Innovating and evolving.
That’s what the top convenience channel distributors in the country are doing when it comes to foodservice, technology, labor and more.
At Temple, Texas-based McLane and elsewhere, they’re investing in technology and focusing on fresh food. Core-Mark said it’s also doubling down in food, as well as in technology and supply chain advancement.
“There’s so much untapped potential [in foodservice], and our capabilities in this area have never been greater,” Sandra D’Asaro, senior vice president of strategy and brand at Core-Mark, told CSP.
Staff stability also is a challenge. At Houston-based Sysco, retention rates have been improving throughout the year, though, and consequently reflecting improved safety metrics, reduced product shrink and increased productivity. Continue reading to see what plans the three biggest distributors in food retailing, determined by CSP’s sister research firm Technomic, have in store.
McLane Helps Customers Solve Problems, Focuses on Fresh
For the last several years, stories surrounding the supply chain have been focused on recovery post-COVID-19, supply chain disruptions and labor and driver availability, said Chris Smith, president of McLane’s retail business. And while components of those challenges remain, with the pandemic largely in the rearview mirror, customers need for McLane to continue to evolve.
McLane is doing this in several ways—through relieving friction, focusing on fresh food and investing in technology.
“Instead of just focusing around winning the day of getting boxes out to customers, it’s really around us engaging to help our customers solve problems, and our supplier partners as well,” Smith said.
There are pockets of the supply chain that still are seeing constraints related to capacity, he said, like confection and other tobacco products. And convenience customers are feeling the effects of inflation and looking for value, he said, which puts pressure on selling units.
So how does McLane help?
‘What that means from a supply-chain perspective is, we need to be accurate, and we need to reduce the cycle time of getting fresh product to our stores.’
First, it makes sure that with core products, it’s getting its c-store customers what they’re ordering in their stores, on time, damage-free and invoiced properly, Smith said. It’s also helping its c-store customers attract new customers into their stores.
“We've had a long track record of being in the food business,” Smith said. “We sell multibillion dollars’ worth of fresh-related product, but we have elevated our brand in a few different categories and are rolling out some programs that we hope that will help our customers win in the fresh area to help drive people into our convenience-store customers.”
McLane offers a variety of foodservice programs including its CupZa! coffee program, its Central Eats grab-and-go foods and its Prendisimo oven-ready pizza program. And it will continue to focus on fresh, Smith said.
“What that means from a supply-chain perspective is, we need to be accurate, and we need to reduce the cycle time of getting fresh product to our stores,” he said. “… When you’re shipping certain categories, customers can make trade-offs. But if you don’t have tomato sauce for your pizza, you’re not selling the pizza. So the impact on the customer based on supply chain lack of performance is different based on certain categories, and with fresh, it matters.”
McLane has also made a major focus around employee engagement and becoming an employer of choice. Its retention rates have improved, Smith said. McLane employs more than 23,000 people, he said.
‘Another area we’ve really been focused on is operational excellence, it’s a mantra within the company.’
“This type of distribution business is a hard business. And it requires good process and good training and good execution to do it well, and as part of that, having experienced teammates that know what they’re doing matters. And I think we’ve seen our average tenure as retention has improved go up, and not surprisingly, so have our operating service level metrics to our customers,” Smith said.
At the same time, it’s investing in technology to create more agility and nimbleness in its business. McLane has made investments to its technology stack, including a new warehouse management system, a new order management system, new transportation management system and more, he said.
“Another area we’ve really been focused on is operational excellence, it’s a mantra within the company,” Smith said. “We’ve made significant investments in resources and assets including developing a continuous improvement organization focused on lean and Six Sigma [a quality management methodology] so that we can take out variability in our business and drive good outcomes to our customers.”
McLane was founded in 1894, and it services convenience stores, mass merchants and chain restaurants. McLane has more than 80 distribution centers across the country and delivers to nearly every ZIP code in the United States. It is a wholly owned subsidiary of Omaha, Nebraska-based Berkshire Hathaway Inc.
Sysco Aims for Stability in Staffing
When it comes to improving supply chain cost performance, Houston-based Sysco Corp., primarily a foodservice distributor serving restaurant, hotel and healthcare facilities, acknowledges that one important lever includes increased staff stability.
With retention rates improving throughout the year, Kevin Hourican, Sysco’s chair of the board and CEO, said on July 30 during the company’s fourth-quarter earnings call that “the improved retention is showing up in improved safety metrics, reduced product shrink and increased productivity of our colleagues.”
Turning to the fast-growing foodservice category, Sysco is expanding its specialty capabilities, including a combination of mergers and acquisitions.
