Food wholesaling plays a vital role within the broader food marketing system. It encompasses the crucial processes of assembling, storing, and transporting food products to a diverse range of customers. These customers include retailers, foodservice operators, other wholesalers, government entities, and various other types of businesses that rely on a consistent and efficient food supply.
According to classifications from the Census Bureau’s Economic Census, there are three primary categories of Food Wholesalers:
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Merchant Wholesalers (excluding Manufacturing Sales Branches and Offices – MSBO): Often referred to as third-party wholesalers, these entities are the cornerstone of food distribution. They primarily purchase groceries and related items directly from manufacturers or processors. Their core function is reselling these products to retailers, institutions, and other businesses within the food sector. In 2017, merchant wholesalers accounted for a significant 55 percent of all grocery wholesale sales, a slight decrease from 56 percent in 2012.
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Manufacturing Sales Branches and Offices (MSBOs): MSBOs represent the wholesale operations managed directly by grocery manufacturers. These are essentially extensions of manufacturing companies, designed to market and distribute their own product lines. Notably, the market share of grocery wholesale sales attributed to MSBOs has grown, increasing from 25 percent in 2012 to 27 percent in 2017.
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Brokers and Agents: This category includes wholesale operators who act as intermediaries in food transactions. They facilitate buying and selling on behalf of others, typically earning a commission for their services. A defining characteristic of brokers and agents is that they generally do not take ownership of or physically handle the food products themselves.
Merchant grocery wholesalers are further categorized by the Census of Wholesale Trade based on the breadth and specialization of their product offerings:
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General-line Distributors: Also known as broadline or full-line distributors, these are comprehensive food wholesalers. They manage an extensive range of food products, aiming to be a one-stop shop for their clients. Prominent examples of general-line distributors include C&S Wholesale Grocers, Supervalu, SpartanNash, and Sysco.
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Specialty Distributors: These wholesalers concentrate their operations on specific segments within the food industry. They specialize in the wholesale distribution of particular product types such as frozen foods, dairy products, meat and meat products, or fresh fruits and vegetables. Operating in niche markets allows them to develop specialized knowledge and expertise in the products they handle and the specific needs of the operators they serve. Specialty wholesalers cater to a diverse array of niche operators, including airlines, convenience stores, hotels/motels, and club warehouses. They represent a substantial portion of the market, accounting for 48 percent of grocery wholesale sales. Within the specialty category, leading segments include packaged frozen foods (31 percent of sales), fresh fruits and vegetables (19 percent), and dairy products (17 percent).
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Miscellaneous Distributors: These companies focus on a narrow spectrum of dry grocery items. Their product lines typically include items like canned foods, coffee, bread, or soft drinks. Their specialization allows them to efficiently serve clients with specific needs within these dry grocery categories.
The food wholesaling industry serves both retail and foodservice sectors. Key sales data highlights the distribution across these sectors:
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Sales to retail food stores, representing the food-at-home sector, reached $405 billion in 2012, the most recent year for which data is available.
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Sales to foodservice operators, encompassing the food-away-from-home sector, amounted to $225 billion in 2012.
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Sales to other wholesalers, particularly smaller specialty wholesalers who source products from larger wholesalers, constituted a significant 25 percent of total wholesale sales, indicating a layered distribution network within the industry.
Several food wholesalers are recognized as some of the largest privately held companies in the United States, based on their substantial sales volumes. Forbes’ annual rankings of America’s largest private companies have consistently placed food wholesalers high on the list. For example, C&S Wholesale Grocers has been ranked as tenth largest, Reyes Holdings as number 12, and Gordon Food Service as number 23, demonstrating the significant economic impact of these companies.
The Role of Retail Food Store Wholesalers
Wholesale sales to retail food operations, including supermarkets and convenience stores, are a major segment of the food wholesaling market. In 2012, these sales totaled $405 billion, representing 41 percent of the total grocery wholesale sales volume. This signifies a slight decrease from previous years, with retail accounting for 42 percent in 2007 and 45 percent in 2002, indicating a shifting landscape in food distribution channels.
The retail food store wholesaling sector is characterized by ongoing structural changes, including significant consolidation. A notable example is the 2013 merger between Spartan Stores, then the nation’s ninth-largest grocery wholesaler, and Nash Finch, the largest food wholesaler serving military commissaries and exchanges. The resulting entity was named SpartanNash. Further consolidation occurred in 2014 when C&S Wholesale Grocers, the largest grocery wholesaler in the U.S., acquired the warehouse and distribution operations of Grocers Supply, which was the eighth-largest wholesaler at the time. This acquisition followed C&S’s earlier purchase of Associated Wholesalers Inc., the ninth-largest U.S. grocery wholesaler, also in 2014.
This trend of consolidation in food retailing has led to shifts in negotiation power. Manufacturers and large retailers, offering a wide array of products, are increasingly finding it advantageous to negotiate directly with each other. This direct engagement reduces the influence of traditional wholesalers. Self-distribution is becoming the preferred vertical coordination method for large grocery chain stores, particularly those with 11 or more stores. Conversely, the reduction in the number of wholesalers can limit options for smaller, independent grocers (those with 1-10 stores) in sourcing their merchandise.
The Significance of Food Service Wholesalers
Restaurants and other food service businesses represent another crucial customer segment for food wholesalers. Sales to these firms reached $225 billion in 2012, accounting for 23 percent of all sales of groceries and related products by food wholesalers. This share has remained consistent since 2007. While retail grocery outlets and food service companies compete for consumers’ food spending, the wholesalers serving these two sectors generally operate in distinct markets, without direct competition for customers.
Industry analysts commonly categorize food service distributors into three primary types:
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Broadline Food Service Distributors: These are traditional distributors who purchase a wide spectrum of food products from manufacturers. They maintain inventories of these goods in their distribution centers to supply a diverse clientele. Most broadline food service distributors offer value-added services tailored to meet the needs of single-store restaurants and smaller chains. Major players in this category include Sysco and US Foods.
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Specialty Food Service Distributors: Unlike broadline distributors, specialty distributors focus on niche markets. They do not stock a wide range of products but instead specialize in specific product categories or service types where specialized knowledge of product sourcing, handling, or service is essential. These specialists serve a variety of niche operators, such as convenience stores, hotels/motels, and club warehouses, requiring tailored solutions.
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System Food Service Distributors: These distributors cater primarily to chain restaurants characterized by centralized purchasing and menu development. Operators within these chains may have less need for the value-added services typically offered by broadline or specialty distributors, such as information on new products or assistance in menu development and preparation. Chain restaurants often have standardized needs that system distributors are structured to efficiently meet.
In a significant industry event, Sysco’s proposed merger with US Foods (formerly U.S. Foodservice) was abandoned in 2015 after being blocked on antitrust grounds. Sysco is the largest distributor of grocery items to U.S. food service operations, serving restaurants, hospitals, and cafeterias, based on sales volume. US Foods is the second-largest food service distributor, and the merger would have significantly altered the competitive landscape of the industry.
This overview provides a comprehensive understanding of food wholesalers, their classifications, their roles in the food supply chain, and their importance in both retail and foodservice sectors.
