Sysco breaking barriers of broadline

2/17/2016 - by Monica Watrous

Distributor eyeing opportunities to stay ahead in the competitive $265 billion market..

BOCA RATON, FLA. — Sysco Corp. still sees “plenty of opportunity” for acquisitions in the wake of its terminated merger agreement with US Foods. Last June, the Houston-based broadline distributor ended its effort to acquire its Rosemont, Ill., rival several days after the U.S. District Court for the District of Columbia granted a Federal Trade Commission request for a temporary injunction to block the transaction.

“I would say there’s still plenty of opportunity in the core business, in the U.S. North American business,” said Bill DeLaney, chief executive officer, during a Feb. 16 presentation at the Consumer Analyst Group of New York conference in Boca Raton. “The only acquisition that we know for sure that we can’t do is US Foods.”

Sysco’s core business segment, U.S. broadline represents 70% of the company’s sales and 90% of its operating income, serving both local and corporately managed customers across food service outlets, including health care, education and restaurants. In addition to seeking opportunities within this business, Mr. DeLaney said Sysco may pursue acquisitions in adjacent categories or international markets.

“We have spoken before about continuing to do adjacencies (such as hotel products supplier) Guest Supply,” Mr. DeLaney said. “That’s an adjacent acquisition we did several years ago. Common customer, different product, that kind of thing.

“And certainly, international… We acquired companies in Canada, then a big organization over 10 years ago, but we’ve grown from there. So, we see opportunities throughout.”

Beyond acquisitions, Sysco has other initiatives under way to remain competitive in the $265 billion food service market in the United States and Canada. As part of a three-year strategic plan initiated after the terminated merger agreement, Sysco is focused on growing gross profit by accelerating local case growth and improving margins; leveraging chain supply costs; and reducing administrative costs. A key driver of local case growth is product innovation.

“We now have a full-blown innovation calendar in place where twice a year we are launching innovative new products,” said Tom Bené, president and chief operating officer. “Many of these products are unique or proprietary to Sysco.”

Another priority for Sysco is the Hispanic consumer segment, whose growth is outpacing the company’s core local customer base.

“We’ve embarked on an approach where we understand that customer better,” Mr. Bené said. “We try to understand what are the things that are drivers and motivators for them, and by going through that process, we’ve now created basically a market-based approach… And we are seeing close to 10% growth in that segment, which is obviously much higher than some of the other segments are growing.”

Fresh meat and produce also figure into Sysco’s growth strategy.

“We all know that locally grown and fresh products are our key focus and priority for a lot of our local restaurant customers,” Mr. Bené said. “So this is an area where we leverage some of those specialty companies that we have…

“We’ve been piloting a fresh initiative, and that is driving significant category growth. In this case, our local cases in the produce category (are) up over 10%. So we’re growing double digits in a very important category for our customer and, again, kind of breaking the traditional barriers of what broadline might do by leveraging some of the experience and capability we’ve got in our specialty companies.”