Managing Ed’s view: Middleby Corp’s dealer buy poses many questions about global channel consolidation

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The first thing I did when I heard that Middleby Corporation was buying one of the largest kitchen dealers in the US was check to see how the news had been reported in its homeland.

I can’t say I was surprised when I saw that the country’s most renowned industry trade publication had described it as a move that would “send shockwaves through the industry”.

Any market where dealers are inherently dependent on manufacturers for product sales is undoubtedly bound to be unsettled by the prospect of a supplier moving down the food chain or branching into areas that might ordinarily be viewed as the domain of partners.

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Middleby is one of the most prolific consolidations in the industry. Its acquisition of other businesses is a central component of a strategy that has successfully propelled it into new markets, armed it with additional manufacturing resource and allowed it to develop new client bases.

But up to now, most of its acquisitions have involved product-led manufacturers, not fully-fledged solution providers with skills in kitchen design, services and stainless steel fabrication.

In buying QualServ Solutions, Middleby is certainly making a bold statement about the directions its business might take in future. And for those looking in from the outside, it poses some intriguing questions about how global distribution channels in the catering equipment industry might change and evolve over the next decade.

It is important to note that QualServ is not in the UK and nor has Middleby made any comments to suggest that will change, expect to say that it intends to expand the company’s capabilities into international markets through its existing footprint.

But UK dealers will certainly have empathy for US counterparts that might be wondering what this all means for them if Middleby now has the in-house resources to offer the same customer-facing services and expertise they do.

Distributors are notoriously protective of their customer bases anyway, maybe even more so if they consider the competition to be coming from angles they previously didn’t have to worry about.

Alternatively, you could argue that the lines between manufacturer, dealer and solution provider are already massively blurred, and this latest development is just another inevitable step in that direction.

After all, manufacturers buying dealers and service-based businesses is unusual, but it’s not unprecedented. Look at another global name in the industry, Ali Group, for instance. It runs businesses such as Service-Line and Miller’s Vanguard, which specialise in reactive maintenance, logistics and installation and equipment supply, even though 95% of Ali Group businesses are manufacturers and brands in the most conventional sense. They all co-exist without too much friction.

To understand Middleby Corporation’s rationale, you’ve got to consider the dynamics that underpin it. On the one hand, relying on pure product sales for organic growth is a challenge that all manufacturers have to contend with and for some the answer is looking at how they can generate value from other avenues.

On the other, the big global operators, which companies like Middleby heavily depend on for volume, are increasingly demanding a more integrated supply chain. Some want their logistical, engineering and services to come from the same people that are providing their infrastructure, and they are willing to cut loose and go elsewhere if they can’t get that from their incumbent supplier.

Acquiring QualServ might be interpreted as a move that places Middleby into direct competition with the core services that some of its US partners provide, such as kitchen fabrication for instance, but you can’t deny that it will allow the firm to be able to offer integrated equipment solutions with its existing portfolio of brands and products.

The net result of this is that it can expand the services that global restaurant chain customers are calling out for on a gargantuan but ultimately streamlined scale.

The issue of who ‘owns’ the customer has been a bone of contention for dealers and suppliers for as long as anyone can remember, but at the highest global level these days it’s the customer that holds all the cards when it comes to who provides the services they are prepared to pay for.

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