Reyes Holdings, LLC

Company Profile
Publication Date: 1 Apr 2010

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TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 SWOT Analysis.....................................................................................................5

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Reyes Holdings, LLC

COMPANY OVERVIEW
Reyes Holdings (Reyes or the company) is a privately-held food and beverages wholesale distributor. The company primarily operates in the US. Reyes is headquartered in Rosemont, Illinois and employs about 10,300 people. Reyes is a private company and has not released its annual report. Therefore, financial details are not available

KEY FACTS
Head Office Reyes Holdings, LLC 9500 West Bryn Mawr Avenue Suite 700 Rosemont Illinois 60018 USA 1 847 227 6500

Phone Fax Web Address Employees

http://www.reyesholdings.com 10,300

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Reyes Holdings, LLC

SWOT ANALYSIS
Reyes Holdings (Reyes) is a privately-held food and beverages wholesale distribution company. The company was ranked as the 25th largest privately-held corporation in America (according to Forbes magazine) and the largest private company in Chicago (Crain's Chicago Business). Strong market position enables Reyes to draw more customers and gives it a competitive edge over its peers. However, sluggish growth in the alcoholic beverages market would affect the companys revenues adversely. Strengths Large scales of operations enhance bargaining power Portfolio of private labeled products allow flexibility to customers Utilizing technology to improve processes and service portfolio Opportunities Strategic initiatives strengthen Reyess core businesses and enhance competitive advantage Growing restaurant sales likely to increase demand for the products distributed by Reyes Popularity of private labels products is another route through which Reyes's topline can increase Weaknesses Narrow focus on the food and beverage market

Threats Dampened demand for alcoholic beverages market impact Reyess ROI Rising fuel prices pressurize margins and profits Shortage of truck drivers and rising labor costs cause operational hiccups

Strengths

Large scales of operations enhance bargaining power With annual revenues in excess of $11 billion, Reyes is one of the largest privately held companies in the US. The company was ranked as the 25th largest privately-held corporation in America (according to Forbes magazine) and the largest private company in Chicago (Crain's Chicago Business). Reyes operates Reyes Beverage Group, the largest beer distribution business in the US. It also owns Reinhart FoodService, the fifth largest privately-held broadline foodservice distributor in the US. Annually, the company delivers over 406 million cases of beer and food products from more than 90 warehouses in the US, Canada, and Puerto Rico as well as Central and South America.

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Reyes Holdings, LLC

Reyes is a leading food and beverage wholesale distributor in the US which enhances its bargaining power and strengthens its reputation among stakeholders. Portfolio of private labeled products allow flexibility to customers Reyes, though its food subsidiary, Reinhart Foodservice (RFS), offers an extensive line of private label products including fresh meats, seafood, produce, dairy and bakery goods. Some of RFS's own brands include Bountiful Harvest, Brickfire Bakery, CHEF MARK, Culinary Secrets, Eagle Ridge, The Ever Family of brands (EverFry, EverRich and EverLight), Katy's Kitchen, ProPak, ProPower, San Pablo, SilverBrook, Smart Source, Southern Pearl, Trifoglio and Villa Frizzoni, among others. Reyes's private label product portfolio allows its customers (who are primarily restaurants, sporting venues, independent restaurants, schools, nursing homes, hospitals and hotels) to offer packaged food items at competitive prices at their selling points. Utilizing technology to improve processes and service portfolio Reyes Holdings utilizes high-end technology to drive efficient workflows and on-time deliveries. Global Positioning Systems (GPS), robotics and hand-held tracking devices are some of the technologies leveraged by the company to ensure that the freshest product arrives in the correct quantity at the specified time. Reyes, though its food subsidiary, Reinhart FoodService also provides its customers with TRACS (Timely, Reliable, Accurate Customer Service) order entry to run its day-to-day activities. The company's TRACS Direct program is a web-based direct entry program through which customers can view the full product and price catalogs and place their orders. Customers can also keep a record of their inventory levels and invoice history through the program. By leveraging high-end technology and software programs, Reyes provides a high level of customer service and thus creates a competitive advantage.

Weaknesses

Narrow focus on the food and beverage market Reyes is largely concentrated on the food and beverage segment. However, some of the company's competitors in the US have a more diversified product line. For instance, The Grocers Supply Co. (Grocers Supply), besides being a full line grocer, offers other product lines including health and beauty products, household products as well as school and office supplies. A diverse product offering has enabled Grocers Supply to provide a one-stop alternative for a variety of retailer needs. In this perspective, Reyes's focus on a narrow product segment puts it at a competitive disadvantage.

