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Home » new course on Buffet table
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new course on Buffet table

June 1, 2003
DC Velocity Staff
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Warren Buffet is apparently developing an appetite for the distribution business. The legendary billionaire financier announced in May that his famed Berkshire Hathaway unit had acquired Wal-Mart's grocery distribution arm for $1.5 billion.

Buffet, who got his start delivering groceries for his family's supermarket business in Nebraska, sees much promise in the acquisition of Temple, Texas-based McLane Co., which operates 18 grocery distribution centers and 18 food-service distribution centers in North America. "We believe there is an excellent possibility for expansion of the customer base in the future," Buffet said in a press release.

Buffet may have been motivated by the opportunity to capture market share in an industry that has seen two of its major players falter under extreme pressure. The purchase comes as U.S. Foodservice, a big player in the industry (owned by Ahold NV), is recovering from an accounting scandal. Also, grocery distributor Fleming Co. filed for Chapter 11 bankruptcy proceedings in April after Kmart ended a major supply agreement with the company.

The acquisition by Buffet places the distribution industry directly under the Wall Street spotlight. "I think it says a lot about the importance that [logistics] has in the economics of a successful product company," says Roger Grogman, vice president of marketing for McLane, which reported sales of $22 billion in 2003. "An important component of success is efficiency, timeliness and having the right products at a low cost. The value of logistics was brought to the forefront by Wal-Mart, which successfully competed not on store ambience or selection but the everyday value it was able to provide because of the efficiencies of its procurement and logistics."

Supply Chain Services Business Management & Finance
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