U.S. Foodservice , based in Rosemont, Illinois, is the second largest broadline foodservice distributor in the United States. Only Sysco Corporation is larger. The company distributes food and related products to over 250,000 customers, including restaurants, healthcare facilities, lodging establishments, cafeterias, schools and colleges. U.S. Foodservice markets and distributes more than 43,000 national, private label, and signature brand items and employs more than 29,500 foodservice professionals.
U.S. Foodservice is currently a private company jointly owned by Clayton, Dubilier & Rice and Kohlberg Kravis Roberts after being sold by former parent Royal Ahold in mid-2007.
History
The history of U.S. Foodservice encompasses the story of how (and where) Americans purchase the food they eat. It reflects the development of an entire industry, shifting from small entrepreneurial wholesalers supplying retail grocery stores to large regional and national distributors offering a broad line of products to institutional clients.
Early history
Several of the entities that comprised what is now U.S. Foodservice started in the 19th century. Monarch Foods, for example, traced its roots to Reid-Murdoch Co., a Dubuque, Iowa, company founded in 1853 to provision wagon trains heading west. Reid-Murdoch was a major sponsor of the "The Teenie Weenies" comic strip.
John Sexton & Company began as a tea and coffee merchant in Chicago in 1883. Sexton soon discovered hotels and restaurants were his biggest customers and he dropped his retail business altogether. Before the turn of the century, Sexton began manufacturing pickles, salad dressings, preserves, and jellies to guarantee a uniform high level of quality for his institutional customers.
L. H. Parke Company started in 1889 as a partnership of Louis H. Parke and William P. M. Irwin. The partnership took over the small provision-pushcart business of Samuel Irwin, a civil war vet. who had lost his arm in the Battle of Winchester, Virginia. Parke started as a seller of coffee, tea and spices. The company grew to be a major institutional wholesale seller of canned goods and had five locations (Philadelphia, Pittsburgh, Washington, DC, Albany, New York and Richmond, VA.) by the time it sold out to Consolidated Foods in 1962. Donald Irwin Jr., President of Parke became the first president of Monarch Institutional Foods at that time.
Los Angeles-based S.E. Rykoff & Co. was established in 1911, and the Mazo and Lerch families started their business in Northern Virginia in 1927. Most of these wholesalers tended to specialize, selling items to local grocery stores. In the early 1930s, distributors, including Mazo-Lerch Company, began offering frozen foods, primarily frozen French fries and orange juice.
Post World War II
Foodservice distributors served institutional clients that provided food away from home, unlike retail distributors, who sold to grocery stores. The first distinction between the two groups came about in 1951, with the formation of the Association of Institutional Distributors. With fighting going on in Korea, the federal government reinstituted price controls, including a 16 percent ceiling on food distributors' gross profits. About a dozen companies met in Chicago to respond to that action. Because it cost more to distribute to their institutional customers than to grocery stores, the distributors wanted to be considered separately from grocery wholesalers and to have their ceiling raised to at least 21 percent. They were successful in their lobbying efforts.
The federal government also helped open up foodservice markets. Five years earlier, in 1946, the U.S. Congress passed the National School Lunch Act. Suddenly, large numbers of schoolchildren were eating cooked meals away from home, and school cafeterias became the first institutional mass market. One of the few distributors to focus on schools was the Pearce-Young-Angel Company (PYA) in the Carolinas. That same year, Consolidated Foods Corp., the precursor of Sara Lee Corporation, acquired Monarch Foods.
By the late 1950s, most distributors had added frozen foods to their product lines. In 1958, Mazo-Lerch held the first food show, and was one of the first distributors to offer both custom-cut meats and beverage dispenser programs. The diversification trend continued over the years, as foodservice distributors provided disposable items such as napkins and tablecloths, followed by china and glassware, then light and heavy equipment.
The 1960s
In 1965, Americans spent just 20 cents of every food dollar for food away from home. Total distributor sales that year were an estimated $9 billion, and the average institutional distributor had an annual volume of $1.5-$2 billion. Institutional Distributor, in its first survey of the foodservice distribution industry, found that the average order size of respondents was $80.40, and the average number of customers was 572. The survey also found that nearly half of the respondents sold to both grocery and institutional customers.
