I first learned about Jetro Holdings in July of 2020 while having a conversation with a close relative. Earlier that day, my relative had visited a local Restaurant Depot to buy groceries. Restaurant Depot is a subsidiary of Jetro Holdings, a New York-based holding company, and is a members-only wholesale cash and carry food service supplier with 144 locations across 34 U.S. states. Restaurant Depot supplies restaurants, caterers and nonprofits with products such as food, wine and spirits, kitchen supplies, equipment and tableware. Early on during the COVID-19 pandemic, Restaurant Depot opened to the general public and my relative began buying groceries there to take advantage of the bargain prices. I've been intrigued by discount retailers ever since reading the autobiography of Sam Walton, the founder of Wal-Mart, but I had never before heard of discount wholesalers, so I took to Google to learn more.
Upon researching Jetro Holdings, I learned that Restaurant Depot and its sister company, Jetro Cash and Carry, which focuses on supplying urban convenience stores and small grocers, are majority-owned by South African billionaire Nathan Kirsh. The company's larger competitors are Sysco, U.S. Foods and Performance Food Group. Jetro Holdings has expanded significantly since the mid-1990s, increasing revenue from approximately $361 million in 1996 to over $10 billion in 2018. Jetro Holdings has also grown its store count from ten stores in the early 1990s to 150+ stores in 2022 and provided a 10x return over ten years to CCMP Capital Advisors, a private equity firm that acquired a minority stake in Jetro Holdings in 2004 and sold back a portion of that stake to Kirsh in 2014. Jetro Holdings was valued at around $9 billion in 2014 and is almost undoubtedly worth more today given that it has opened about five new stores per year since then.
Jetro Holdings has been able to successfully compete with larger food service distributors over the past few decades by maintaining a laser-sharp focus on providing low costs and prioritizing customer needs. Apart from offering industry-low costs, the company is unique in that it doesn't charge a membership fee, allows customers to purchase smaller quantities of goods than other wholesalers and is open seven days a week. Restaurant Depot also conducts in-store demonstrations to educate customers on the many products that the company sells. Jetro Holdings is able to offer highly competitive prices because it has a lean internal cost structure—the company doesn't offer delivery (thus avoiding trucking costs) but instead sells its goods from 50,000+ square foot, low-overhead warehouses that have food, equipment and supplies stacked from floor to ceiling.
Jetro Holdings' business model is undeniably strong but what I consider to be most impressive about Restaurant Depot and Jetro Cash and Carry is that they have been able to scale nationally while effectively hiding in plain sight. In other words, they are anonymously ubiquitous. Unless you're an employee, customer, competitor, industry professional or happen to be innately inquisitive about the goings-on of a nondescript warehouse located on a secluded block in your town, most people would have no reason to know that Restaurant Depot or Jetro Cash and Carry exist. This is even more remarkable considering Jetro Holdings would qualify as one of America's 35 largest private companies based on its 2018 revenue (and my presumption that revenue has grown since then).
I've come across numerous articles over the years arguing that a company's competitive positioning is strongest when it becomes a "verb" (i.e., Google, Uber, Netflix, Fedex, Zoom, Xerox) or attains household name recognition. However, researching Jetro Holdings leads me to believe that not enough credit has been given to companies that are able to scale nationally or even internationally while remaining largely anonymous. The beauty of anonymously ubiquitous companies is that they are less likely to attract new competition than better known companies, they are less likely to attract political and regulatory scrutiny (i.e., antitrust challenges and subpoenas to testify before Congress), they tend to require smaller marketing and branding budgets and they are less susceptible to theft of trade secrets and proprietary information. Given that the average life span of companies in the S&P 500 has declined from 61 years in 1958 to less than 18 years in more recent times, it seems that the force of capitalism's creative destruction is stronger than ever before and that companies might improve their odds of survival by avoiding rather than chasing the limelight.
Jetro Holdings is a successful private company that has excelled at anonymous ubiquity but there are numerous public companies that have also done well on this front. Companies like Church & Dwight (household and personal care company that sells deodorant, baking soda, toothpaste, detergent and pregnancy tests, among other items), Waste Connections (North America's third largest waste management company), NCR (a software, hardware and services company that sells self-service kiosks, ATM machines, check processing systems and barcode scanners, among other items) and MGP Ingredients (a leading supplier of specialty proteins and starches that are added to a wide range of foods and beverages to increase their nutritional value) come to mind. The common thread across these companies is that they all seem to be far less well known than would be expected given their respective footprints. Additionally, each company has done a good job of maintaining if not expanding its market share over the years.
Undoubtedly, there are industries and business models for which anonymity may be anathema (i.e., luxury goods, media, hospitality, pharmaceuticals). However, I think that the subset of companies that have a business model or operate within an industry that lends itself to anonymous ubiquity are worth studying. These companies enjoy a host of competitive advantages that make them exceptionally resilient and afford them greater potential for reliable, long-term profits.
Disclaimer
The material in this blog is provided for informational and educational purposes only and under no circumstances should any content or communication herein be construed as investment advice or as an offer or solicitation to buy or sell securities, whether express or implied. Factual statements in this blog are believed to be truthful and reliable but are not warranted against errors or omissions. All opinions expressed in this blog are subject to change at any time without notice. By reading this blog, you accept these conditions.
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