Name: Quick guide to the segments and sectors of the foodservice industry
Uploaded: 2024-06-24T15:08:09.222Z
Duration: 542.31
Description: What exactly do we mean by the foodservice industry? Join David Henkes, Senior Principal at Technomic, as he breaks down the different segments that make up the industry, and explains how they work together to shape the industry.

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English

{{00:00:07}}
The main players within food
service, when you look at sort of

{{00:00:10}}
the supply chain or how it works,
manufacturers are at the top.

{{00:00:15}}
They create food and beverage
products, packaging products, , there's

{{00:00:20}}
equipment manufacturers, there's
other types of manufacturers.

{{00:00:23}}
And so the manufacturer community,
sells their product then

{{00:00:27}}
typically into distribution.

{{00:00:30}}
And so food service distribution,
when you think about them, these

{{00:00:33}}
are the likes of a Cisco, U.

{{00:00:34}}
S.

{{00:00:35}}
Foods, Gordon Food Service.

{{00:00:37}}
But we would also include,  cash
and carries like a Restaurant Depot.

{{00:00:42}}
We also actually include club stores
like Sam's and Costco,  in there.

{{00:00:46}}
And so food service distribution is really
the route to market that manufacturers use

{{00:00:51}}
to get their products to restaurant
and food service operators.

{{00:00:55}}
Food service operators are essentially
the customers in most ways.

{{00:00:59}}
A lot of times I think,  you know,
the, the consumer is the ultimate,

{{00:01:03}}
patron or the ultimate customer of
the industry, but really it's the

{{00:01:06}}
restaurants and food service operators
that select and make the decisions on

{{00:01:10}}
what products to buy, what brands to buy.

{{00:01:13}}
And so within food service, you
have the restaurant community

{{00:01:16}}
broadly defined and that's,  limited
service restaurants and full service

{{00:01:21}}
restaurants within limited service.

{{00:01:23}}
You've got quick service and fast casual,
which is more of an upscale fast food,

{{00:01:28}}
if you will, an upscale limited service.

{{00:01:30}}
And then within full service you
have casual dining, you've got

{{00:01:34}}
fine dining and you've got family
dining are kind of the three breaks

{{00:01:37}}
that we do,  within full service.

{{00:01:40}}
And then beyond that, you've got retail
food service, which is convenience.

{{00:01:44}}
And supermarket food service,
that's food service sold in

{{00:01:47}}
supermarkets, not necessarily the
whole entirety of the center store.

{{00:01:51}}
You've got travel and leisure, which
is hotels, food and beverage sold in

{{00:01:56}}
hotels, it's recreational venues, it's
clubs,  transport,  and then you've

{{00:02:02}}
got what we call institutional or non
commercial, and those would be business

{{00:02:06}}
feeders, educational feeders, whether it's
primary or secondary schools or colleges.

{{00:02:12}}
You've got healthcare venues,
hospitals, and nursing homes, and

{{00:02:17}}
senior living, things like that.

{{00:02:20}}
And then finally you
get into other military.

{{00:02:23}}
You've got corrections.

{{00:02:25}}
And then a segment that we call
refreshment services, which is a separate

{{00:02:28}}
segment, and it kind of overlays a lot
of other segments that I just mentioned.

{{00:02:33}}
But that would be refreshment
services, which is essentially

{{00:02:35}}
vending micro markets.

{{00:02:36}}
And so they have  their business
in a lot of the different types of,

{{00:02:41}}
establishments that I just talked about.

{{00:03:01}}
I think when you look at the
interaction, I mean, manufacturers

{{00:03:04}}
sell their products to distribution.

{{00:03:05}}
And so there's typically trucks
that are going to distributors.

{{00:03:11}}
There's also something that we
call redistributors that if a

{{00:03:14}}
manufacturer can't sell a full
truck load to a single distributor

{{00:03:18}}
house or to a single distributor
location, they would sell it to.

{{00:03:21}}
What we call a redistributor that then
distributes to all other distributors.

{{00:03:26}}
Distributors then have
their own sales force.

{{00:03:28}}
They're out.

{{00:03:29}}
They're making daily deliveries
essentially to all of their customers,

{{00:03:33}}
whether they're restaurants or
other food service establishments.

{{00:03:37}}
And typically they're selling their own
brands or selling manufacturer brands or

{{00:03:40}}
selling a whole suite of services,  of
the different types of products that

{{00:03:45}}
they carry within their warehouse.

{{00:03:47}}
And again, that is one,
because it's a logistics play.

{{00:03:51}}
Efficiencies and cost control is paramount
for distribution as they're going to,

{{00:03:56}}
restaurants and food service and margins
are pretty slim within distribution

{{00:04:00}}
because,  you know, they're essentially
marking up the product a little bit and

{{00:04:05}}
then using that markup to pay for their
sales and all of the logistics activity.

{{00:04:08}}
In

{{00:04:14}}
terms of the different experiences
you get, I would say in general,

{{00:04:17}}
when we talk about the industry.

{{00:04:20}}
We talk about two axes of competition.

{{00:04:22}}
There's convenience and
there's experiential.

