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Food and Beverage Distribution Industry Analysis Paper Example

7 pages
1790 words
Middlebury College
Type of paper: 
Business plan
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

a)  The history of the industry

Food and beverage distribution industry is an extensive global network which is made of several sectors. There are the manufactures, the retailers, the suppliers, and the end consumers. The company is a standard distribution agency which will engage in the distribution and the imports of food and beverage products to local retailers. Therefore in this network, the organization acts as a supplier, and it plays a very crucial role in connecting the manufactures and the end consumers.

Food and beverage retailing business started as early as the 19th and 20th century and since then the industry has been growing exponentially. This growth has been credited to the fact that food and beverages are a significant human need. It is essential to know that industrialization caused a lot of changes in the distribution and production of food. In fact, the suppliers in the food and beverage distribution industry benefited the most from new innovations. The industrialization of food processing and the development of transportation played a major role in the growth of food and beverage distribution industry. New ways of preserving food and beverage products gave suppliers an opportunity to widen their business. Furthermore, introduction of cheap and quick means of transport such as air transport assisted suppliers in their processes of ensuring quick distribution of their products. Therefore, it is safe to say that industrialization is the father of the food and beverages distribution industry.

b) Size of the industry

There are over 16,000 organizations participating in the distribution of food and beverage products in the United States alone (Tolhurst, 2013). These organizations are estimated to be producing over 200 billion dollars annually in profits. Some of these companies are family-owned, government-owned corporations, or integrated grower-shippers. The size of the food distribution industry in the US is increasingly growing because of the continually changing customer expectations. Nowadays customers are short on time and they are often seeking for methods to save money and time. As of 2017 for instance, approximately 10 percent of the United States consumers preferred shopping for food and beverage products online. Towards the end of that year, online food and beverage sales amounted to approximately 15 billion US dollars. With these kind of figures in play, the food distribution industry is usually forced to adjust to the customers lifestyles and demands leading to growth of the industry in the process.

c) The trend

Food and beverage distribution industry has undergone a lot of transformations, and it is estimated that it will continue changing. Technology is seen as one of the main drivers that will transform the shape this industry. Some of the benefits which technology will bring into the industry includes: improved safety and quick delivery of the products. Online and mobile ordering technology for instance is a tool which has been adopted by multiple organizations and it is proving to be extremely effective. Clients can now use common mobile technologies such as iPhones and iPads to buy products of their choice. E-commerce heavyweights such as Amazon are expected to join the food and beverage distribution industry in the future. Therefore it is fair to say that the industry is projected to grow in the next five to ten years due to the entry of more players. Moreover, the adoption of new technological methods will bring efficiency in the industry while enhancing globalization.


d) Key players in the industry

US Foods and Sysco Companies are two of the biggest players in the food and beverage distribution industry. These two companies represent approximately a quarter of the US market. However, it is important to know that there are other smaller organizations that also compete for business. In 2016, Sysco Company reported yearly sales of approximately 50 billion US dollars while the US Foods reported yearly sales of 46 billion dollars. Other players include Gordon Foodservice, Labatt Foodservice, Reinhart Foodservice, and Shamrock Foods Company.


2. Barriers and challenges to entering the market

Venturing into the food and beverage industry involves a lot of processes. There are a lot of factors which poses challenges to the prospective companies and entrepreneurs. Some of the barriers and challenges to entering the food and beverage distribution industry include: requires huge capital requirements, it is always difficult to access the required distribution channels, economies of scale, strict government policies, high cost of technological and operational tools (McGrath, 2016).

First, starting a food and beverage company requires a lot of capital. This is because a lot of resources and infrastructures need to be acquired. This may not appear to be a challenge for huge and cash-rich organizations, but for smaller organizations, capital requirements can be a huge barrier (Colyer, 2000). Second, it usually difficult to get access to appropriate distribution channels in the food and beverage distribution industry. This is due to the existence of relatively few players in the market specifically the producers. Third, Government policy is also another factor which usually hinders smaller companies from entering into the food and beverage distribution business. There are some government policies which requires companies to meet certain financial standards for them to be allowed to operate. This means that the organizations which have financial difficulties often find it hard to run a business.

