Consolidation is a concept that inevitably creeps into every business sector, constantly contradicting the arguments that people just want more choice. Rockefeller and Carnegie are famous for their consolidation of the oil and steel industries, respectively. Presently, we see the same sorts of moves happening, born out by Amazon, Apple, Intel, and Android. However, virtual monopolies don’t concern me when they happen among retail sectors. Yes, those companies I mentioned above control very important services, chief among them is data, but at the end of the day we can survive without the internet and the cloud. We cannot survive for very long without food and water, and so I do become worried when I see consolidation happening within the food industry.
80% of all the beef we consume in this country is produced by just four companies. It’s the same for chicken and pork. Tyson is the only company with the dubious distinction of being within the four companies in each category. This immediately jumped out as a problem in 2020 when the coronavirus spread to the meat packing industry. It exposed the harsh conditions of working on a production line, but it also helped expose the problem of relying on just a few places in the country to process most of its meat. So, not only do the companies that produce the meat number so few, but it turns out that there are only a handful of mega processor sites. One of them closing due to a pandemic or cyber attack would seriously cripple production.
The above-mentioned issues are definitely vital concerns to me as a foodservice professional, because they can lead to higher prices, price-fixing, and shortages. But the real world consolidation that affects me, and you, dear reader, on a weekly basis, is the one among food delivery companies. Just two of them handle most of the food deliveries in the country. You know them well, because there is a good probability that you have a contract with one of them, whether you are in healthcare, a pizza place, a burger joint, or a diner. That’s right, it’s the Big Two, Sysco and U.S. Foods (USF). They are so big that when Sysco tried to buy USF, it was batted down by the Federal Trade Commission because it would have broken antitrust laws, namely by creating a sort of monopoly and effectively killing competition. But, honestly, doesn’t it seem like they already have a monopoly on food deliveries? I will occassionally see Performance Food Group trucks on the highways of New Jersey, and to a lesser extent, Driscoll trucks, but by far, the trucks you see criss-crossing state highways belong to Sysco and USF.
So why do I care so much? A few reasons. First, I don’t like that our local distributors get pushed out of the market. Those smaller companies are able to have a more personal touch to their service. They know New Jersey, they know her people, and they know the culture. They aren’t from Philly or Allentown. Their smaller stature also allows them to cater to smaller establishments. On the contrary, USF and Sysco recently increased their minimum case requirements making it harder for smaller businesses to order from them. They have also both chosen to cut out some of those smaller establishments because it isn’t worth it to route their trucks to them. Now, I can understand that decision in the context of the current economy, but it still stings to see that email from your rep telling you that you will no longer be getting a delivery. You’re just not worth it.
Second is the culture created by having just two big companies that, in some places, deliver everything. Some places are so small that their food, paper, cleaning supplies, and equipment all come from USF or Sysco. Corporate and healthcare foodservice companies will often have contracts with either of the two exclusively so that the accountants at the home office don’t have to rifle through so many invoices. Again, I get it. Some of those companies, like Aramark and Sodexho, are so big that it doesn’t make sense for each account to have seven different vendors, because corporate would be flooded with too much paperwork. But there are plenty of other, small and medium sized businesses that are nimble enough to shop around. Still, those exclusive contracts happen way too much, and in those cases you end up with no smaller distributor to bail you out, no produce guy, no fishmonger or butcher. The convenience of one stop shopping ends up as too alluring to pass up.
Finally, and most importantly, is the matter if national security. Just two companies provide the bulk of distribution for the country. What happens when one is disrupted by a ransomware attack? A few years ago I wouldn’t have worried about such a thing. I mean, hackers need to eat too, right? But then JBS was attacked. Ok, hackers must be vegetarians. And then Edward Don was hit. So what, hackers don’t need napkins or paper plates? Sure they do, but the ransom they get allows them to wipe their mouths with dollar bills. In the end, the greatest threat is from other nations that want to hurt us, and it’s awfully easy for them to do that when all they have to do is paralyze one company in order to significantly disrupt our society. I’m confident that when faced with a ransomware situation, Sysco and USF would pay it within a few days, but an aggressive attack meant to hurt the American public would cause serious problems. We wouldn’t necessarily see empty shelves everywhere we go, but there would be serious shortages. The system is just too big to be nimble enough to survive. We need a greater variety of national and state companies, a greater foundation undergirding everything. Indeed, we do have those companies, which is great, but their market share needs to be higher and the share of the Big Two have to be lower. One pair of foodservice companies can’t be allowed to account for 75% of business.
And so, there you have it. Rest assured, I don’t think these doom and gloom situations are probable, just possible. But when the subject is of such vital importance to human survival, possible is a good enough reason to take action. We need to scale down the foodservice industry. I am not anti-capitalist, in fact, I am very much a capitalist, but I believe less and less every day that capitalism should so deeply apply to such a fundamental commodity. Food availability is not something that should be so uneven. So please, diversify your list of vendors if you can. Take a look at the smaller companies, because in a truly capitalist society, it is the demand that changes things, and we as the chefs and business owners are in a great position to do just that.
If you have gotten this far, then you must have read enough to have some kind of opinion. Tell me. Comments and questions are always welcome, as well as civil disagreement. My directory of businesses is growing daily, so continue to periodically check out those categories that might lead you to your next vendor. Remember, diversify! Cheers!