I love that you try to run a honest business, it’s rare to see nowadays. But:
Sysco, the bulk supplier of >70% of US restaurants
Has the US completely given up on this market competition thing? Why is that in every US market, there are 1-3 players with 70-90% market share? I mean based on this, the only thing you need for inflation to spike is for companies like Sysco to raise prices.
I love that you try to run a honest business, it’s rare to see nowadays
Thanks, I genuinely appreciate that. The restaurant is just a side project, and I only almost break even on it, so people appreciating a straight-forward business is the main joy I get out of it
Has the US completely given up on this market competition thing?
Yes. Over 90% of the market is consolidated into 3 major players: Sysco, US Foods, and Performance Foods. Given how monopolistic American markets are, you can probably guess what I’m going to say next: US Foods and Performance Foods are exploring a merger. Given the regulatory landscape and current US politics, I expect a proposed merger to eventually go through
The US restaurant market is going to get even more consolidated under only a few distributors, which will mean restaurant prices are going to keep rising
Silver lining: That consolidation has allowed a much larger R&D budget than before. Some of the new coatings and things coming out are crazy good. I did a tasting with my Sysco rep, and the frozen french fries are insane now. Fresh cannot realistically compete, which means less food waste and a better end product. As long as they don’t start filling the fries with fake shit, it’s great
While there is a lot of genuinely anti competitive behavior in the market (e.g. huge mergers that should never be allowed).
The reality of a lot of “competition” as we tend to describe it in capitalist economics is that someone usually wins. At least for a while. It’s often not related to their core competency or quality either. It’s often about financial leverage, regulatory favors, technical advantages, etc…
For example, Taxis weren’t crushed by Uber because of better drivers, fuel efficiency, or more comfortable rides. It was the challenge of hailing a cab, the regulatory barriers of taxi drivers getting licensed (which Uber just didn’t bother with), commercial insurance, and the ability of Uber to operate at a loss while building their market share. Taxis had a 100 year head start in this competition, and they were pretty much obsolete in a few years. They lost due to competitive disadvantages they didn’t even know they had. And Taxis still exist, they’re just fighting for the scraps left by Uber and Lyft.
I’m experiencing this first-hand with my restaurant. In-house delivery drivers cannot compete with Uber Eats/Doordash/etc. because they don’t need to make money or even break even, don’t have to pay for insurance, and don’t have to deal with liability
One difference, though, is there is going to be a lot of experienced drivers in the workforce when Uber Eats/Doordash/etc. try to jack up prices. I can relatively easily swap to in-house deliveries again, whereas taxis can’t just start back up
It’s not really that we gave up, it’s just that the little guys can’t compete with the big guys, and the big guys all merged together and collude to make everything as expensive as possible. I try to support smaller businesses when I can but they are usually significantly more expensive and I can’t always afford it. There’s not really a solution for regular people when our politicians are all bought and paid for.
I love that you try to run a honest business, it’s rare to see nowadays. But:
Has the US completely given up on this market competition thing? Why is that in every US market, there are 1-3 players with 70-90% market share? I mean based on this, the only thing you need for inflation to spike is for companies like Sysco to raise prices.
Thanks, I genuinely appreciate that. The restaurant is just a side project, and I only almost break even on it, so people appreciating a straight-forward business is the main joy I get out of it
Yes. Over 90% of the market is consolidated into 3 major players: Sysco, US Foods, and Performance Foods. Given how monopolistic American markets are, you can probably guess what I’m going to say next: US Foods and Performance Foods are exploring a merger. Given the regulatory landscape and current US politics, I expect a proposed merger to eventually go through
The US restaurant market is going to get even more consolidated under only a few distributors, which will mean restaurant prices are going to keep rising
Silver lining: That consolidation has allowed a much larger R&D budget than before. Some of the new coatings and things coming out are crazy good. I did a tasting with my Sysco rep, and the frozen french fries are insane now. Fresh cannot realistically compete, which means less food waste and a better end product. As long as they don’t start filling the fries with fake shit, it’s great
While there is a lot of genuinely anti competitive behavior in the market (e.g. huge mergers that should never be allowed).
The reality of a lot of “competition” as we tend to describe it in capitalist economics is that someone usually wins. At least for a while. It’s often not related to their core competency or quality either. It’s often about financial leverage, regulatory favors, technical advantages, etc…
For example, Taxis weren’t crushed by Uber because of better drivers, fuel efficiency, or more comfortable rides. It was the challenge of hailing a cab, the regulatory barriers of taxi drivers getting licensed (which Uber just didn’t bother with), commercial insurance, and the ability of Uber to operate at a loss while building their market share. Taxis had a 100 year head start in this competition, and they were pretty much obsolete in a few years. They lost due to competitive disadvantages they didn’t even know they had. And Taxis still exist, they’re just fighting for the scraps left by Uber and Lyft.
I’m experiencing this first-hand with my restaurant. In-house delivery drivers cannot compete with Uber Eats/Doordash/etc. because they don’t need to make money or even break even, don’t have to pay for insurance, and don’t have to deal with liability
One difference, though, is there is going to be a lot of experienced drivers in the workforce when Uber Eats/Doordash/etc. try to jack up prices. I can relatively easily swap to in-house deliveries again, whereas taxis can’t just start back up
It’s not really that we gave up, it’s just that the little guys can’t compete with the big guys, and the big guys all merged together and collude to make everything as expensive as possible. I try to support smaller businesses when I can but they are usually significantly more expensive and I can’t always afford it. There’s not really a solution for regular people when our politicians are all bought and paid for.
We’ve been badly in need of some widespread trust busting for a few decades now