Denver Wholesale Foods: Leaders in Secondary Market

Spring 2011 - Considering the fact that U.S. businesses have faced a challenging economic climate for the last few years, it’s remarkable and encouraging when a company marks 2009, the bottom of the nationwide economic downturn, as its best year for revenue. Denver Wholesale Foods (Denver Foods) is one of these companies. Founded in Denver, Pa., in 2006, Denver Foods has seen a strong bottom line thanks to a strong discount market, a full-service approach to business, and many loyal vendors and customers.

Denver Foods works in what is known as the Secondary Market, as a buyer of manufacturer closeouts, factory seconds, overruns, insurance claims, liquidations, warehouse damage, close-coded products, out-of-code products and distressed products. The company in turn sells and distributes these products to discount grocery stores, dollar stores, prisons, food banks, restaurants, commissaries and small manufacturers. The company buys both small and large lots at deep discounts, warehouses and then delivers these goods for these customers in the retail and food service markets.

Although Denver Foods is a relatively young company, it benefits from ownership by four partners with over 42 years of combined experience in the wholesale business: Moses Stoltzfus, Myron Stoltzfus, Gary Martin and Paul Weaver IV. Martin explains that the company’s relatively isolated success is because, as he puts it, “There are not many companies that do what we do.” This is especially true in the company’s ability to buy and distribute large quantities of frozen food.

Knowing Its Market

From its sole location in Lancaster County, Denver Foods focuses the majority of its business in the northeast region of the U.S. Although the company is available to service customers nationwide, it rarely crosses over the Continental Divide to the west, but instead maximizes regional efficiencies in storage and delivery throughout Pennsylvania and all surrounding states. Denver Foods exclusively subcontracts with regional partners Denver Cold Storage (for warehousing) and Denver Logistics (for distribution).

Thanks to a thriving discount market in the U.S., Denver Foods has enough business to keep its employees busy. Yet, its small in-house operation – nine employees – doesn’t adequately represent the broad reach and success of Denver Foods’ business.

“We sell all types of grocery,” including shelf-stable, nonperishable and canned goods, refrigerated (meats, deli, seafood, dairy) and frozen food products, says Martin, who adds that frozen makes up the largest portion of Denver Foods' business. Frozen product drives business for Denver Foods in part because, as Martin explains, most regional competitors don’t have the capacity to work with frozen product due to the added considerations of cold-storage warehousing and delivery.

In sourcing customers for all its products Denver Foods looks to both the retail and the food service market. The retail side of business means working with primarily discount grocery stores, and the food service side of business serves up customers in the form of prisons, restaurants, camp facilities and conference centers.

Full-service Supply

Although business has been good, it does fluctuate due to the nature of close-out/overrun buying. Product availability depends on the nature of the U.S. manufacturing market, which is out of Denver Foods’ control – it can’t buy what isn’t available. “Our biggest challenge, as far as growth is concerned, is the ability to find the product that we need. We are largely opportunity buyers. We are constantly seeking to develop new vendors, manufacturers who are looking to liquidate product,” says Martin.

Denver Foods does, however, control what it can: its operations. The company stays ahead of the competition thanks in large part to its full-service nature. Denver Foods is both a “wholesaler and a distributor,” says Martin, and tying these two services together has been extremely beneficial for streamlining business and controlling quality.

As both – wholesaler and distributor – the customer can rely on Denver Foods for the storage of their product, and the delivery of their product as it is needed. This “order picking” system is a perfected part of Denver Foods, and customers can utilize a weekly or biweekly delivery schedule, as they see fit. Bundling these two aspects of inventory management for the customer – the retailers and food service venues – benefits them in the way of decreased costs and increased ease of business (in dealing with fewer parties).

Loyal Vendors

Denver Foods also thrives thanks to a somewhat surprising policy, which goes against the traditional workings of business. It is commonplace that buying agreements are in the control of the buyer, or at the very least are negotiated between the buyer and the vendor. This is not the case with Denver Foods. Denver Foods has upended the process with its commitment to always honor the vendor’s terms. If its bid is accepted, Denver Foods will play (and pay) by the vendor’s rules. Honoring the vendors’ restrictions is the company’s highest priority when it comes to selling the products it purchases. It’s not about getting top dollar for an item, but instead selling it into the correct channel to ensure a positive ongoing working relationship with vendors.

This flexibility rewards Denver Foods with loyal vendors who regularly opt to do business with Denver Foods because they know exactly what kind of payment arrangement they can rely on: their own. “I know vendors who had higher bids on their product, but went with us,” says Martin. Paying vendors on their terms is not the only way Denver Foods secures loyalties. Speaking of many vendors, Martin says, “They trust us, because we seek to really build on that trust for their sake.” Trust comes from paying on time, providing repeat business, and by using professional discretion.

In four years time, Denver Wholesale Foods, partnered with Denver Cold Storage and Denver Logistics, has built up an impressive network of business in the northeastern U.S. With this tightly managed coordination system driving allowing for consistent profit, it's not last year, but this year and all the years to come that might just be Denver Wholesale Foods' best one in business.