Foodservice distributors are operating in an increasingly challenging landscape. Whether it be inflation, fluctuating demand or labour shortages, it’s fair to say that the industry has been constantly up against it over the past few years. And when you combine this with the fact that there are rising customer expectations, it’s clear that the delivery experience can make or break a business.

However, according to Research and Markets  the foodservice profit sector is expected to reach GBP115.5 billion ($152.5 billion) in 2029, meaning the industry is getting bigger. The risk for distributors here, though, is clear: those that continue to treat last-mile ‘delivery’ purely as a back-office cost will struggle to capture their share of that growth.

​To remain profitable and compete in such a saturated market, good operational efficiency alone is no longer enough. For businesses to safeguard margins moving forward, they must now treat delivery as a strategic lever for growth, not as a cost to manage like it has been in the past. In this article, Andrew Tavener explores how distributors can reduce costs while unlocking new sources of revenue…

Obstacles to profitable foodservice distribution  

There are numerous challenges facing the food service industry. The first being  sales volumes. Despite steady growth since the COVID-19 pandemic, demand has not entirely bounced back. And from a revenue perspective, some companies have returned to pre-pandemic levels by raising final prices. But when it comes to sales volumes, demand is still prone to seasonal fluctuations. This means food distributors must safeguard their margins while looking for new growth opportunities. And while margins are so tight, just one slip-up in the delivery process could prove costly.

High costs, driven by exploding rents and labour shortages, are another obstacle facing the industry. For instance, according to the Food Foundation, throughout 2025, inflation on food costs continued to remain firmly above the Bank of England’s 2% target and from August to October 2025 UK food inflation ran approximately two percentage points higher than the Euro Area average, says The Centre for Economic Transition Expertise.

Additionally, the prices of fuel, energy and raw materials also remain historically high. This all comes at a time when environmental regulations favour newer vehicles and alternative fuels. While these measures should decrease costs in the long term, the upfront investment can put a dent in profits. With so many external factors impacting the bottom line, the onus is on distributors to increase efficiency and grow sales wherever possible. In practice, this is where poor route planning, failed last-mile deliveries, and manual processes become margin leaks that compound week after week.

Customer expectations are also playing a part. Over the past years, a shift in customer expectations means that people expect more choice and fresher, locally-sourced products to be available to them. At the same time, economic constraints make cost a deciding factor when choosing where to eat. Unfortunately for hospitality businesses, this means that receiving goods ‘On Time, In Full’ is no longer enough. Distributors need to provide a higher level of service without increasing costs. Clients in the hospitality sector expect convenient time slots, same or next-day delivery options, real-time tracking, and electronic proof of delivery. To increase market share, food and beverage service suppliers must also invest in new technology and digital communication channels.

What’s the answer?

Some businesses have attempted to offset this by creating economies of scale through acquisitions and partnerships. While others are trying to specialise in a particular market segment. Many businesses have even tried charging their customers more, but this is shortsighted and won’t be tolerated for long. Another solution is to improve productivity and alleviate labour shortages through technology, such as route optimisation, and offering new products or sales channels to attract more customers and increase margins. One common mistake, however, is investing in technology purely to cut costs, without considering how it can also support revenue growth and service differentiation.

When finances are squeezed, it’s tempting for businesses to try to maximise profits through cost-cutting activities. However, this isn’t always the answer and businesses should look at options to increase sales. On the one hand, they should aim to reduce costs through optimisation and process automation. On the other hand, they should aim to increase revenue through a better a service that increase market share. This is where good delivery management solutions can help businesses succeed in both these areas…

Delivery management is the key

Automation of delivery processes allows foodservice companies to carry out more deliveries with the same number of vehicles and staff. In addition, distributors can cut operational costs by minimising miles driven, reducing customer complaints and avoiding failed deliveries. When executed well, this doesn’t just reduce cost per drop; it frees up capacity that can be reinvested into higher-value services and new customer commitments.

This process consists of a few key factors. The first is strategic optimisation, which involves running simulations to make business decisions, for example, depot locations and fixed delivery routes, that will reduce costs and increase revenue in the long term. The second is to use daily route optimisation software that builds on fixed routes by adapting as and when new orders come in. This software can be configured to optimise routes based on business goals, such as selecting the lowest-cost option. In foodservice, having this flexibility, where last-minute changes are the norm, is a game-changer.

The third is to enlist visibility and execution tools to eliminate human error by giving drivers all the information they need. Data from the field lets businesses track planned versus actual performance and identify areas of inefficiency. Without having this visibility, businesses only discover issues after the customers complain, by which point it’s too late.

Finally, utilising customer engagement tools can involve real-time delivery notifications, driver tracking and electronic proof of delivery. This increases lifetime customer value by giving recipients the digital experience they expect. In addition, proactive communication reduces costly missed deliveries.

Driving profitability with delivery services

Another route to profitability, naturally, is increasing sales. Many food and beverage distributors could benefit from including sales teams in discussions around delivery. Commercial colleagues will know when a business is losing contracts because there’s a particular service they can’t offer.

By working cross-departmentally, businesses can work together to predict the consequences of adding or refining certain delivery services. And the initial investment will be worth it if these services allow said businesses to recover market share. Strategic planning software can take this a step further by simulating the impact of commercial decisions. This gives leadership teams clarity on whether a new delivery service will genuinely drive profitable growth, rather than simply increasing operational complexity.

Conclusion

Profitable foodservice distribution needn’t rely solely on trimming costs. Distributors must look beyond operational efficiencies and consider how delivery capabilities can actively drive growth. With the right strategic delivery management solutions in place businesses can reduce waste and add value to customers. By treating delivery as a growth lever rather than a necessary cost center, foodservice distributors will thrive. However, those that fail to make the shift risk falling to rising costs and shrinking profit margins, even if demand for their services continues to grow.