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Performance Food Group: Market Share And Economies Of Scale

June 18, 2012

Performance Food Group (PFG) is not a company you hear of much often or perhaps never heard of. Yet on many occasions or even on a regular basis you may be eating food that this company distributes. It’s one of the largest food distribution companies in the U.S. and growing.

The company delivers food and food-related merchandise to more than 130,000 national and independent chains of quick-service eateries, chain restaurants, pizzerias, theaters, schools, hotels, health care facilities, and other entities through the entire U.S. The service it provides reaches millions of people.

The enterprise has four divisions catering to defined markets:

  1. Performance Foodservice – distributes 68,000 national and proprietary brand food and related products, includes baked goods, seafood, meat, and cleaning supplies.
  2. Roma Food – distributes Italian and Italian-American food products, includes cheeses, pastas, tomatoes, flour, and pizza boxes.
  3. Vistar – distributes candy, snacks, beverages, and other convenience and frozen food items.
  4. PFG-Customized – distributes to the customized needs of family and casual dining restaurant chains.

PFG not only distributes but processes and packages as well. While the set-up seems well defined the history of PFG shows that it is a product of mergers and acquisitions of relatively small and fragmented distribution companies scattered throughout the U.S.

The mid-1980s saw larger players in the U.S. food distribution industry swallowing up smaller ones to get market share and economics of scale. Executives of Pocahontas Foods USA a distributor and buying group took steps so they would not be swallowed up. They banded together forming Pocahontas Food Group.

The key companies that were acquired to form the group was Caro Produce, Institutional Foods (both acquired in 1987) and K.O. Lester Co. (acquired in 1988). With limited resources Pocahontas Food Group was only able to acquire ailing companies and became known as a turnaround specialist. The company changed its name to Performance Food Group in 1992. It went public in 1993 through NASDAQ.

With more capital after going public, the company was able to buy healthier and bigger companies helping it fuel its growth.  By 1998 PFG had sales topping $1.6 billion. Then in 2008 it was bought by the Blackstone Group and Wellspring Capital Management and later merged with rival Vistar Corporation turning into a private company once again. PFG continues to acquire other food distribution companies.

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