Foodservice distributors over the past year had to watch as the sector of the restaurant industry they’d spent the most time and effort chasing—the independent restaurant—was devastated by a pandemic that shut down dine-in service and put many of their businesses in peril.
Yet distributors are also confident in the future of local restaurants, at least if you pay attention to executives talking on earnings calls.
“We believe the independent restaurant customers are fighters,” Sysco CEO Kevin Hourican told investors on Tuesday, according to a transcript on the financial services site Sentieo. “They’re doing a terrific job in light of the conditions that they’re dealing with to stay in business.”
Restaurants lost about $240 billion in sales last year and, according to the National Restaurant Association, some 110,000 locations have closed. It’s safe to say that the bulk of those were local restaurants—chains, particularly the largest chains, largely recovered from the pandemic, their problems largely limited to urban and mall locations.
Distributors rely heavily on independents for their profits because, well, it’s more profitable to sell food to a single restaurant than to a company that represents a couple of thousand restaurants that is going to want lower costs. The loss of that business has hammered distributors. Sysco’s sales were down 23% in the last six months of 2020—the first half of the company’s fiscal year. Performance Food Group’s sales were down 17% excluding the impact of its acquisition of Reinhart Foodservice.
But their views do offer insight into the state of the independent restaurant and their future. And though the comments should be taken with a grain of salt—executives tend to be optimistic, as you might imagine, on their own business strategies—their views of the resiliency of the independent restaurant should be viewed as a bullish sign on their long-term future.
“The independent is incredibly resistant, I mean amazingly so,” George Holm, CEO of Performance Food Group (PFG) said on Wednesday, according to a Sentieo transcript.
PFG, in fact, said its independent sales declined just 5% last quarter and suggested that it could recover fully later in the fiscal year—the company cited its investment in that side of the business for its improved performance. And Holm noted that the sales are up in some warmer-weather markets. “We have several markets we’re actually doing more independent sales,” Holm said, noting that the company’s more challenged markets include New York, New England, Chicago, Minneapolis and the West Coast.
Distributors have been saying for some time now that independent restaurants are in better shape than many people think. Pietro Satriano, CEO of US Foods, told investors in January that the permanent closures of independents are in the “low-to-mid single digits,” which would be considerably lower than the 10% many of us had predicted early in the pandemic. Many independent closures appear to be temporary—add those in, Satriano said, and closures would be in the “mid-to-high single digits.” Executives with other distributors have echoed similar estimates.
It’s clear that tens of thousands of restaurants will not emerge from the pandemic, the bulk of them independents. But fewer will close than expected. And once the pandemic is over—and yes it will end—it can reasonably be expected they’ll start developing once again, as independent restaurants always do.
“I probably would have speculated nine, 10 months ago that the independent customer population would have been more at risk,” Hourican said in December. “The facts are, we’re not seeing that. The facts are that we’re actually seeing that the independent restaurant customer type is performing well to the prior year. And they’re staying business at a rate that is exceeding our expectations and certainly exceeding what’s been publicly speculated.”
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.