{{00:04:24}}
And while operators and restaurants can
offer a little bit of both, you really

{{00:04:29}}
have sort of a, kind of a broad dichotomy
between convenience driven restaurant

{{00:04:34}}
operators, that would be primarily fast
food or quick service restaurants, right?

{{00:04:40}}
So they're competing more on speed of
service, on drive through, on takeout

{{00:04:46}}
and delivery, on really getting a
product to a consumer fairly quickly.

{{00:04:51}}
Certainly you want to have a high
quality product and all of that,

{{00:04:54}}
but really sort of the basis for
competition in the limited service

{{00:04:58}}
segment is going to be one more
toward the speed and convenience side.

{{00:05:03}}
That other axis of competition
that I talked about, experiential,

{{00:05:06}}
tends to be where people are
eating inside the restaurant.

{{00:05:10}}
And so certainly there's some
limited service restaurants

{{00:05:13}}
where that is important.

{{00:05:14}}
I think some of these upscale,
fast, casual type operators.

{{00:05:18}}
But for the most part, it's a full
service restaurant phenomenon.

{{00:05:21}}
So the, the experience that you get
within a full service restaurant

{{00:05:25}}
is really essentially what defines
the value proposition for that.

{{00:05:30}}
And so you think about a fine
dining establishment, or you think

{{00:05:33}}
about maybe casual dining, where
they've got a full bar and beverage

{{00:05:36}}
program, or a broad menu of products.

{{00:05:40}}
Or, or you think of a mid scale restaurant
that's maybe breakfast oriented.

{{00:05:44}}
But, but in any, in any of those
instances, they're really trying

{{00:05:47}}
to build the experience and create
something unique to the patron, that is

{{00:05:53}}
not necessarily driven by convenience.

{{00:05:55}}
Now certainly they're doing takeout and
delivery on their own, and so they're

{{00:05:59}}
starting to compete in that way as well.

{{00:06:01}}
But that's really the differences, and
I think you can really analyse, How a

{{00:06:07}}
restaurant sells by those two axes of
competition and whether they're trying to

{{00:06:10}}
be more of a convenience driven  operator
or if they're trying to be more of an

{{00:06:14}}
experience, an experiential led operator.

{{00:06:23}}
When you talk about overlap, what has
happened particularly since the pandemic

{{00:06:28}}
is the rise of what we call off premise.

{{00:06:31}}
So off premise is takeout delivery.

{{00:06:34}}
We would include drive through in there.

{{00:06:36}}
And historically that's been an area that
has been limited service oriented, right?

{{00:06:41}}
I mean, pre pandemic.

{{00:06:42}}
People were mostly getting takeout
or delivery,  or a drive through

{{00:06:48}}
from a limited service restaurant.

{{00:06:49}}
Now the pandemic changed
all of that to survive.

{{00:06:52}}
Full service restaurants had to
immediately pivot into off premise, into

{{00:06:57}}
figuring out how to do delivery, how
to maybe expand their takeout programs.

{{00:07:02}}
And so I think when you talk about maybe
where there's overlap, because typically

{{00:07:06}}
a limited service restaurant is very
different than a full service restaurant.

{{00:07:10}}
But when you talk about ordering food
through an app or you talk about,  you

{{00:07:15}}
know, picking something up to bring
home suddenly, all of these restaurants

{{00:07:19}}
are competing against each other.

{{00:07:21}}
And there's a lot more
overlap in that service.

{{00:07:22}}
And so I think the off premise that take
out and delivery area is really one where

{{00:07:28}}
you now see competition really going head
to head among all kinds of restaurants.

{{00:07:33}}
Quite frankly, it's not
even just restaurants.

{{00:07:35}}
It's also convenience stores
and it's other restaurants.

{{00:07:37}}
Parts of the industry that offer a grab
and go or a takeout program as well.

{{00:07:41}}
And so there's, there's a lot
more competition happening in that

{{00:07:44}}
part of the business and perhaps
on the sit down side of things.

{{00:07:54}}
I think when you look at how
operators buy, they're typically

{{00:07:57}}
buying not necessarily directly
from the manufacturer, but they

{{00:08:01}}
are buying from a distributor.

{{00:08:03}}
And so the distributor tends to be the
face of a lot of things to the operator.

{{00:08:08}}
And so, quite frankly, that distributor
sales representative that's calling

{{00:08:12}}
on, the restaurant is, in many ways,
a primary driver for who a restaurant

{{00:08:18}}
is going to use and what distributor
they're going to use,  selection,

{{00:08:22}}
price, value, all of that plays a role.

{{00:08:25}}
Now, what we're seeing growing, though, is
what we call the contract business, right?

{{00:08:28}}
And so, there are instances now,
and in fact, it's growing and

{{00:08:31}}
it's becoming very prevalent.

{{00:08:33}}
where, restaurant and food service
operators are contracting a specific

{{00:08:38}}
price directly with the manufacturer.

{{00:08:40}}
Still delivered by a distributor,
but the contract, the contracted

{{00:08:45}}
nature of the business means that
increasingly,  there is a more of a direct

{{00:08:51}}
relationship between restaurant and food
service operators and manufacturers.

