Chef Spices
Image: Chefs' Warehouse.

As people get pickier about the food they eat, there's been a revolution in the way that businesses have responded to new demand. Whole Foods Market (NASDAQ:WFM) has thrived from the long-term trend toward healthier eating at home, but for the restaurant community, Chefs' Warehouse (NASDAQ:CHEF) has served the equally important function of getting hard-to-find high-quality specialty products to the chefs that need them the most. Coming into Tuesday's third-quarter financial report, Chefs' Warehouse investors wanted to see further signs that the company is still driving massive growth from capturing a greater share of its potential market, and its results followed through on the company's potential quite admirably. Let's look more closely at the latest from Chefs' Warehouse and see if it can sustain its growth for the long haul.

Chefs' Warehouse looks appealing
Chefs' Warehouse's third-quarter results were even stronger than the fairly high expectations that investors had for the company. Revenue jumped by a third to $277.5 million, just edging over the consensus forecast for the company's top-line growth. Net income rose by more than a fifth to $5.2 million, and on a pro forma basis, modified earnings of $0.21 per share topped estimates by $0.03.

As we've seen in past quarters, the impact of recent acquisitions by Chefs' Warehouse had a large but not exclusive impact on the company's overall sales gains. The purchases of Del Monte Meat and Euro Gourmet added about $59.3 million to revenue, accounting for roughly 28 percentage points of sales growth. Yet organic growth was about 5%, and case counts, unique customers, and placements all grew in a range of between 6.5% and 8%. Food-cost inflation was less of a factor than it was earlier in the year, with prices rising by just 1.9% because of higher protein and chocolate prices, with falling cheese, dairy, and seafood costs helping to lessen the blow.

Unfortunately, Chefs' Warehouse reversed some of the progress it had made on the cost-containment front. Expenses as a percentage of net revenue rose by nearly a full percentage point to 20.8%, with higher occupancy costs and bad debt expense, more than wiping out falling fuel and freight costs. The acquisition of Del Monte also added to overall amortization expenses which fell through to the bottom line.

CEO Chris Pappas was happy with the company's results. "The integration of Del Monte continues to go very well," Pappas said, "as we convert their computer systems to our standard platform." In addition, the company said it has already gone through many capital-intensive internal projects and hopes to see free cash flow rise in the near future.

Can Chefs' Warehouse keep climbing?
Chefs' Warehouse gave investors some positive news on the guidance front. The company narrowed its sales guidance, now expecting $1.04 billion to $1.06 billion in revenue for the full 2015 year, which was squarely in the middle of its previous range. Yet adjusted earnings per share are now seen coming in between $0.73 and $0.77, which is $0.03 to $0.06 per share higher than Chefs' Warehouse's previous guidance.

The long-term question that Chefs' Warehouse will need to face is whether it will eventually have to adjust its business model to reflect competition. Whole Foods has certainly struggled with big challenges in that arena, as the grocery retailer once had the natural and organic food niche almost to itself. Over time, traditional grocery chains have stood up to Whole Foods with organic initiatives of their own, and Whole Foods has struggled to answer the call while remaining true to its original spirit. Chefs' Warehouse doesn't have to worry overly much about that potential problem at this point, but if it's successful in the long term, it needs to think about how it can adapt to keep its leadership advantage.

Chefs' Warehouse stock didn't move much immediately following the announcement, but long-term investors should stay apprised of how well the company does at continuing to find high-quality acquisitions and integrating them into its existing framework. As long as the food craze lasts, there'll be room for Chefs' Warehouse to keep delivering the goods to hungry customers -- and investors.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Dan Caplinger owns shares of Whole Foods Market. The Motley Fool owns shares of and recommends Whole Foods Market. The Motley Fool recommends The Chefs' Warehouse. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.