3. Marketing & Sales Leaders Forum
Program Planning Committee
Bill McClellan Dawn Foods Chair
Connie Fuller B&G Foods Vice Chair
Judy Karner Azarta
Bryan Koster Barilla
Lisa Kermizis-Abraham Bigelow Tea
Bill McCullough Bunge Oils
Alfredo Ortiz CSM Bakery Products
Hugh Sullins Epi Breads
Cory Sexson FoodHandler
Amy Fattori Grecian Delight
Andrew Dun Insight Beverages
Jeannine Scherzer International Paper
Jeff Pierce Kagome
Ben Wexler Kellogg Company
Michael Alexander King & Prince
Steve Diener Paramount Farms
Doug Allison PepsiCo
Deborah Jackson PepsiCo
Peter Sirgy Reser’s Fine Foods
Dinsh Guzdar Rich Products
John Zimmerman Rosina Food Products
Kristin Bird Sara Lee
Chris Travisano Sugar Foods Corp.
Mike Cannon Surlean Foods
Mike Castagna Ventura Foods
Alan Sterling Wayne Farms

5. State of the
Foodservice Industry

6. DPI is Sluggish
% Real Change vs. Prior Year
-8%
-4%
0%
4%
8%
Apr'06
Aug
Dec
Apr'07
Aug
Dec
Apr'08
Aug
Dec
Apr'09
Aug
Dec
Apr'10
Aug
Dec
Apr'11
Aug
Dec
Apr'12
Aug
Dec
Apr'13
May 2013
1.0%
Source: Department of Commerce
 Correlates with foodservice spendingKey Insights

7. Restaurant Employment Has Consistent Growth
% Change from Prior Year
-4%
-2%
0%
2%
4%
6%
May…
Nov
May…
Nov
May…
Nov
May…
Nov
May…
Nov
May…
Nov
May…
Nov
May…
Aug 2007
4.1%
Dec 2009
-2.9%
 But driven by more part timers.Key Insights
Source: Bureau of Labor Statistics
Jul 2013
3.7%

8. Small Chains/Independents Outpacing Chains
1.6%
3.5%
4.9%
2.9%
-1.5%
4.6%
5.6%
3.0%
2010 2011 2012 2013(F)
Top 500 Chains Small chains/Independents
Nominal Growth
 Indys heavily FSR-orientedKey Insights
(F) = Forecast
Source: Technomic

9. Obamacare Has Many Operator Implications
Yes
65%
No
35%
Obamacare to Have a
Direct Impact? Reactions*
Restaurants Beyond
Restaurants
FT employee reduction 44% 27%
PT employee increase 36 29
Raise menu prices 34 46
Reduce FT employee hrs. 29 22
Cut other costs 29 27
Reduce total employee # 21 14
 Schools least likely impacted
 Those operators not impacted have <50 employees,
or already provide healthcare
Key Insights
*Base: Operators indicating Obamacare to have an impact
Source: Technomic Operator Survey – 3Q-2013

10. Jack Li
Managing Director
Datassential

11. believe LTO’s are
MORE
INTERESTING
more
interesting
38%
better
taste
15%
marketing
ploy
45%
believe LTO’s are
BETTER TASTING
believe LTO’s are
MARKETING
PLOYS
LTO“This phrase really has no meaning.

12. Just 16%
believe LTO’s to be
very unique

13. menu adoption cycle

14. INCEPTION
Foodservice
Fine Dining
Ethnic independents
Retail
Ethnic grocers
Largely absent elsewhere
ADOPTION
Foodservice
Chef-casual
Food trucks
Fast-casual
Casual dining Independents
Retail
Specialty grocers
Gourmet food retailers
PROLIFERATION
Foodservice
Casual dining chains
QSR
Lodging
C&U
Retail
Traditional grocery stores
Mass merchandisers
Club stores
UBIQUITY
Foodservice
Midscale restaurants
B&I
K-12
C-Stores prepared foods
Grocery deli
Retail
Frozen foods aisle
C-Store shelves
Drug & dollar stores
MAC
menu
adoption
cycle

