ily meals and snacks. That change follows a trend among
some CPG brands, including Kellogg’s, which dropped
DSD for its cookies and crackers business in 2017, and frozen food manufacturer Schwan’s.
Speaking at a presentation in Arlington, Va., Nestle
USA CEO Steve Presley said historical advantages of DSD
for the manufacturer “no longer exist,” including speed
to shelf and the opportunity to build displays. The move
also responds to changes in how its largest customers are
“The reality today is that retail environments have con-
solidated, and retailers have become more sophisticated
at controlling their space,” Presley said. “They have really
gotten tight around plan-o-grams so there’s no incremen-
tal space for display. And the unique thing for frozen that
people with ambient DSD don’t have to deal with is that we
need a freezer for display. We can’t just go build displays
around the store.”
The move will break down a massive network Pres-
ley described as “highly complex and extremely costly,”
including 4,000 employees, 230 warehouse facilities and
1,400 trucks making about 3 million deliveries a year. The
savings will free up cash that can be invested back into the
products, he said.
Rick Shea, president of Minneapolis-based Shea Food
Consultants, says DSD will not likely disappear from all
categories in the store, noting that faster-moving items
with short shelf lives, such as bread, or items with weight
concerns, such as beverages, would likely keep using route
delivery. But he said cost concerns sweeping the CPG
industry and changes in how retailers go to market have
rendered DSD too inefficient to be effective for some.
Fields, however, suggests that CPG companies mak-
ing such decisions may ultimately see the costs they save
accompany a decline in the sales of the products associated
with them. Kellogg’s, which earlier this year announced a
deal to sell the Keebler brand it yanked from DSD two years
earlier, acknowledged the pending sale to Ferrero Group
would provide the brand with a parent that could provide
“the focus and resources to grow.”
“In the end, it gets rationalized,” Fields says. “They say,
‘Look at how much money we saved, and look at how the
category shrunk since we withdrew DSD.’”
partners to exchange messages with one another and can
automatically escalate them based on their severity.
This, Lecznar says, is a cure for store managers whose
typical response to a DSD out-of-stock is to wait until the
route driver makes another visit.
“From an industry standpoint, you have all these retail-
ers developing their own programs. You have every supplier
out there, for the most part, developing their internal pro-
grams and there’s not one communication platform that
brings it all together,” he says. “This is an industry issue
that one retailer can’t fix and one distributor can’t fix. There
has to be a platform that brings it together.”
Aggregated data over time recognizes common issues
and patterns and can highlight specific issues and sales dif-
ferences from one location to the next, Lecznar says.
Lecznar estimates retailers can lose 4% of their sales
each year from common items being out of stock or not
readily available on shelves, while companies participating
in the program—Southeastern Grocers is one—saw DSD
category sales increase by 3.5%.
Other tech providers have turned attention to ordering
and receiving DSD orders, such as Itasca, whose software
links electronic receiving of high-volume DSD products to
real-time forecasting and computer-generated ordering.
In the Age of Big-Brand Cost Cutting
The proliferation of DSD—and the subsequent expansion
of technologies built to support and optimize its use—is at
odds with some recent moves among large CPG firms to
switch to warehouse distribution.
Earlier this year, Nestle said it would dismantle its organization providing direct delivery of frozen items—primar-
The reality today is that retail
environments have consolidated, and
retailers have become more sophisticated
at controlling their space.” —Steve Presley, Nestle USA
Distribution Strategies Technology
K-VA-T Food Store’s
Food City banner adopted
Global Worx solutions to
address out-of-stocks due
to direct-store delivery
earlier this year.