‘We are adding our Asian foods business to our recently opened Allentown, Pennsylvania, distribution center.’
“We are adding our Asian foods business to our recently opened Allentown, Pennsylvania, distribution center,” Hourican said during the earnings call. “This addition will greatly improve our ability to serve the large and growing Asian market in the Northeast.”
When it comes to core in-stock items as well as improving the distributor’s agility when a supply-chain disruption occurs at one of its suppliers, Hourican told investors that progress is being made and that “we have increased the importance of fill rates in our leadership performance evaluation metrics for 2025.”
Sysco’s Sustainability Commitment
Sysco Corp. is also prioritizing post-pandemic consumers’ concerns toward the environment. As part of its sustainability commitment, the Houston-based distributor said it plans to “reduce scope 1 and 2 emissions by 27.5% by 2030.” Scope 1 emissions are direct greenhouse emissions that occur from sources that are controlled or owned by an organization, according to the U.S. Environmental Protection Agency (EPA). Scope 2 emissions are indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling.
In September, Sysco widened its goal of being a responsible foodservice distributor with the arrival of eight heavy-duty electric tractors to their fleet in Victoria, Canada, which serves more than 1,500 customers.
‘We are excited to scale our electric truck fleet into Canada and continue our journey to meet our climate goal of reducing emissions across the enterprise.’
Sysco now has more than 130 heavy-duty electric tractors globally across the United States, Canada, United Kingdom and Sweden.
“We are excited to scale our electric truck fleet into Canada and continue our journey to meet our climate goal of reducing emissions across the enterprise,” said Neil Russell, Sysco’s chief administrative officer. “Electric tractors produce zero tailpipe emissions, which is good for the environment and important for our customers who want to do business with a responsible foodservice distributor.”
Core-Mark Looks Forward to the Future
Despite recent challenges, Westlake, Texas-based Core-Mark is excited about the future.
Sandra D’Asaro, senior vice president of strategy and brand, said that “macroeconomic conditions, and in particular inflation, have taken a toll on the consumer and how they’re spending their money in c-stores.”
Core-Mark’s in-store merchandise sales, specifically in the areas of confection and snack, have been challenged,” she said. “We’re seeing acceleration and [cigarette] carton declines, which is impacting trips.”
Nicotine sales are up, she said, but “we’re fighting an uphill battle against the illicit vape trade.”
20%: The percentage of Core-Mark products that represent 80% of its sales, according to Sandra D’Asaro, the company’s senior vice president of strategy and brand.
More than any other category, foodservice has the most potential to deliver relevancy trips and profitability—as long as it’s “really compelling,” D’Asaro said.
Core-Mark, Westlake, Texas, is part of Performance Food Group.
Core-Mark is “leveraging even more advanced food and technology solutions at hand,” she said.
To stay on top of its game, Core-Mark in the last year completed several systems improvements, D’Asaro said, which have stemmed from tools and solutions inherent in Eby Brown and legacy Core-Mark. Performance Food Group acquired Core-Mark in 2021 and Eby-Brown in 2018—and Eby-Brown now operates under the Core-Mark brand, she said.
Despite these advances, there are still several areas ripe for improvement, she said, as various units operate more and more as a single convenience organization.
Measuring Success
Success at Core-Mark is measured myriad ways, including a few internal key-performance indicators—but the most important metrics are those that affect Core-Mark’s retailers, D’Asaro said, such as fill rates, service levels and on-time delivery.
Fill rates are affected by manufacturer out of stocks or Core-Mark not buying properly, she said. “We call it part of the blocking and tackling of what a distribution organization does: It delivers a high-quality fill rate.”
There’s a limited margin for error.
Fill rates are getting better but still “very impactful to our customers,” D’Asaro said. “Most of this is limited to a small subset of vendor and manufacturer out of stocks that have persisted, but we feel like there’s things we can do better.”
‘We’re pretty proud of what we have in place today in the area of supply chain, it’s our goal to deliver our products with the least amount of disruption.’
To improve, Core-Mark has created a fill rate task force comprised of purchasing leaders, sales leaders and operation leaders, evaluating performance on a weekly basis to get back to historical standards and fill-rate expectations, she said.
And if a customer is having a promotion, Core-Mark wants to know about it to adjust accordingly, she said.
“If our customer’s going to run a pizza promotion, we better make sure we ordered enough cheese and toppings and pizza crust so we can fulfill that in full when they’re ready to deliver,” she said.
There are five Performance Food Group turnkey programs: Red Seal pizzeria, True BBQ, Deli 55, Contigo Taqueria and Perfectly Southern Chicken, as well as private brands.
