The Food Service Industry: 3 Things You Need to Know

Johnny Marx
November 14, 2016

The food service industry consists of many players to keep track of, many different channels for getting products to market, and many different strategies that can lead to success or failure in the space. Add to that the rapid pace of change in food service industry technology as well as an ever changing regulatory environment, and it all adds up to a big challenge for new and even established manufacturers and distributors in the food service industry. We’re here to help cut the confusion with the top three things manufacturers and distributors need to know about the food service industry:

  1. The food supply chain is highly complex.

When we think of the food service industry, we typically think of the retail and restaurant establishments that sell food directly to consumers. But those players are just the tip of an iceberg that represents an extremely complex food supply chain. In order for food to reach the retailer and end consumer, it actually follows a rather complicated path, full of highly specialized players. Here are a few of the players that are typically involved in the food service industry:

  • Manufacturers’ reps. Manufacturers reps, also called food brokers, manage the process of selling food directly to stores on behalf of manufacturers. They typically outsource the logistics of delivery to a third party.
  • Wholesale distributors. Wholesale distributors manage the process of selling, storing, and delivering the food products. . The wholesale distributor differs from a manufacturers’ rep in that they physically take possession of and handle the food and are often in charge of logistics and end-consumer marketing efforts.
  • Self-distributing retail. Large retail chains like Walmart, Kroger, Safeway, and Target are both retailers and distributors with their own logistics networks and distribution centers located in regional hubs around the country. If the retailer has its own trucks, it typically is a self-distributing retailer.
  • Foodservice reps. Similar to manufacturers’ reps, food service reps sell food to restaurants but do not  physically store or deliver products or handle logistics.
  • Wholesale foodservice distributors. Foodservice distributors buy and sell products while handling the logistics involved with getting food from the manufacturer to the retailer’s or restaurant’s stockroom.
  • Self-distributing food service. Similar to large retail chains, there are restaurant chains so large that they handle their own foodservice distribution. McDonald’s and Golden State Foods are probably the best known of these. Again, if the restaurant has its own trucks, it is likely to be self-distributing.
  1. Regulation and safety are key concerns.

Obviously, food safety is a big concern; as a result, regulation plays a big role in how things get done in the food service industry. There are numerous regulatory bodies involved in regulating the food service industry. They include the Food and Drug Administration and the USDA, as well as more than 3,000 state, local, and regional agencies. These agencies work together and independently to create the complex set of food safety standards that govern how food is manufactured, distributed, and handled in the United States. There are also regulatory bodies outside the United States that impact the global food industry. In a world where much of the food we eat every day is globally sourced, this results in a highly complex and constantly changing set of regulations that govern the industry. Recently, technology has made it possible to dramatically improve food safety with enhanced track-and-trace capabilities that provide more data about how food has been handled through the supply chain. Best practices in this area have in turn enabled regulators to increase regulation in efforts to improve food safety. Currently, the FDA and USDA are rewriting the rules around food handling in cooperation with industry insiders as part of the Food Safety Modernization Act. One of the biggest issues in food safety regulation is maintenance of the cold chain, in other words, making sure that products like dairy and meat that have to be kept cold are maintained at appropriate temperatures. Technology plays a big role in enabling food safety regulations to become more stringent and this trend is likely to continue as technology such as the Internet of Things (IoT)makes it possible to gather more data. Another major issue in the food service industry is standardization around labeling, product descriptions, and claims. Government organizations at the state, federal, and international level may have different regulations around food labeling for foods designated as organic, genetically modified, natural, healthy, or other categories. These are often highly regulated and subject to change as well, depending on the market.

  1. Technology is critical.

As indicated with the continued emphasis on food safety, traceability, and regulation, technology plays a key role in the food service industry. This role is likely to only expand in the coming years: food service companies are increasingly expected to be supply chain technology companies. Two supply chain technologies that are having a growing impact on the food service industry include:

  • Mobile apps and devices. Mobile devices such as smartphones and tablets are revolutionizing how food service industry companies are ordering food, tracking it through the supply chain, paying for it, and managing is placement on store and warehouse shelves. Mobile order management and payment apps now enable orders to be placed anywhere simply by tapping a device, eliminating the need for paper forms. As the technology improves, it will also help with managing distribution warehouses and manufacturing processes as mobile devices become more integral in the supply chain.
  • IoT and big data. As more devices become connected to the Internet of Things—from containers and pallets to trucks, forklifts, even the products that are used in the food service supply chain such as cold storage refrigerators and coffee makers—manufacturers and distributors will have access to more data that can help them track, trace, and manage food in their supply chain. As regulations tighten, companies that succeed must learn to leverage this data effectively.

The food service industry increasingly relies on a complex web of players, regulations, and technologies to ensure that food reaches customers safely. What do you wish you had known about the food service industry when you first began your career in food manufacturing or distribution? We’d love to hear about it in the comments.