The 1970s
The decade of the 1970s saw the move to broadline, multi-branch organizations. Consolidated Foods bought the old Pearce-Young-Angel distribution network in 1971 and merged it with its Monarch Foods subsidiary to form PYA/Monarch, which would eventually become the foundation of US Foodservice. Within a few years, PYA/Monarch had linked data processing operations in its branches with the computer in its headquarters. S.E. Rykoff went public in 1972, one of the few foodservice distributors to do so.
The 1980s
The distribution industry went through a difficult period during the early 1980s, with companies under pressure as a result of inflation and economic slowdown. However, people still needed to eat, and much of the pressure was from competition. Speakers at national conferences focused on customer service, productivity, and professional development. Computers were playing a greater role in the business, enabling a distributor to provide customers with information to help control inventory, determine menu costs, and analyze profitability. As distributors became more professional, restaurant chains such as Marriott and Howard Johnson folded or reduced their self-distribution activities and focused on their restaurant operations.
By 1982, the foodservice distribution was a $69 billion industry. Five companies were considered "national distributors," with a total of 168 distribution centers covering major portions of the country. PYA/Monarch and John Sexton & Co. were two of the five, joined by Sysco Corporation of Houston, CFS Continental, Inc., and Kraft Foodservice. Despite their dominance geographically, these multi-branch distributors reported combined sales in 1982 of $4.8 billion – 7 percent of the industry.
Over the next several years, the big distributors made major acquisitions. S.E. Rykoff bought Sexton & Co. in 1983, in what was then the largest acquisition in the industry. The renamed Rykoff-Sexton took fourth place among foodservice distributors with $800 million in sales. CFS Continental's purchase of Publix Fruit and Produce moved it into third place, with sales in the $1.1 billion range. Number one Sysco acquired B.A. Railton along with Pegler, increasing its volume to over $2 billion. Meanwhile, in Greenville, South Carolina, number two PYA/Monarch bought Fleming Foodservice of Austin, Texas, raising its 1984 sales volume to an estimated $1.3 billion. By the end of its fiscal year in June 1984, PYA/Monarch was serving some 70,000 foodservice operators, and its 22 distribution centers blanketed 60 percent of the United States.
PYA/Monarch was one of the first distributors to compete as a provider of services as well as products. "The day of the distributor who merely warehouses, delivers, and takes orders for products a customer wants is over," company management told Institutional Distribution in a 1984 article. PYA/Monarch's mission statement revealed its goal: "... to be a premier company in every area of operations, providing products and services that can enable a customer to run a more efficient and profitable business."
Using the largest computer in the industry, PYA/Monarch phased in a new state-of-the-art data processing system. Totally centralized, the system made it possible for headquarters to carry out data processing for each of the 22 branches, whose computers now gathered data.
The 1980s saw a tremendous change in the eating habits in the United States. By 1986, Americans were spending one-third of every food dollar outside the supermarket, and the foodservice distribution had grown to a $78 billion industry.
By April 1989, Sara Lee Corporation had decided to sell off the northern division of PYA/Monarch, citing dissatisfaction with its performance. Although the southeast division was the top food distributor in its region, overall PYA/Monarch ranked third behind Sysco and Kraft, and Sara Lee was committed to being first or second in each of its businesses.
In June 1989, members of PYA/Monarch management incorporated a new entity, JPF Holdings, Inc. Two weeks later, on July 3, JPF Holdings acquired all the capital stock of the Sara Lee subsidiary, JP Foodservice Distributors Inc, including the mid-Atlantic and northeastern operations of PYA/Monarch Inc. Under the terms of the leveraged buyout, Sara Lee retained ownership of PYA/Monarch, now operating in the southeast, as well as 47 percent of the shares in JP Foodservice.
Headed by James L. Miller, who had been executive vice-president of PYA/Monar
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