15. ethnic population
acculturation
urbanization
food culture
technology
TREND
ACCELERATION

16. explore the nuances
future predictions

17. Menu Adoption Cycle
accelerates
2010 2015
2020 2030

18. fine dining continues its
democratization
FOOD TRUCKS
CHEF-CASUAL

19. FOODWATCH
Customized
LTO updates

20. Bill Hale
President
The Hale Group

22. Agenda
• The Hale Group has a point of view concerning the
evolution of the foodservice landscape and strategic
implications for foodservice manufacturers. Specifically,
1. Foodservice 2020: Global, Consolidated, and Structured
2. Consumer Thinking versus Channel Thinking
3. GPO’s as a Segment Opportunity
4. The Distributor of the Future
• Let review this outlook and where it takes us.
22

23. • The dominant forces shaping the foodservice landscape in this decade:
Foodservice 2020: Shaping Pressure Point
Value & Economics
 Consumers will drive for value and not expected to increase
greater per capita number of AFH occasions
 Operators seeking pricing relief and point of
differentiation
 This will drive price and margin pressure at all levels

=

24. Consolidation of Operator Purchasing

25. • Operator demand will be aggregated.
Foodservice 2020: Consolidated
Share Controlled by Consolidated
Operator Purchasing
Source: The Hale Group’s Estimates
Segments 2009 2020 (P)
Restaurants 58% 72%
Lodging 70% 85%
Retail Foodservice 80% 90%
Recreation 55% 70%
Airlines 100% 100%
Business & Industry 75% 85%
Colleges & Universities 57% 65%
K-12 65% 85%
Healthcare 80% 95%
Others: Government, Agencies, Institutions 70% 80%
Total 62% 79%
Fewer
but
bigger
buyers

26. • GPO’s consider their role to be the representative of the
operator.
• GPO’s aggregate demand and leverage the power of that
purchase volume and exploit market discontinuities.
GPO’s as the Representation of the Operator
Distributor
Manufacturer
Independent
and Self-Op’s
Operators
GPO
Source: The Hale Group estimates

27. Review of the
Foodservice Distributor
Segmentation of Distributors
Role of the Distributor

28. Foodservice Distributor
Landscape: Segmentation
Source: ID Magazine and Newsletters Top 50 , Technomic and The Hale Group estimates (excludes alcohol and non-food equipment))
1. Alternative formats include Restaurant Depot, Warehouse Clubs and Cash and Carry
The distinctions between broadline and system distributors will continue to blur;
alternative formats capture independent operators.
The structure of the distributor industry will change over the decade…
Share of Total Sales (%)
Type of Distribution 1995 2000 2005 2010 (F) 2020 (P) Comments
Broadline 45% 50% 53% 58% 59%
Adding categories & systems
business to Increase share
System 14% 17% 15% 11% 11%
Broadliners are competing
for this business
Product Specialist 38% 30% 27% 20% 16%
Have high service levels and
specialty products
Alternative Format
Specialist 2% 3% 5% 11% 14% Capturing the independent
Total Percent 100% 100% 100% 100% 100%
Total Sales ($Billion) $103 $132 $159 $175 $203

29. Forces of Change for Distributors
•There are essentially three forces shaping the change in the distributor
community
1. Changing customer mix with more multi-unit operators
and buying groups that want a low cost high efficiency
and reliable supply-chain / logistics partner – extreme
margin pressure
2. Trade income under pressure as the manufacturer
trade dollars are now shared among distributors, buying
groups, operators and soon to be consumers – margin
relief is going away
3. Bigger customers with multi-regional footprints
want one distribution vender versus a patchwork –
streamlined, one touch distribution network
•The pressures are economics and changing customer needs and wants

30. Implications for Foodservice
Strategic Imperatives
Distributor Strategy
Elements

31. • A key to future success is an organizational
culture that embraces a more…
Success Factor
 Analytical approach to decision-making
• Doing the homework
 Directed approach to business and customer development
• Targeting the segments and customers
 Structured value proposition and execution
• Explicit solution to the opportunity
 Measured results and constant corrections
• Open sharing of results and accountability