Sysco US Foods Merger Stalled. Sued by FTC.

FTC and 10 states sue to prevent Sysco US Foods Merger…

Those of us in the foodservice industry were originally surprised by the announced acquisition of US Foods by Sysco, however as the year progressed many assumed it was a “done deal.”   Not so, says the Federal Trade Commission.    Sysco’s promised divesture of 11 distribution facilities to Performance Food Group, as reported earlier in the month, apparently did not alleviate concerns that Sysco would control 75% of broad-line distribution resulting in increased pricing.  Sysco argues that due to many localized distribution options, they would only handle 30% of the foodservice distribution volume and efficiencies would be improved resulting in lower pricing.   This author does not have a crystal ball regarding pricing to operators, however manufacturers would certainly feel the pressure from a stronger Sysco with limited other national distribution options.   Stay Tuned.

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Two Distributor Powerhouses Combine

Sysco to acquire US Foods and the future implications…

 

Sysco announced their intent to “merge” with US Foods early this month which is expected to close in the 3rd quarter of 2014.  The combined company will represent about 30% of the foodservice distribution market.  Who saw that move coming?  They’ve created a website bestofbothinfood.com to relay the benefits.  Peter Romeo, VP and Editorial Director of Restaurant Business Online suggests in his blog that the merger will speed technological advancements and eliminate distribution redundancies.   However operators are concerned that service will suffer, prices will increase, while choice declines.  For manufacturers, Bill Hale suggests that the new landscape will require an approach similar to Walmart which includes aligned teams and product development specific to Sysco’s brands.   Distribution has always been critical to getting foodservice products to the operator and ultimately the consumer.   Though there is a lot of uncertainty moving forward, one thing is clear – Branded manufacturers who deliver value-added products, who offer good price/value, and who build loyal relationships with operators willing to demand their brands will continue to  succeed.

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Sysco Driver Tweets his FSR Approval

Sysco customers love FSR according to driver tweet!

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