, it's our analysis there's an up-cycle and renaissance in the independent food brokerage sector, primarily for the reasons independents have always been successful in the field: generally superior local market knowledge and relationships, the ability to better focus on smaller lines, agility, lower overhead, and a few other key variables.

We see this trend growing for some time, until once again a number of these independent brokerage firms become large enough to start merging together, and end-up creating new mega-firms out of the result of these various regional firms coming together.

Of course, when that happens once again--as it will--it in-turn will open the door once again for a new renaissance of independent food brokerage firms to emerge on the scene.

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