On the Margin
Sysco headquarters

The Sysco headquarters in Houston, Texas.

Could Amazon take on Sysco? Don’t bet against it

Blog: Here’s how Amazon could disrupt the distribution market

This post is part of the On the Margin blog. 

Amazon Inc. may not be able to get into the restaurant business, but that doesn’t mean it couldn’t have a major impact on the industry — by getting into distribution.

There’s been speculation that Amazon could make a move to start selling more goods to restaurants, following its acquisition of Whole Foods Market Inc. — thanks to a report by Morgan Stanley Analyst John Ivankoe.

But here’s the thing. “Amazon is already a distributor to the foodservice industry,” said Bob Sala, an industry consultant who specializes in the distribution business.

Indeed, in 2015 the company created Amazon Business and within 12 months it had generated $1 billion in business. Some of that is being sold to restaurants already, Sala said.

It’s also a rapidly growing business, from which Amazon could take aim at the foodservice market. “The b-to-b space is about a $7 trillion space with lots of distribution entities,” Sala said. “It’s an opportunity they’re taking seriously.”

Sala said that Amazon finds underserved markets and then looks to fill them, and one such market is the alternative distribution market, which includes cash-and-carry suppliers like Costco and Restaurant Depot.

Such companies represent 12 percent of the market, he said, but it’s also the fastest growing segment of the distribution business. 

“Amazon looks for those underserved markets and does its thing,” he said. “They will continue to grow and grow and grow.

“I would not bet against them.”

Meanwhile, its acquisition of Whole Foods gives Amazon 450 locations in desirable markets around the country, from where it could potentially deliver goods to those independent restaurants.

Armed with those locations, Amazon could make a bigger push into the distribution market, even taking business away from broadline distributors and specialty distributors.

“Amazon has proven it is very effective at disrupting large markets,” Sala said. “If I were a distributor, I would kind of be looking over my shoulder.”

Amazon, especially after the Whole Foods deal, could provide those companies with more access to healthier, fresh foods they might not be able to get under current distribution models — food many restaurants are eager to serve. 

The company could also provide independents with a wider variety of goods.

“For an independent operator, they could have access to products that are only available on a limited basis at certain broadline or specialty distributors,” Sala said. “The independent operator is constantly looking for products that stand out.” 

All Amazon needs to do, Sala said, is figure out the service and delivery model. “They could carve out a pretty good share and challenge the traditional distribution community with how they operate,” he said.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

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