New look at Gordon Food Service and another acquisition
GFS buys another food company while industry watches Sysco/U.S. Foods merger.
New signs for a re-brand were going up in January at Gordon Food Service Store locations in the Grand Rapids region, even as the $10 billion-plus Grand Rapids-based food service company was making another acquisition: Halperns’ Steak and Seafood Co. based in Atlanta.
Gordon Food Service has confirmed it acquired Halperns’, a privately held company founded in 2005 that has 600 employees and more than 5,000 food service customers. Ray Farmer, Halperns’ spokesperson, said the situation was “one family-owned business purchasing another.”
Neither Halperns’ nor GFS will release the dollar amount of the deal or Halperns’ annual sales revenue, but GFS spokesperson Deb Abraham said it is a high-quality meat and seafood processor and distributor, “one of the largest food service specialty distributors in the U.S. dedicated to center-of-the-plate protein.”
Website undercurrentnews.com, an online seafood industry business journal edited in London, England, said in a report on the acquisition that Halperns’ had sales last year of $400 million.
Halperns’ operates four production and distribution facilities in Atlanta, Baltimore, Orlando, and Fort Lauderdale. GFS said in an announcement that Halperns’ has “a strong and established presence in the Southeast and Mid-Atlantic areas of the United States,” and has a variety of independent and national chain customers across much of the East Coast and beyond.
“The purchase of Halperns’ will enhance our capabilities to provide our customers with the highest quality fresh meat and seafood products,” said Jim Gordon, CEO of Gordon Food Service.
Abraham said the company is ramping up operations at its new distribution facility in Douglasville, Ga., and started shipping from the 445,000-square-foot plant in late January.
According to The Right Place in Grand Rapids, Gordon Food Service is the largest family-owned foodservice distributor in North America. The company told the Business Journal in 2013 that its food service customers are in the Midwest, Northeast and Southeast, and across all of Canada.
Gordon Food Service does not reveal its annual sales revenue but undercurrentnews.com reported in January that the company has indicated its revenues are in excess of $10 billion.
The food service industry is enthralled by the pending merger of Sysco and U.S. Foods, first reported in the Business Journal in December 2013. The deal is reportedly on hold due to anti-trust concerns by the Federal Trade Commission, and industry analysts have predicted that Sysco and U.S. Foods together would control more than 25 percent of the market if the deal goes through.
Undercurrentnews.com said the Sysco/U.S. Foods merger “seems to have pushed the food distribution web to make some changes,” fueling more M&A activity. The publication speculated that it is “possible that the recent activity in the mid-sized distribution sector, such as Gordon Food Service’s purchase of Halperns’ Steak and Seafood, was motivated in part by the pending deal.”
Gordon Food Service has expanded with a number of acquisitions in the past year. In November, it announced a new logo, marketing tagline and name for its stores “as part of the evolution of its corporate brand.” The stores were formerly known as GFS Marketplace; now they are called Gordon Food Service Store. The company told the Business Journal they do not want to be referred to as GFS but only as Gordon Food Service.
“This was an opportunity for us to catch the brand up to the business,” marketing manager Mark Dempsey told the Business Journal last week, adding, “and really clarify who we are in the marketplace.”
Finance professor Gregg Dimkoff of the GVSU Seidman College of Business, who has been closely watching major public corporations in West Michigan for decades, said margins of profit in the food industry “are razor thin” and thus “economies of scale are really, really important.”
As an example, he noted a jewelry store can mark up its merchandise 300 percent over its cost and successfully sell it. Not so in the food industry, where “in a good year, they maybe make two cents per dollar of sales. And in a bad year, they can get down closer to one.”
A foodservice company might be willing to accept a profit margin of 1 percent, “if we’re talking about 10 billion dollars. It’s all about how much stuff you can sell.”
“In the food industry, it’s cutthroat. Size really does matter,” said Dimkoff.
Size is important because it gives a large company more bargaining power with its suppliers.
Although Dimkoff said he is not personally familiar with the operations of Gordon Food Service, the Business Journal asked if it might be looking at other companies as potential acquisitions — or is being looked at by larger companies as a possible acquisition itself.
“It’s probably both,” he replied.
Dimkoff was asked if being a privately held company puts GFS in a different situation, regarding M&A activity. He indicated it does.
“There are no public shareholders to appease,” he said, should a privately held company be considering a larger company’s offer to buy it.
“It’s not like 75,000 people owning Stryker, for example. It’s easier” for the privately held company, said Dimkoff.