Distributor fragmentation makes the market what it is

If I was asked to pick one word to best sum up the catering equipment distributor landscape it would probably be this: fragmented.

There are some powerful kitchen and project houses in the country that turn over in excess of £15m to £20m a year, but on the whole it is fair to say the market is largely dominated by local and regional SMEs with revenues in the single-digit millions.

While we saw JLA go on a bit of a buying spree at the end of last year, there hasn’t really been the sort of fervent consolidation associated with other industries where fragmentation is symbolic of the sales channel.

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One of the main reasons for the diversity of the sector seems to be that the catering equipment reseller market is inherently local in its approach: dealers have generally done a good job of setting up organisations to serve the catering establishments, restaurants, schools and businesses in their communities.

It would be interesting to know what percentage of total orders the average catering equipment dealer receives from customers within a 50-mile radius of its base. I’d wager that for most provincial dealers the figure would still be pretty significant.

While I say that, it certainly won’t have gone unnoticed by a lot of people that one of the key trends of recent years has been the readiness of kitchen houses to travel further afield.

The number of dealers from outside London now regularly winning and delivering schemes in the capital has shot up hugely. The same is true of other major British cities where restaurant investment is rife.

Whether this eventually leads to more consolidation activity as companies seek to entrench themselves in a geographic area by buying, merging or partnering with a ‘competitor’ remains to be seen, but it certainly wouldn’t be a shock if it did.

This month’s news that Zanussi is to target the UK market through a network of exclusive distributors will have grabbed many people’s attention. But one of the more notable aspects of that story is that the five dealers which secured the sales rights are collectively branding themselves the ‘Springboard Group’.

I’m told there is no ownership, structural or operational changes with any of the companies involved, but clearly the fact they have created this ‘national network’ with its own name suggests there is an advantage from uniting under a common brand. It will be intriguing to see how this develops in the months to come.

Out of a fragmented market often comes opportunity for those willing to seize the moment.

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