Why This Matters to Distributors: Chefs’ Warehouse is expanding facilities, hiring salespeople, and broadening product offerings to win customers and increasing business on delivery routes. Its strategy pairs sales expertise with purchasing scale and digital tools to support growth while managing higher distribution costs.
Chefs’ Warehouse is expanding distribution capacity in Texas, New England and the Midwest and adding protein processing capacity in Las Vegas as it seeks to serve more customers and improve purchasing and delivery efficiency.
The specialty food distributor also is hiring salespeople and investing in artificial intelligence tools for pricing and sales support. Executives outlined the initiatives during the company’s Oct. 28 earnings call, describing a growth strategy centered on adding customers, expanding product categories, and making better use of its facilities and delivery network.
Chief financial officer Jim Leddy said projects underway include consolidating Dallas operations into a new distribution center, combining facilities and adding capacity in New England, and expanding Las Vegas protein processing. Work also is underway in several Midwest markets.
The projects are expected to come online over the next two to three years. Chefs’ Warehouse is evaluating additional capacity in the New York market, but Leddy said the company had nothing to announce.
The investments accompany growth driven primarily by the existing business. Third-quarter sales increased 11.2% to $1.14 billion from $1.02 billion a year earlier, while net income rose 54.7% to $29.6 million from $19.1 million.
For the nine months ending Sept. 25, sales increased 11.8% to $3.36 billion from $3.01 billion. Net income rose 59.3% to $80.8 million from $50.7 million.
Sales excluding acquisitions increased 10.3% during the quarter. Acquisitions contributed about 0.9 percentage points to total sales growth.
Chairman and CEO Christopher Pappas said the company is gaining market share while expanding into additional categories and territories. Investments in salespeople and customer acquisition are intended to offset weakness among individual accounts by increasing the sales and gross profit generated on delivery routes, he said.
Specialty case volume increased by about 6.1%, while the company reported a 4.4% increase in distinct customers served and a 7.2% increase in customer-product placements. Pounds sold in its center-of-the-plate category, which includes proteins such as meat and seafood, increased about 6.6%.
Pappas said the Middle East conflict partly affected reported customer growth. Excluding that effect, customer growth was about 5.7%.
Hiring remains a constraint on expansion. Pappas said the company needs salespeople with enough product knowledge to advise chefs, requiring careful selection and substantial training.
“But we are hiring still as fast as possible where we find really good people because we still cannot meet the demand that is coming at us,” he said.
Some regional salespeople have too many accounts, Pappas said. He also noted the cost of investing two to three years in employees who leave or fail.
The facility investments are intended to strengthen procurement as well as delivery. Pappas said additional space allows regional businesses to buy directly, purchase larger quantities and reduce reliance on smaller freight shipments.
Leddy said regional operations also are broadening their product offerings as sales teams gain experience. A greater mix of higher-margin specialty foods and proteins, stronger purchasing capabilities and pricing improvements are contributing to better results.
Digital tools support those efforts. Leddy said the company is integrating AI technology into pricing and sales processes, while Pappas described continued digital investment as part of the operating budget.
“I am not ready to give up on people,” Pappas said. “I think people play a really important part of what we do, and how we do it.”
Pappas said technology should help employees become more effective and enable the company to handle more work with limited staffing resources. He did not provide a quantified AI savings target and said the company’s longer-term forecast does not depend on a major technology breakthrough.
Higher costs remain an operating challenge. Net price inflation was 4.1% during the quarter, including 2.6% in specialty products and 6.6% in center-of-the-plate products, Leddy said.
Selling, general and administrative expenses increased 12.1% to $233.4 million. The company attributed the increase to compensation and benefits, facilities and distribution expenses supporting growth, fuel costs, and higher depreciation from facility and fleet investments.
Leddy said Chefs’ Warehouse has passed through much, though not all, of the increase in fuel costs. Procurement and pricing teams also have helped manage higher inbound freight expenses.
Gross profit increased 15% to $284.3 million. Gross profit as a share of sales rose to 25% from about 24.2%, reflecting a combination of product mix, purchasing scale, pricing and fuel cost recovery, executives said.
Demand remained strong heading into the holiday season. Leddy said October growth continued at a double-digit pace consistent with earlier trends, while Pappas cited private events, corporate functions, and celebrations as sources of fourth-quarter demand.
Conditions vary by customer. Pappas said attendance was softer at some conferences and à la carte business was uneven at some private clubs, but private events were offsetting weakness elsewhere.
Chefs’ Warehouse remains committed to its Middle East operations in the United Arab Emirates, Qatar, and Oman. Pappas said recent revenue was about level with a year earlier as residents and expatriates returned after the summer.
The company retained some caution about December because tourism is important to the region and uncertainty remains. In the fourth quarter, Chefs’ Warehouse also will begin comparing results with a prior-year period that included the Atalco acquisition, reducing the acquisition’s contribution to reported sales growth.
Chefs’ Warehouse raised its full-year sales outlook to $4.56 billion to $4.61 billion. The Ridgefield, Connecticut-based distributor carries more than 90,000 products and serves more than 55,000 customer locations across the United States, Canada, and the Middle East.
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