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:
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.