Technomic Sees Increasing Role for Foodservice GPOs

FSGPOs

Recent research by Technomic shows that group purchasing organizations (GPOs) in the foodservice channel continue to grow in size, scope and influence. From 2009 to 2012, foodservice operator purchases made through GPOs significantly outpaced the broader industry growth rate. Last year alone, restaurants and other foodservice operators made $19.7 billion worth of food, beverage and related purchases through these groups.

Defined as third-party organizations that negotiate discounts and aggregate purchases for operators in various foodservice segments, GPOs have benefited from the profitability challenges facing operators, who express strong satisfaction with the significant cost saving they are able to achieve via GPOs.

“While operators are definitely satisfied, we see mixed opinions among manufacturers and distributors serving the foodservice industry,” noted David Henkes, a vice president at Technomic and one of the study authors. “For foodservice operators, compliance remains the biggest challenge, especially among independents where the preference is to make their own supplier and brand choices. While we clearly identified manufacturers and distributors that have been successful in growing with GPOs, other companies note that GPOs present challenges that require strategic solutions.”

Gary Karp, executive vice president at Technomic and the study’s co-author added, “Best practices for manufacturers and distributors suggest that GPO participation should be viewed in light of a company’s priorities and strategies. Not all manufacturers’ or distributors’ business models work with GPOs, but it is possible to grow and succeed with them if sound business practices are used.”

GPOs have their roots in the healthcare foodservice segments, but have rapidly expanded into other markets including educational venues, lodging, recreation, and, more recently, independent restaurants. Among these segments, GPOs control 21 percent of purchases. Going forward, the growth in purchases controlled by GPOs is expected to outpace overall industry growth and could reach 23-25 percent of relevant purchases within three years.

Technomic’s newest study updates its prior research on GPOs and investigates two hotspot issues—the proliferation of GPOs focused on “local market” independent operators and issues created by price extendibility. To learn more about this research, please contact David Henkes.

View the full article on Reuters

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