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IFDA Productivity Report: Distributors 'Fared Well' in 2003

FALLS CHURCH, VA - The International Foodservice Distributors Association (IFDA) said in its recently-released the 2004 Distributor Productivity Financial Report (DPFR) that distributors "fared well" in 2003, according to the locally-based association.

IFDA Senior Vice President of Industry Relations Steve Potter presented the results of the study during a workshop session at the 2004 Food Industry Productivity Convention in Dallas.

The DPFR study provides foodservice distributors with key financial and operational benchmarks against which to judge the success of their own companies and find opportunities for improvement. In addition to the aggregate data for all participating firms, the DPFR includes a separate analysis for those companies in the top 50% of profitability as determined by total return on assets. Detailed measurements in the study include sales growth, asset management, profitability, expense management, and more.

Profitability: Some of the most interesting data in the study come from looking at the most profitable firms, according to Potter. "One would expect that the most profitable companies would have the lowest expenses, but that was not true this year," he said.

The report found that the most profitable firms actually had higher operating expenses, primarily due to higher selling expenses, 3.3% of sales compared with 2.6% of sales for firms in lower 50% of profitability. While the high profit firms invested more in sales, they also reported higher growth rates. "We believe these numbers indicate that those companies who invest in a good sales force, good sales training, and value-added customer services will see a definite payoff," said Potter.

Growth: Some of the key results in this year's report include that the median foodservice distributor experienced 3.9% growth compared with the previous year's study. The median company turned its inventory 13.7 times and reported a total return on assets of 9.2%. "These numbers indicate that foodservice distributors fared well in 2003," said Potter. "While the percentage of disposable income spent on food-away-from-home remained static, overall disposable personal income continued to climb."

E-Business: The 2004 DPFR also included a special section on e-business in foodservice. The study found that more e-business was being done in larger companies than smaller ones. Companies with over $100 million in sales were more likely to be doing business electronically with trading partners and to be a member of one the major trading exchanges.
The more profitable firms were taking the lead in certain areas of e-business as well. For instance, 16.7% of these firms can handle item maintenance transactions (EDI 888) with suppliers, and 25% can exchange the price/sales catalog (EDI 832). Such EDI transactions are central to savings that the Efficient Foodservice Response (EFR) initiative suggested could be achieved through electronic commerce.

The study also found that the more profitable firms tend to offer unique "customer focused" transactions and services more often than other companies. For example, it is more likely that these companies will provide menu planning, menu costing, and proof-of-delivery services via the web. "Understanding their menu costing options and helping with menu planning are both ways that distributors can help their customers grow and thereby help their own businesses grow at the same time. These types of services really show the value of the distributor to the customer," noted Potter.

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