The main players within food
service, when you look at sort of

the supply chain or how it works,
manufacturers are at the top.

They create food and beverage
products, packaging products, , there's

equipment manufacturers, there's
other types of manufacturers.

And so the manufacturer community,
sells their product then

And so food service distribution,
when you think about them, these

But we would also include,  cash
and carries like a Restaurant Depot.

We also actually include club stores
like Sam's and Costco,  in there.

And so food service distribution is really
the route to market that manufacturers use

to get their products to restaurant
and food service operators.

Food service operators are essentially
the customers in most ways.

A lot of times I think,  you know,
the, the consumer is the ultimate,

patron or the ultimate customer of
the industry, but really it's the

restaurants and food service operators
that select and make the decisions on

what products to buy, what brands to buy.

And so within food service, you
have the restaurant community

broadly defined and that's,  limited
service restaurants and full service

You've got quick service and fast casual,
which is more of an upscale fast food,

And then within full service you
have casual dining, you've got

fine dining and you've got family
dining are kind of the three breaks

And then beyond that, you've got retail
food service, which is convenience.

And supermarket food service,
that's food service sold in

supermarkets, not necessarily the
whole entirety of the center store.

You've got travel and leisure, which
is hotels, food and beverage sold in

hotels, it's recreational venues, it's
clubs,  transport,  and then you've

got what we call institutional or non
commercial, and those would be business

feeders, educational feeders, whether it's
primary or secondary schools or colleges.

You've got healthcare venues,
hospitals, and nursing homes, and

And then finally you
get into other military.

And then a segment that we call
refreshment services, which is a separate

segment, and it kind of overlays a lot
of other segments that I just mentioned.

But that would be refreshment
services, which is essentially

And so they have  their business
in a lot of the different types of,

I think when you look at the
interaction, I mean, manufacturers

And so there's typically trucks
that are going to distributors.

There's also something that we
call redistributors that if a

manufacturer can't sell a full
truck load to a single distributor

house or to a single distributor
location, they would sell it to.

What we call a redistributor that then
distributes to all other distributors.

Distributors then have
their own sales force.

They're making daily deliveries
essentially to all of their customers,

whether they're restaurants or
other food service establishments.

And typically they're selling their own
brands or selling manufacturer brands or

selling a whole suite of services,  of
the different types of products that

And again, that is one,
because it's a logistics play.

Efficiencies and cost control is paramount
for distribution as they're going to,

restaurants and food service and margins
are pretty slim within distribution

because,  you know, they're essentially
marking up the product a little bit and

then using that markup to pay for their
sales and all of the logistics activity.

terms of the different experiences
you get, I would say in general,

There's convenience and
there's experiential.

And while operators and restaurants can
offer a little bit of both, you really

have sort of a, kind of a broad dichotomy
between convenience driven restaurant

operators, that would be primarily fast
food or quick service restaurants, right?

So they're competing more on speed of
service, on drive through, on takeout

and delivery, on really getting a
product to a consumer fairly quickly.

Certainly you want to have a high
quality product and all of that,

but really sort of the basis for
competition in the limited service

segment is going to be one more
toward the speed and convenience side.

That other axis of competition
that I talked about, experiential,

tends to be where people are
eating inside the restaurant.

And so certainly there's some
limited service restaurants

I think some of these upscale,
fast, casual type operators.

But for the most part, it's a full
service restaurant phenomenon.

So the, the experience that you get
within a full service restaurant

is really essentially what defines
the value proposition for that.

And so you think about a fine
dining establishment, or you think

about maybe casual dining, where
they've got a full bar and beverage

Or, or you think of a mid scale restaurant
that's maybe breakfast oriented.

But, but in any, in any of those
instances, they're really trying

to build the experience and create
something unique to the patron, that is

Now certainly they're doing takeout and
delivery on their own, and so they're

But that's really the differences, and
I think you can really analyse, How a

restaurant sells by those two axes of
competition and whether they're trying to

be more of a convenience driven  operator
or if they're trying to be more of an

experience, an experiential led operator.

When you talk about overlap, what has
happened particularly since the pandemic

Expert Insight

What exactly do we mean by the foodservice industry? Join David Henkes, Senior Principal at Technomic, as he breaks down the different segments that make up the industry, and explains how they work together to shape the industry.

Industry Basics

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David Henkes

Discover insights from other experts

Senior Principal 

Henkes elaborates on the organisation of the food service supply chain, detailing each segment and they are connected.

Understanding Food Service Relationships

Discover the the food service supply chain and how manufacturers connect with distributors, optimising distribution for maximum efficiency.

 How segments work together in supply chains

Henkes explores the restaurant scene's two sides: speed versus experience. From fast food to fine dining, find out how each competes to satisfy customers.

 Differentiating food services segment

Learn how full-service restaurants moved into delivery and takeout, blurring the lines of competition after the pandemic.

How foodservice segments overlap

Discover how distributors influence dining choices and how direct contracts between restaurants and manufacturers are changing relationships.