PFG and Reinhart: Our Perspective

by David Henkes, senior principal

With the announcement late last month that Performance Food Group (PFG) was acquiring Reinhart Foodservice from Reyes Holdings, it provides another reminder of how much size and scale plays into the future success of foodservice distributors. With this acquisition, as well as the pending acquisition of Eby-Brown, PFG reaches nearly $30 billion in total revenue and creates a strong national foodservice presence that more fully provides a third alternative to Sysco and US Foods. Reinhart adds nearly 30 more distribution centers to PFG’s portfolio and, while there will likely be some consolidation, it does provide more touchpoints for the operator.

Strategically, this move helps create a stronger broadline business for PFG. Recent acquisitions have helped propel PFG to be well-situated in segments outside of “traditional” foodservice, with the aforementioned Eby-Brown helping build upon PFG’s success with Vistar in targeting convenience-driven operators and other acquisitions, such as Continental Concessions, Jenny Service and Fox River Foods, helping build out capabilities in strategically important alternative segments and categories. In fact, PFG’s recent performance has been helped dramatically by significant growth in the Vistar business. At the same time, PFG’s broadline business was always significantly smaller than either Sysco or US Foods, and the Reinhart acquisition strengthens the broadline piece of PFG’s business and gives the company further access to a national network of growing independent “street” restaurant operators. PFG has publicly stated that one of its strategic platforms is to emphasize and shift its portfolio more to the independent operator, and this acquisition clearly helps do just that.

A secondary benefit of this acquisition is creating scale to help drive down costs and increase profitability. In its most recent public filing, PFG reported strong top-line revenue and case sale results, but also saw major increases in costs that in turn led to negative operating margins. By combining with Reinhart, PFG believes that it can save up to $50 million in costs over the next three years, significantly improving its overall profitability. This scale will also help it compete in segments that are heavily contract-oriented. As group purchasing organizations continue to grow and chain operators gain more leverage, the greater scale a distributor has can provide counter leverage to these operators and also gives it greater leverage in negotiations with the supplier community.

Going forward, this may be one of the last true “mega-mergers” and acquisitions in foodservice distribution. When the U.S. government vetoed the Sysco-US Foods merger roughly four years ago, it signaled the fact that the government will take a hard line on any merger and acquisition activity that it views as anticompetitive, and the acquisition of Reinhart still has some hurdles that need to be cleared to be accepted, given the overlap in some of the markets in which they both operate.

Recent Technomic research has suggested that the foodservice distribution model is becoming increasingly commoditized, and the need to invest in differentiation and new capabilities is clearly driving actions like this. Going forward, we expect to see continued activity by PFG and other “power distributors” to acquire specialists and new capabilities, as distributors work to align their business with the needs of the evolving foodservice industry.

Press inquiries and report details: David Henkes, (312) 506-3927,

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