Total market: $150 billion
Net share: $15 billion
Net share in 2011: $50 billion
of a $180 billion market
Though 10 percent of food services business is now done online, the industry has yet to gobble up an open system. Most online transactions are done via members-only extranets that link distributors with existing customers, which include restaurants, chains, hotels — any business that sells prepared foods to consumers. A handful of upcoming online companies such as Foodgalaxy.com and Networld Exchange allow fluctuating prices; purchasing managers can place their orders and have distributors respond with bids. But this business model won’t take off until most major distributors have come aboard — a stumbling block considering some, such as Sysco and Alliant Foodservice, use proprietary purchasing extranets they established in the last few years.
One player to watch: Instill, a centralized agency through which purchasing managers place orders online with many different distributors. Its database standardizes product ordering codes, which vary among distributors. Like Foodgalaxy and Networld Exchange, however, Instill’s system is open only to subscribers, which precludes the efficiency created by a truly open market.
“The Net creates new opportunities where there’s excess inventory,” says Forrester analyst Bruce Temkin, who envisions online auctions for excess food products, which could spawn a new type of restaurant that sells “last-minute specials” created from cheaply bought last-minute ingredients.