It was this week in 2003 when RetailWire posted a story and discussion (The Future of Grocery Wholesaling - RetailWire, 5/12/03) on Wal-Mart's decision to sell McLane Company to Warren Buffet's Berkshire Hathaway.
Members of the BrainTrust weighed in with opinions on the future of food distribution and what Berkshire Hathaway's ownership of McLane would mean for the company going forward.
Here's what a couple of our panelists had to say back then.
W. Frank Dell II, CMC, President, Dellmart & Company
"In 1990, I asked the question - are wholesalers obsolete. I think the answer then and now is yes, if one assumes the current business model. For example, one wholesaler offered 270 free services before changing their charge plan. When they asked their customers to pay for these services, what they found is no one was buying. These value added services had no value for the customer. Wholesalers who make their living on the buy side will not last long term. The business model for wholesalers is that of 3rd party logistics for the industry. This means managing the physical distribution from the production line to the consumer. Additionally, it means handling pallets, cases and broken cases. Some wholesalers have moved into broken case distribution for the convenience stores. This is taking over the expanded business of the old candy/tobacco distributors. Another poorly operated segment are the specialty products distributors. For wholesalers to survive, they must expand the scope and range while lowering cost. This is accomplished by doing one thing right."
Ryan Mathews, Founder, CEO, Black Monk Consulting
"What seems clear is that wholesaling, as Frank discusses it, is over and what we are going to see are dramatic new models emerging. Without question, one of these models could include a radically different approach to supplying foodservice operators. If you look at work done by McKinsey and others addressing the future of foodservice, you see that they project that together Sysco and (a pre-scandal) U.S. Foodservice will still have slightly less than half of the foodservice market by 2013. Assuming -- and I think it's safe to assume -- that the market will continue to grow, that opens up a universe of opportunity for a small army of Warren Buffets. Maybe Buffet is just trying to do what Wal-Mart seems to have done -- use McLane's as a learning lab to improve existing operations and open the door to opportunistic growth. As to the future of wholesaling, let's remember a different model isn't the same thing as a premature burial. Evolution takes casualties but the species improves over time."
Discussion Questions: What has being a wholly-owned subsidiary of Berkshire Hathaway meant for McLane Company? How has grocery wholesaling changed since 2003? What future do you see for grocery wholesalers?