Technology Upgrades
Core-Mark has been focusing on food, technology and supply chain advancement, D’Asaro said, adding the company has invested in several third-party partnerships to support business-to-consumer (B-to-C) solutions necessary to succeed.
These include loyalty scan, data aggregation, frictionless checkout solutions and third-party delivery.
“On the B-to-B front, we’ve maintained our investment in category-management solutions, and we’re on a journey to constantly upgrade our ordering platform,” she continues. “Though we’re pretty proud of what we have in place today in the area of supply chain, it’s our goal to deliver our products with the least amount of disruption.”
For Core-Mark’s retailers, this means delivering “what they ordered as complete and accurate as possible, and we get on and off their property as quickly as we can.”
To improve in this area, Core-Mark is testing a solution that will balance robotics with humans in the warehouse-selection process, “allowing us to pick more accurate orders while supporting a large breadth of products—and doing so more quickly,” D’Asaro said.
‘On the B-to-B front, we’ve maintained our investment in category-management solutions, and we’re on a journey to constantly upgrade our ordering platform.’
Because 80% of Core-Mark’s sales come from less than 20% of its products, the technology would let employees focus on pulling the 20% bulk while robots focus on the rest.
“We’re going to put [products] in a racking system where we can leverage robotics to go pick high and bring it down when it’s randomly needed and keep our people on the floor with the high-turn product. They can be more efficient because they’re not having to walk so much,” D’Asaro said.
Core-Mark also is testing an automatic electric palette jack system in place of dollies for delivering products into c-stores quicker while easing the physical process for its drivers. It can bring in a substantial amount of product. “You just turn the handle back and it’s kind of self-driving and it gets you into the store,” D’Asaro said.
“Hopefully that will result in improving safety, their longevity on the job and even attracting a more diverse workforce,” including women because the job won’t be as physically demanding, she said.
Because it does not use large, heavy batteries, orders for c-stores can be brought in on the pallet jacks without cracking floor tiles.
Maintaining Relationships
To maintain positive relationships with c-store partners, Core-Mark uses a fully dedicated in-field sales team that frequently engages with its retailers.
“We want to be flexible and hear and understand what’s important to our customers and find solutions beneficial to both of us,” she adds.
Looking ahead to 2025 and beyond, D’Asaro said Core-Mark will continue doubling down in food, technology and supply chain advancement.
‘We want to be flexible and hear and understand what’s important to our customers and find solutions beneficial to both of us.’
Core-Mark sees the biggest opportunity in the realm of food because “there’s so much untapped potential, and our capabilities in this area have never been greater.”
With a sales decline in confections and snack foods, plus combustible cigarettes and gasoline, those trip drivers are down, particularly because many of these latter two consumers are perhaps among the most frequent c-store visitors, she said.
C-stores must figure out how to drive trips in the headwinds of an increasing number of people not coming to buy cigarettes and people fueling their cars because of better gas economy or electric vehicles, she said.
“We think having a compelling food offering and convenience is one of those ways that does drive trips,” she said.
Dockworkers Avoid Distribution Disruption
The dockworkers strike in October that retailers feared would disrupt distribution nationwide ended after two days, with management and labor reaching an agreement on pay and a short-term contract extension.
The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) said in a joint statement on Oct. 3 that both sides reached the tentative agreement on wages and agreed to extend the master contract until Jan. 15, 2025, “to return to the bargaining table to negotiate all other outstanding issues.”
President Joe Biden praised the agreement saying it “represents critical progress towards a strong contract.”
Dockworkers began the strike Oct. 1 at all U.S. East and Gulf Coast container ports, after the six-year master contract between the ILA and the USMX expired on Sept. 30.
‘While the extended contract through January 15 allows time for further negotiation, key issues like port automation remain unresolved.’
“The decision to end the current strike and allow the East and Gulf coast ports to reopen is good news for the nation’s economy,” National Retail Federation President and CEO Matthew Shay said.
Eric Hoplin, president and CEO of the National Association of Wholesaler-Distributors (NAW) welcomed the strike stoppage but also urged labor reform to safeguard supply chains.
“While the extended contract through January 15 allows time for further negotiation, key issues like port automation remain unresolved,” Hoplin said in an Oct. 4 statement.
As ports clear the backlog, businesses and consumers will still feel the strain of increased inflationary costs, Hoplin added.
“This strike underscores a critical need for reform. No single union should have the power to cripple our economy. Our labor laws, written in a different era, should reflect today’s interconnected supply chain. Manufacturing, transportation, warehousing, and distribution are all essential to our national security, and our policies should recognize their vital role in sustaining the flow of goods and services.”
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.