What challenge(s) do our clients face?
Food service is a fragmented and highly specialized market, with specific dynamics and challenges, which players must be able navigate with agility and precision.
Survival and success in the food service market often depends on an organizations’ ability to navigate a large number of specific challenges which are relevant to this sector; such as:
- Dealing with a fragmented market: local restaurants represent up to 80% of the market, depending on the country, and they are highly specialized, including bakeries, cafés, restaurant chains, industrial kitchens and others.
- Managing a complex supply chain: making and delivering perishable or frozen/refrigerated products with minimal waste.
- Local players tend to be less sophisticated in terms of management and have less working capital / storage capacity, which results in a high frequency purchases, which can be weekly or even higher.
- Products are specific, in terms of packaging volume, and demand a high degree of standardization/uniformity – format, thickness, color, etc. that allows dishes to be replicated.
- Brand development is a challenge – as the brand does not reach the final consumer – and what drives the purchase is the quality and price of the product itself.
- Categories have different dynamics: those with a high price per kg and a high volume of consumption, such as proteins and beverages, is where the POS spends most of it’s energy to obtain products with good quality for a lower price.
- For large restaurant chains, the challenge is to ensure standardization and efficiency. Discussions center around central kitchen models, centralized versus decentralized purchase and production, and optimization of the timetables of the restaurant and management team.
- Qualification of the workforce and management of operation: raw materials, purchases etc … are also challenges, especially in the case of large networks, which requires control systems, clear KPIs, constant training and a corporate structure that promotes standardization.
How do we help?
Our experience along the value chain in different markets allows us to address these challenges with a focus on our client’s specific context and objectives.
Integration has worked with a broad range of clients including food manufacturers, distribution partners, logistics operators, and food service chains, in a variety of geographies. We have been involved in strategic GTM projects and market scans; as well more operational improvement projects such as cost efficiency projects, logistics network redesigns and implementation of systems and process projects, among others.
In recent years we have helped food service clients address broad and multifaceted challenges such as:
- How to create differentiation in a fragmented, specialized market with a high expectation of service level?
Here, we have determined alongside our clients the levers for differentiation based on their customer base – this could be assortment, logistic service level, price, commercial policy, sales service etc. Leveraging our GTM methodology we are able to identify market clusters who could be served in a similar manner, and the cost of serving each one.
- How to optimize efficiency in the management of food service chains?
Integration has expertise in many efficiency projects, working, for example, in optimizing the central kitchen model, with business cases for automation of production processes.
We have also delivered projects with POS teams, implementing systems to ensure greater control; and decreasing the idle capacity of restaurants, making studies of staff adjustments, working hours, and span of control to adjust for daily peaks and troughs.
- How to meet the logistics needs of the POS; which has high frequency of purchase and low storage space?
In this scenario, Integration has well-established methodologies to ensure good diagnosis, design, and delivery of optimized logistics networks, whether from industry, distributors or other operators.
By understanding qualitatively and quantitatively what adds value to the customer we can define what to increase and what to reduce in customer service from a logistical point of view: punctuality, fulfillment, minimum order, frequency of delivery, lead time, prioritization of customers, and add-on services (FOB, palletization, etc.). With this clarity, our clients can act prepare to offer a better-quality service at a lower cost.
We have worked with clients in different categories, geographies and positions along the value chain:
Our client was a holding company focused on an aggressive acquisition strategy – aiming to consolidate the foodservice distribution market in Brazil. They had acquired a number of strong distributors around the country; but were struggling to find a commercial strategy that connected the different distributors they had acquired throughout the years.
Integration utilized its experience in the Private Equity & Investments market to establish one of the portfolio companies as a ‘platform for growth’. Under this arrangement we designed a GTM strategy and structure for a single company, which could be leveraged by the rest of the portfolio.
This GTM took into consideration the product categories, regions, and POS type characteristics for the whole country so that any new state and new acquisition would be covered in the long-term. Based on this definition, we defined the activation strategy, prioritizing all the opportunities in terms of category and POS type for each state.
Based on the GTM strategy and activation strategies the holding company was able to identify the required changes per category and POS per state of Brazil. This made clear the path to growth for their current portfolio and provided a view of the future acquisitions that would be needed to best fit the growth strategy.
The projected revenue increase of implementation of the changes was ~USD 80M / year.
Following the merger of three large fast food retail companies, it was necessary to standardize stores systems and ERP for the entire group. Integration was asked to support during this critical moment to ensure a smooth and swift transition; whilst also identifying potential synergies between the companies which would reduce operating costs to at least industry-standard level.
Integration took on a project management role to deliver the transition end to end. In our central role, we provided coordination between representatives from the global management team of the three companies and various suppliers to ensure all processes, systems, and roles and responsibilities were appropriately mapped. Based on this mapping we worked with our internal and external experts to identify the best method for system consolidation taking into consideration cost, complexity and speed of implementation.
Also, Integration had a role to identify potential synergies. We went above and beyond standard back-office and headcount reduction approaches looking also towards optimizing the central kitchen model, and the POS team, to decrease the idle time of restaurants.
Based on a clear and detailed consolidation plan, the new sales and management systems were implemented successfully without interruption to the operation.
Furthermore, we were able to identify synergies which could lower costs beyond the board’s expectations. Our differential in this case was to carry out extensive field visits in order to better understand the client reality and to identify opportunities that just numbers would not tell us (e.g. in reducing POS headcount).