China's current retail transformation, whether it's membership warehouses, discount retail, or instant retail, as well as the forced adjustments in supermarkets and convenience stores, is all about improving supply chain efficiency. Improving industry efficiency inevitably involves supply chain adjustments, and distributors, as a key intermediate link in the supply chain, are the hardest hit. As a result, many distributors are confused about their future business positioning and unclear about where the future lies. However, this is not the case. This cycle of industry chain adjustment has been experienced in the retail development history of all developed countries. Naturally, the solution for the 'middleman' business can also be found in global retail history. This article briefly shares the top strategies of the world's 'distributor' giant McLane, and how it adjusted its stance during North American retail transformation, adapted to the cycle, and continued to maintain growth. McLane's Positioning: Making the 'middleman' business the infrastructure of the FMCG industry It's not entirely accurate to describe McLane as a distributor; more precisely, it has fully evolved into a supply service company. Its business started by supplying groceries to Cameron County, Texas, and surrounding areas via rail and horse-drawn carriages, and has now developed into three major business segments: general merchandise distribution, foodservice distribution, and beverage specialty, covering the entire United States. The three main areas covered by McLane's supply chain services With 85 distribution centers (26 for general merchandise, 45 for foodservice, and 14 for beverage), 11,000 owned trucks, 24,800 employees, and over 50,000 SKUs in inventory turnover, it has built the largest supply chain network in the U.S., deeply covering over 100,000 outlets (46,000 general merchandise, 32,000 foodservice, and 30,000 beverage). Founded in 1894, this distribution company has traversed several cycles with the development of American retail and is now an infrastructure presence like 'water, electricity, and coal' in the North American FMCG industry. Infrastructure-type businesses are often similar: large scale, low margins, extremely high moats, and stable cash flow. It is this preference for such businesses that led Warren Buffett's Berkshire to acquire it from Walmart in 2003. According to Berkshire's latest financial report, its revenue exceeded $54 billion in fiscal 2024, and profits rarely exceeded 1% thanks to the dividend from AI technology, rising from 0.86% in 2023 to 1.2% ($650 million). From a regional distributor to a national supply chain service giant Currently, its general merchandise distribution services retail chain clients including Walmart, Sam's Club, Walgreens, Pilot Flying J, Circle K, Wawa, Target, Love's, Kmart, Family Dollar, and AAFES. The foodservice distribution segment also serves well-known chains such as Taco Bell, KFC, and Pizza Hut. McLane's own development reveals an unshakable fact: the 'middleman' business will not disappear with the improvement of supply chain efficiency; instead, it will become the infrastructure of the FMCG industry. McLane's Response in the Era of Retail Transformation Let's focus on the North American market from the 1960s/70s to the present, a period when retail transformation began, and new retail species like Sam's Club, Costco, Trader Joe's, and Target emerged and rose. Let's see how McLane responded to the transformation. Frankly, retail transformation is not necessarily a bad thing for distributors; it could even be a major opportunity. McLane's move out of Texas in 1970 to begin national expansion was entirely within this cycle of retail transformation, using strategic shifts to grow from a regional small distributor into a national supply chain service company. This process also reveals McLane's key business actions: diversifying customer service, embracing giants at stages, extending the depth of supply chain services, and leveraging technology to reduce costs and increase efficiency. Retail transformation inevitably impacts old channels with new ones. Adopting diversified service measures to build a networked business and reduce single dependency is the most critical principle McLane has followed to become industry infrastructure. Representative clients served by McLane Only by serving a broad enough range of customers, even covering the entire industry, can one be called industry infrastructure.

