Planning for the Rebound in Foodservice Distribution
Posted on March 31, 2021
Five Things to Consider
When the pandemic hit a year ago, no one in the industry had contingency plans for such an event. We all figured it out on the fly – it was essentially “react” as opposed to “plan”. However now is the time to complete your strategies for the recovery.
With the increase in vaccinations and financial relief coming from Congress for the restaurant industry, trends are more promising. With this in mind, we spoke with owners at numerous independent distributors and processors to see how they’re planning for the upturn.
Here’s a summary of what we heard most frequently. While many of these appear be basic, our nearly 20 years’ experience in the industry tells us that the companies that actually follow through in these types of initiatives will be the ones who will thrive during the recovery.
- Carefully Model Cash Flow Requirements
- Develop a flexible “what if” financial model that allows for a range of possibilities
- Anticipate heavier than normal inventory levels
- Project higher customer A/R requirements as dining increases
- Focus particularly on Q 2 – 3 but look beyond into 2022 as well
- Solidify Financial Position
- Proactively communicate with your lenders so they’re ready with additional support if needed
- As noted above, develop and refresh realistic projections and have them available if requested by your lender
- Ensure borrowing facilities can accommodate rapid increase in cash requirements
- Review lending covenants
- Nurture Customer Relationships
- Competition could become fierce; solidify relationships, particularly with key customers
- Have your sales team closely monitor the market for opportunities. Aggressively expand your prospecting efforts
- Develop contingency programs that can be readily implemented if volume were to change significantly
- Develop Contingencies For Inventory
- Expect challenges in availability and delivery for the foreseeable future
- Recognize that “in stock” positions could become a significant selling advantage
- Strengthen ties with suppliers
- Consider options for inbound freight delivery
- Pay Particular Attention To Human Capital
- Anticipate a rapid change in warehouse throughput and the need to expand routes
- Assume the labor market for drivers and selectors will intensify even more
- Ramp up recruitment activities well in anticipation of the actual need
- Strengthen relations with all current employees, particularly operations managers and staff
- Be mindful of the new administration’s regulation changes, particularly around unionization
Foodservice Distribution Aquisitions Expected to Increase
M&A interest and activity is beginning to increase. We expect that interest in acquisitions will elevate as the recovery further unfolds.
We are ready to assist in any way so please feel free to contact us for a confidential discussion.