Dive Brief:
- National distributor Performance Food Group (PFG) announced on July 1 it has agreed to acquire competitor Reinhart Foodservice, the nation's second-largest privately held food distribution company, for $2 billion, according to a press release.
- "This transaction provides us with greater overall scale, a diverse customer base, including a solid base of independent customers, and builds upon our strong distribution platform," PFG CEO George Holm said in the release.
- PFG's operating expenses rose 9% this year due to increases in personnel costs and other factors. By absorbing Reinhart's additional distribution capacity, the company hopes to leverage efficiency gains to reduce operations costs by as much as $50 million over the next three years.
Dive Insight:
PFG stands to benefit from the acquisition on two fronts: An expanded product portfolio and increased distribution capacity.
PFG serves clients through its brands focusing on everything from high-end steaks and international cuisines to snacks for hotels and conference centers. Reinhart's sales network, on the other hand, focuses on independent restaurants, healthcare, military and education-related organizations.
PFG has a coast-to-coast network of 73 distribution centers. Reinhart's 26 distribution centers, which PFG has said it will keep open, are concentrated in Midwestern and East Coast major cities including Milwaukee, Boston, Pittsburg and New Orleans. Holm said PFG hopes this will strengthen its ability to save costs by shortening trucking routes and improving efficiency in a market demanding fresher food and faster delivery times.
This is a strategy some food supply chains are pursuing as the increasing cost of trucking (due to driver shortages, high fuel costs and increased demand for cold freight transport) can be a drain on margins. Dollar General has invested in building new distribution centers to cut down on long-haul freight rates to avoid customer price increases.
PFG's Reinhart acquisition comes after PFG absorbed another leading distributor, Eby-Brown, in March to help its convenience, prepared meals and snacks division, Vistar, expand further into the market. "There is significant overlap with suppliers and existing customers, across several product categories. Vistar and Eby-Brown combined will service over 75,000 convenience locations," Holm said on the company's Q3 earnings call. The company's M&A pipeline "remains robust," according to the CEO, hinting at greater expansion in the future.