By:  Barry Friends | Bob Goldin

June 17, 2020


The foodservice value stream includes a long-established and minimally discussed class of distributors specializing in restaurant chains, known as “Systems” or “Customized” distributors (in the 1980’s ID Magazine called them “the special breed”).  Prominent among those are McLane, Martin Brower, Sygma (Sysco), PFG Customized, and QCD, as well as large self-distributing chains such as Dunkin,’ Domino’s, Papa John’s and others. Systems distributors had combined pre-pandemic volume of approximately $40 billion, and while not nearly as profitable as the better-known broadliners, are poised to stage a quicker comeback from COVID-19 thanks to QSR-heavy customer mixes.

One such firm, Maines Paper & Food Service, however, sadly fell prey to the pandemic’s impact and has been “absorbed” by the foodservice ecosystem on several fronts. As part of the change, Maines’ physical assets and many employees have been acquired by a newcomer to foodservice “last mile” distribution, Lineage Foodservice Solutions, an affiliate of Lineage Logistics, the industry’s largest owner-operators of cold storage facilities (210 US locations, many near manufacturer plants). Some years earlier, Lineage acquired re-distributor Consolidated Distribution Corp., an enterprise with three decades of experience helping chains to synergize inbound freight and manage slower turning “long tail” SKUs. 

A few of Maines’ former customers opted not to sign on with the new entity, and moved to competing providers with whom they had other relationships.  Anchoring Lineage’s new “last mile” business are several iconic brands, notably Burger King, Tim Horton’s, and Darden Restaurants, the latter having outsourced its “Darden Direct” logistics functions (warehousing and delivery) to Maines for many years.  Darden’s model (in-house sourcing, QA, purchasing, and inbound mgmt.; outsourced warehousing and distribution), unique among the restaurant industry’s biggest players, has long been admired for its streamlined, low cost efficacy.  With Lineage’s massive network and new capabilities, it’s possible we may see other aspiring chains experiment with “outsourced self-distribution.”

Chain customized distribution isn’t only performed by specialists, of course.  In fact, there’s nearly as much provided by broadliners (aka “hybrids”) that co-mingle chain volume with other customer types.  Many chains lack the volume and/or unit density to warrant a fully-customized solution, and, as such, are best served by a hybrid broadline distributor. In a twist of pre-pandemic irony, some broadliners suffering from labor shortages and cost pressures in recent years had been resigning unprofitable chain accounts to free up capacity for business that could generate better returns on limited resources.  In light of the current industry malaise, it remains to be seen whether that proves to have been a good strategy.

Lineage’s arrival in the last mile space brings interesting potential for value creation where collegial arm’s-length relationships between trading partners have often inhibited the sort of collaboration that can, as proven in other industries, drive out unnecessary costs.  A common trait among highly-effective supply chains is top-to-bottom transparency, an attribute easily leveraged in a substantially vertically integrated system such as Lineage now enjoys.  Taking pages, for example, from the Darden Direct playbook may enable chains to unravel longstanding and costly (both hard and soft cost) supply chain backlashes.

We expect the industry will welcome this latest “mutation” and will almost certainly witness a period of innovation in the foodservice supply chain that will support the industry’s struggle to regain its pre-pandemic share of consumer patronage.  Foodservice distribution, as we have known it, will accelerate its evolution, resulting in fundamentally changed practices in virtually all aspects of its business.

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