GPO Traction with Independents Changing The ‘Street’ Game

In late April, I attended a summit in Chicago exploring the rise of Group Purchasing Organization (GPO) membership among independent restaurant operators and the statistics surprised many of us in the room:

GPO Traction with Independents Changing The ‘Street’ Game

Source: “The Fight for Foodservice ‘Sweet Spot’: GPO Traction with Independents.” Pentallect. April 2017.

  • Nearly 40,000 independent operators belong to a GPO
  • Independents only represent 40% of total GPO purchasing volume, but comprise more locations than chains/groups (60% of GPO volume)
  • Independent membership in GPOs is projected to experience double-digit growth over the next five years

As Pentallect poignantly observed “independent foodservice operators [represent] a $100 billion market with little clout.”

Why It’s Happening

It’s a combination of several factors, but two themes emerged throughout the day: price and transparency

  • Independents pay 10% – 20% more than ‘groups’ for products and services
  • Average GPO gives operators an immediate 5% – 7% savings on margin
  • The rise of non-traditional foodservice ‘distributors’ (Restaurant Depot, Webstaurant Store, Amazon) are pushing the industry toward total price transparency

What We Think

Manufacturers that rely heavily on street business must have an overarching GPO strategy.

GPOs are here to stay. With penetration already high in non-commercial, expect aggressive pursuit of independents and even K-12 accounts. Adopting an overarching GPO strategy is critical to protect margins and will help ensure pricing consistency as operators demand (and receive) more price transparency.

What’s Next

There is no one-size-fits-all strategy that works for everyone. Manufacturers need to identify GPO partners that align with strategic portfolio and business priorities. Partnerships should:

  • Ensure programs align with one another
  • Ensure operator compliance
  • Have measurable ROI systems in place

Want a deeper dive on how GPOs with independents are changing the industry? Contact your account service representative to learn more.

Questions, comments or want to learn more? Let's connect! weshouldtalk@jtmega.com

Want to receive more Thought For Food Insights?
Subscribe Now »

Recent Posts

Talkin' 'bout our (next) generation
Talkin’ ‘bout our (next) generation.

I’ve been to a number of conferences over the past year and inevitably, the agenda includes at least one breakout about “Millennials”. There’s always an audible groan as attendees agree that they have “heard enough about this generation of experience-seeking, non-committal, entitled kids!”. (I should mention here that I am considered a Millennial myself…) Anyway, […]

Read More »

What's your function?
What’s your function?

Have you had pH balanced water recently? Or added a teaspoon of collagen to your coffee? Maybe enjoyed a beverage with probiotics like kombucha? While not everyone has jumped on this trend, the functional food market is growing rapidly, with revenue projected to reach over 440 billion dollars by 20221. Referring to food and drinks […]

Read More »