  • In 1967, it signed a distribution agreement with Southland, the parent company of 7-Eleven, becoming the earliest distributor in the U.S. to systematically serve convenience stores. It avoided competition with traditional supermarkets and targeted the incremental market of 24-hour retail formats;
  • In 1968, it signed with the Red&White chain brand, establishing a non-food division covering health and beauty products, achieving 'one-stop supply' capability;
  • In 2000, it acquired Ameriserve to establish a foodservice distribution division, entering the chain restaurant supply chain and breaking its single reliance on retail;
  • In 2010, it acquired Empire and Horizon companies, operating a beverage supply chain under independent brands;
  • After 2016, it expanded to military base supply chains, developing special channel business, covering 85% of U.S. military units by 2024;
  • ... Frankly, even this is far from enough. McLane's excellence lies in its ability to adjust its strategy periodically. In the process of nationalization, it knew that relying solely on itself to complete the layout would be difficult and lengthy, so embracing giants at stages could more quickly complete infrastructure coverage. This is why in 1990, it chose to sell to Walmart, becoming a deeply bound strategic service provider for Walmart. Although we generally worry that binding to a customer may lead to taking sides, thereby losing other industry customer resources. That is indeed the case. But embracing giants brought benefits far exceeding losses during McLane's staged development. When McLane was sold to Walmart in 1990, its revenue was only $3 billion, but by 2003 when Buffett took over McLane from Walmart, its revenue had reached $23 billion, with Walmart accounting for 35% of its sales ($8.05 billion). More importantly, through this cooperation, McLane gained national supply chain service capabilities, which are the scarcest for serving large customers. It is precisely this capability that allowed McLane to acquire Meadowbrook Meat (with annual sales of $6 billion) in 2012, taking over the business of serving Taco Bell, KFC, and Pizza Hut. Just like China's current retail transformation, U.S. retail giants have also begun to develop their own private label products during their development, which naturally impacts 'middlemen.' Similarly, to counter this impact, McLane also expanded its product development segment to deepen its supply chain.
  • In the early 2010s, it established a subsidiary, CVP (Consumer Value Products), to independently operate private label development, providing products 20-50% cheaper than mainstream market brands to enhance the stickiness of small and medium channels;
  • After acquiring Empire in 2010, it leveraged its beverage supply chain capabilities to develop specialty alcoholic products such as craft beer;
  • In 2012, through Meadowbrook Meat, it customized prepared dishes and seasoning packs for chain restaurants.
  • ... As the market intensifies efficiency competition, McLane not only faces the squeeze from retail customers to eliminate 'middlemen' but also faces competition from other supply chain service companies. Therefore, how to continuously ensure its own business efficiency is also a key area it has always been exploring. Especially in the high labor cost environment in the U.S., improving fulfillment costs through technology is a segment McLane places great emphasis on.
  • Since the 1960s, it introduced computer systems to manage warehousing and distribution networks, and during the integration with Walmart in 1990, it built a complete nationwide network system;
  • After acquiring Empire and Horizon in 2010, it launched digital upgrades for the beverage specialty business, integrating logistics temperature control technology;
  • After acquiring Meadowbrook Meat in 2012, it introduced cold chain temperature control algorithms and multi-temperature zone distribution technology to support precise delivery needs for fast-food chains;
  • In 2017, it invested $150 million to build its first smart warehousing center in Ohio, introducing robotic arms, high-speed conveyor belts (speeds up to 60 mph), and AI sorting systems, increasing daily processing capacity from 80,000 to 325,000 items, a 400% efficiency improvement;
  • In 2018, an AI-based logistics route planning system was put into operation, reducing transportation costs by 25% and improving on-time delivery rates by 40%, covering differentiated time-sensitive needs for convenience stores and restaurants;
  • In 2020, it strengthened middle-platform construction, investing $120 million to upgrade the Databricks data platform, achieving full-chain visibility for all outlets, improving demand forecast accuracy by 35%;
  • ... It is these key actions, continuously refined, that allow McLane to maintain gross margins of 5-6% and net profit margins of ~1% year-round, gradually expanding and ultimately growing into a national supply chain service company. There Are Many Opportunities in the Era Distributors Still Have Significant Room China's current retail industry transformation cycle may last another 5-10 years or even longer. In this process of eliminating 'middlemen,' if distributors only focus on the present, they see only problems. But if they look at more developed markets, they see more opportunities. At least mature retail market experience tells us: 1. The market will always need 'middleman' services; 2. 'Middlemen' are infrastructure like water, electricity, and coal in the FMCG market. However, compared to supply chain service giants like McLane, China's current distribution business or B2b platform business still has significant gaps in business status (whether in corporate awareness, digital capabilities, or investment levels in warehousing and distribution infrastructure). Gaps mean opportunities. Although this development process involves elimination competition and the laws of industry development are irreversible, whether to ultimately become the infrastructure of a market or choose to leave the market, more initiative still lies in the hands of distributors themselves. If you think in the right direction and learn from benchmark companies, there is still significant opportunity.