Sysco Launches Innovative Strategy to Aid Foodservice and Retail Operators
HOUSTON, TX - During this time of adversity in the foodservice space, operators are stepping up to the challenge by creating new opportunities for support. One of the leading global foodservice distribution companies, Sysco, recently announced a business and financial strategy in response to changes in the foodservice industry due to the impact of the coronavirus (COVID-19).
“Sysco is operating from a position of financial strength and will weather this storm. We continue to prioritize the health and wellbeing of our associates, customers, and communities around the world,” said Kevin Hourican, President and Chief Executive Officer. “In addition to ensuring the safe delivery of food and related products, we are taking decisive actions to manage our costs, capital spend, and working capital to maintain a positive free cash flow position.”
Sysco’s strong balance sheet provides financial flexibility for the company to navigate current challenges in the “food-away-from-home” market resulting from the spread of COVID-19 and subsequent actions taken across the country to increase social distancing.
According to a press release, the company has cash on hand of approximately $2 billion as of March 20, 2020, including a recent $1.5 billion withdrawal under its revolving credit facility. Importantly, Sysco has no debt maturities for the next six months and is working with its banking partners to explore opportunities to raise additional funds and further strengthen its liquidity.
The company is taking aggressive action to reduce variable expenses, aligning inventory to current sales trends, reducing capital expenditures to only urgent projects, and tightly managing receivables.
“As the largest foodservice distribution company in the industry, we play a significant role in supporting the food supply chain. Due to the significant impact on the food-away-from-home business, we are pivoting our business to better support the surge in demand that is being experienced in the retail grocery store setting,” Hourican continued. “We are establishing new customer relationships with retail grocers to provide them with logistics services and much needed product. We are also advocating for and supporting our customers, who are essential to our future service. I am proud of our associates for their commitment to safety and the work they are doing to serve an essential industry. I am confident Sysco will emerge a stronger company, even more focused on being our customers’ most trusted and valued business partner.”
In addition to efforts to reduce costs, the company is leveraging its supply chain expertise to provide new services to the retail grocery sector. This new business will help balance some of the declines in the food-away-from-home segment and also positions Sysco for growth opportunities after the COVID-19 concern subsides.
Examples of growth initiatives that are being implemented include:
- Providing logistics services to retail grocery customers;
- Becoming a supplier of product to retail grocery customers;
- Enabling small restaurants to stand up home delivery operations and online order pick-up service; and
- Distributing cleaning supplies to keep kitchens safe and virus free.
Sysco noted that it is supportive of the National Restaurant Association (NRA) in its efforts to seek relief for America’s foodservice industry. The NRA’s proposed policy changes include the establishment of a $145 billion recovery fund for the foodservice industry to provide immediate liquidity and expanded access to federal small business loans, among others. The press release also shared that Sysco does not wish to receive any financial support through this relief package. The company’s focus is to support the small business owners it serves.
Sysco has also determined to withdraw its FY18-FY20 three-year plan guidance due to the rapidly evolving impact of COVID-19 on the global economy.
We stand in solidarity with those who are working so diligently to protect our industry throughout this challenging time. To see how other companies are stepping up, keep following along with us at AndNowUKnow.