Opportunities

Strategic initiatives strengthen Reyess core businesses and enhance competitive advantage

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Reyes Holdings, LLC

As part of its growth strategy, Reyes undertook two strategic initiativesone, to strengthen its business with McDonalds; and two, to consolidate its beverage distribution operations to better serve the San Diego County. Towards strengthening its business with McDonalds, Reyes' subsidiary, Martin Brower acquired Metroplex Holdings in April 2009. Metroplex Holdings, through its subsidiaries, manages distribution facilities for McDonalds restaurants in the New York metropolitan area, McDonalds Republic of Ireland, and McDonalds Northern Ireland region. The new Martin-Brower Metroplex division will service 574 McDonalds stores and 49 Chipotle stores in New York and New Jersey as well as over 100 McDonalds stores in Ireland. The Metroplex acquisition has enhanced Reyess capacity to generate more revenues through serving McDonalds global network of restaurants. Towards consolidating its distribution operations to better serve the San Diego County, in June 2009, Reyes subsidiary, Reyes Beverage Group and Crest Beverage Company formed a joint venture consolidating three specific operationsSan Diego beer distributorships, Mesa Distributing, and Crest Beverage Company. The new joint venture will operate as Crest Beverage LLC and will represent a diverse portfolio of brewers across the San Diego County. The new joint venture will provide greater market penetration opportunities to the brewers and will enhance cross selling opportunities for Reyes. Initiatives such as these strengthen Reyess core business and add to its competitive advantage. Growing restaurant sales likely to increase demand for the products distributed by Reyes Restaurant sales which were adversely affected in 2009 due to economic slowdown are expected to recover from 2010 onwards. According to National Restaurant Association's 2010 Restaurant Industry Forecast, the sector is expected to grow gradually. In 2010, restaurant sales are estimated to increase by 2.5% and reach $580 billion. Although, the growth in volumes is expected to be flat, the decline is estimated to be bottomed out with the growth rate picking up pace from 2011. Reyes, though its food subsidiary, Reinhart Foodservice (RFS) provides food items to restaurants. The positive outlook in the end market would increase the demand for the company's products and in turn improve its revenue growth rates. Popularity of private labels is another route through which Reyes's topline can increase The private label market in the US is expected to grow at a fast pace. During 2009 among the food products, the national brands grew at a rate of 2.4% while the private brands grew at a faster pace of 3.2%. The recent slowdown has kept price the top concern for consumers. Instead of expensive brands, consumers across the industry are turning to generic and private label products. Even upper-income shoppers are more willing to buy generic, which has traditionally appealed more to shoppers with limited budgets. The sales of private label products in the US are also estimated to reach $56 billon by 2011. Private labels comprise 15% of the total food sales which converts into large volumes. Reyes offers an extensive line of its private label products including fresh meats, seafood, produce, dairy and bakery goods. The increased demand for private label products among consumers will, therefore, have a favorable impact on the demand for Reyes's private labeled food items.

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Threats

Dampened demand for alcoholic beverages market impact Reyess ROI The market for alcoholic beverages in the US was impacted owing to the economic slowdown in 2009. Industry reports estimates that the annual growth rate of the US beer market to be 0.6% during 2009-12 compared to a 0.9% annual growth posted during 2004-08. Wines and spirits have been further affected by the downturn, being premium alcoholic beverages products. The spirits growth is estimated to be 1.1% during 2009-12 compared to 2.7% between 2004 and 2008. Reyes, through its subsidiary Reyes Beer Group, is a distributor of import/craft and domestic beer brands. The market for these products having been affected by cautious consumer spending is estimated to decelerate. This will affect the companys return on investments adversely and as a large number of players are competing in a low growth market-competition will intensify. Rising fuel prices pressurize margins and profits The fuel price in the US has been rising in the recent times. According to the EIA forecasts, annual average regular grade retail gasoline price will increase from $2.35 per gallon in 2009 to $2.84 in 2010 and to $2.96 in 2011 owing to the increase in crude oil prices. Furthermore, average US pump prices are estimated to exceed $3 per gallon at peak times during the forthcoming spring and summer driving season. Annual average retail diesel fuel prices are estimated to rise to $2.96 and $3.14 per gallon, respectively, in 2010 and 2011. Reyes being a distributor will be affected by the increase in fuel prices as transportation is its major operations. Rising fuel prices will pressurize Reyess operating margins and profitability. Shortage of truck drivers and rising labor costs cause operational hiccups The truck transportation industry in the US is experiencing a national shortage of truck drivers. The American Trucking Association (ATA) predicts the shortage will increase to 111,000 by the year 2014 given the current demographic trends. Secondly, retaining truck drivers is another challenge faced by employers such as BEK. The driver market is the tightest it has been in 20 years, and the turnover rate at large trucking companies exceeds 100%, according to ATA. As Reyes operates in the distribution industry, shortage of truck drivers and increasing turnover rate could hamper its business operations. Adding to this is the trend of increasing labor wages in the US. In recent times, tight labor markets, increased overtime, government mandated increases in minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs. The federal minimum wage rate in the US, which had remained at $5.15 per hour since 1997, increased to $5.85 per hour in July 2007 and then $6.55 per hour in July 2008. The federal minimum wage rate further increased to $7.25 per hour in July 2009. The retention of truck drivers amidst the increase in labor wages will have an impact on Reyess margins as the operational costs will increase.

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