Without a Defensible Edge, We Don’t Think Chefs’ Warehouse Will Be Able To Keep Competition at Bay

We don’t believe Chefs’ Warehouse has carved out an edge in the hypercompetitive foodservice distribution landscape. Specifically, we think the distributor faces an onslaught of competition from thousands of smaller specialty peers and scale-advantaged broadline distributors. Without barriers to entry and with minimal switching costs, we suspect entrenched industry incumbents could lean more heavily into specialty distribution and incrementally pressure Chefs’ long-term prospects. That said, we still believe the firm’s near-term prospects could remain alluring, as it continues to integrate a slew of recent acquisitions and leverages technology to bolster its operations. The distributor posted average organic sales growth of 10% over the past seven years, outperforming the foodservice industry’s 5% annual rise (per Euromonitor). Coupled with sales-driving initiatives and new market expansions, we forecast continued near-term market share gains, with 6.8% organic growth over the next five years, ahead of our 4.4% broader industry growth estimate.