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NPD Confirms: Indies, Small Chains on Rebound;Distributors Should Prepare to Support Customers' Imp

NEW YORK - After several months of sluggish business, independent operators and small regional chains are joining the major chains in a noteworthy rebound, according to the Port Washington, NY-based industry researcher NPD.

This up tick in business for street accounts and regional chains, explained Michele Schmal, vice president of product management for NPD Foodworld, is being felt across the country and should provide foodservice distributors with an array of consultative and marketing opportunities to help their operator-customers. Echoing sentiments expressed to ID Access by many regional family-owned broadliners, Schmal observed that independent restaurants are ripe for growth right now and smart distributors should stay abreast of this encouraging trend.

"It's a great opportunity for independent distributors to help their independent operator and small-chain customers catch the wind of this rebound that started with the major chains and has now started to pick up steam for the independents," Schmal told ID Access.

NPD noted that while the large chains have already come back to life after the worst restaurant slump in more than a decade, the independents and small chains are only now on the launching pad of a rebound. For the 12 months ending March compared with a year ago, customer traffic at the major chains was up 3%, while traffic at small chains was down 1% and traffic at independents was down 4%.

"The independents and small chains haven't fared as well during the weak economy," said Schmal. "This group is the corner coffee shop or diner. They don't have the big dollars for marketing and expansion that the big chains have so it's a lot harder to survive in tough times. During weak economic times chains tend to take market share from independents."

Independent and small-chain business is significant, according to NPD. This market segment makes up 72% of actual "brick and mortar" restaurants in the country, but during difficult times they do not expand. The NPD Group's restaurant census database, ReCount, shows that there are 294,000 independent restaurants in the U.S. and 234,000 chains, which do a lot of business. Sixty-three percent of all carry out goes through small chains and independents and 60% of meals eaten at restaurants and delivered to homes go through small chains and independents.

"Independents and small chains are always going to be an attractive market because you can hang a shingle pretty easily," said Schmal. "Traditionally, customer satisfaction levels at the smaller restaurants are higher than at the large chain restaurants. Independents fill a niche market and there will always be successes in this segment, but we do expect large chains to continue to take more market share from this group.

Moreover, independent distributors traditionally target independent operators and apply greater sales and marketing efforts in that category. Their strategy is based on the conviction that independent distributors will thrive when independent operators are successful and, conversely, they will suffer if their street accounts go out of business.

Schmal encouraged distributors to target their efforts in this market, which is huge but slower in emerging from the doldrums, compared with the major chains. "It wouldn't hurt for them to see if they are targeting appropriate products to independent operators and also to understand their clients' businesses so they could target the opportunities that have the most sense for them," she said.

She also advised distributors and DSRs to work with their supplier partners and manufacturers' sales agent in addressing their customers' needs with the best products and marketing programs. "Distributors should work with suppliers to identify which products work best and are popular in which restaurants," she said.

Small chains and independent restaurants dominate servings of certain foods and beverages in the restaurant industry, NPD reported. This segment garners a greater share of several entree-related foods such as seafood (75%), pasta (62%), beef entrees (67%) (excluding burgers), and Asian foods (96%). Many side dishes are ordered more often among the independents and small chains including rice (87%), side salads (61%), and non-fried vegetables (66%). Drinks are also popular in this segment. Eighty-five percent of alcoholic beverages are ordered at small chains and independents, 65% of tea orders, 67% of juice orders and 81% of bottle water/seltzer orders come from this segment.

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