3. Identifying competitors

Competition is one of the main challenges for food and beverage distribution companies due to limited resources and high customer expectations (Eckmann, 2016). Different organizations tend to have its crop of customers. However, there are some organizations which have a larger share of the market compared to others. Currently, Sysco Company enjoys a larger market share in the food and beverage industry followed by the US Foods. The other remaining share of the market is shared among the smaller companies. Amazon Company is planning to enter into the food and beverage distribution industry. This is an e-commerce agency which has already established itself, and its participation in the industry will have serious implications for both the huge companies and the smaller companies. The level of competition will increase, and the smaller companies may even suffer more.

Some of the big competitors we will be facing in our region (Southern California) include the Coca-Cola Company and Starbucks who take pride in global presence, profitability, years of well-proven experience, and market presence.

4. Identifying a market niche

Numerous case studies reveal that there is a high demand for food and beverage products in California. However, the existing businesses in the region have failed to explore the Californian market. California is a culturally diverse region that is; a very multicultural population characterizes it. The problem is that existing businesses have failed to cater for the needs of every member of this multicultural population. Therefore, this creates a gap for the company to exploit. Furthermore, it is estimated that the multicultural population in California is expected to grow in the next ten years. This means that if we fully exploit this opportunity now, our sales are going to increase exponentially in the next ten years.

5. Description of the innovation

This innovation is web-based and depends on the e-commerce technology. It involves the creation of a site which will automate the operations of the company as well as provide transaction efficiency and customer satisfaction. This is innovation a service because it drives revenue growth, improves risk management and most importantly it leads to cost reduction. It provides many functionalities such as automated ordering system which is the key to acquiring a competitive advantage and to building strong business-customer relationships. This innovation also allows the company to link its external and internal processes more efficiently and effectively. Service innovations like this one are often used to create opportunities for improvements within the company. Moreover, it inspires companies to adjust to the ever-changing employee demands and expectations.

6. Competitive analysis

Implementation of the innovation will foster a strong interaction between the business and its customers (Dudovskiy, 2017). This innovation involves the creation of an e-commerce site which will require all the retailers and consumers using the companys products to create their accounts on the site. With their accounts in hand, these clients will have the freedom to order the Companys products in advance and even give feedbacks after using those products. This site will also have functionality which will allow the managers to complete transactions, track orders, contact retailers, and respond to the customers feedback. In general, this innovation will automate most operations in the Company hence saving on the operational costs. Moreover, it will ensure quick delivery of products from the producers to the suppliers hence resulting in total customer satisfaction. Therefore it is fair to explain that this technological tool will assist us to compete favorably or even better with other companies.

7. Significant factors in the macro environment

There are several factors in the macro environment which are likely to affect this business. Some of these factors include technological, political-legal, socio-cultural, economic, and international factors. These factors can either decrease or increase the need for the companys products or create new product needs. Moreover, it can drive the costs of raw materials up or down. Demographics, for instance, is one of the most crucial macro-environment factors which businesses should always consider before making any major decisions. In this case, we understand that California region is characterized by a multicultural population comprising of Hispanics, African Americans, and Asian Americans. These groups have different needs and expectations. Therefore products and services of the company should be tailored to suit the needs of everybody in the society. Other forces such as technological changes and the legal-political atmosphere are likely to affect the organization. For instance, hiccups on the internet technology are likely to cause huge impacts on the operations of the innovation which will consequently result in major losses for the company. The unstable political environment is bad for business, and it is difficult to operate in such an environment. In general, these are some of the significant factors in the macro-environment which the business should be aware of before starting its operations.


8. Strategic Positioning

Several factors were considered before choosing Southern California as the preferred location. They include the size of the market, security, competition, favorable government policies, and availability of adequate infrastructure. First, Southern California counties have a population of about 23million people. This is a huge market for us to exploit. Moreover, a lot of studies report that consumers from this region are fan favorites of different types of food and beverage products. Therefore, it is fair to say that we have a readily available market waiting to be exploited. Second, although there are some existing companies in the market such as Coca-Cola and Nestle, competition in Southern California is still relatively low. In fact, these companies sometimes do not fully satisfy the needs of Southern California consumers. Therefore, we have...

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