Sysco Corporation Business Information, Profile, and History

Company Perspectives:

SYSCO's Mission--Helping Our Customers Succeed. It's the foundation o f the decisions and actions taken by our employees on a daily basis.

Attention to detail, going the extra mile and simply being available for any need enhances the level of service each customer receives, an d ultimately benefits customers in their daily endeavors to satisfy t heir patrons.

We are committed to our customers' success and to helping them achiev e their goals. Maintaining outstanding service has become even more i mportant as consumers embrace quality dining experiences as they enjo y meals away from home. Our responsibility is not taken lightly--our customers' success is vital to our success.

History of Sysco Corporation

SYSCO Corporation (an acronym for Systems and Services Company) is th e largest marketer and distributor of foodservice products in North A merica, holding a market share of approximately 14 percent. With more than 160 distribution facilities located throughout the contiguous U nited States and parts of Alaska, Hawaii, and Canada, SYSCO provides food and related products and services to approximately 390,000 resta urants, schools, hospitals, nursing homes, hotels, businesses, and ot her foodservice customers. Restaurant customers account for fully two -thirds of revenues. The company's line of products includes about 27 5,000 items, including fresh and frozen meats, seafood, poultry, full y prepared entrees, produce, canned and dry foods, desserts, imported specialties, paper and disposable items, china and silverware, resta urant and kitchen equipment and supplies, and cleaning supplies. Foun ded in 1969, SYSCO has grown steadily ever since, mainly through doze ns of acquisitions of smaller distributors, with double-digit increas es in sales and earnings nearly every year.

Founded Through Combination of Ten Distributors

John Baugh was the guiding force behind the founding of SYSCO. Baugh had grown up on a ranch near Waco, Texas, and got his start in the fo od business through a part-time job at a local A&P grocery store when he was in high school. He eventually founded Zero Foods Company of Houston, a Houston-based food distributor. In 1969 Baugh convinced the owners of eight other small food distributors to combine the nin e companies, forming what he hoped to mold into a national foodservic e distribution organization, one that would be able to distribute any food despite its regional availability. The other eight original com panies were: Frost-Pack Distributing Company (Grand Rapids, Michigan) ; Global Frozen Foods, Inc. (New York); Houston's Food Service Compan y (Houston); Louisville Grocery Company (Louisville, Kentucky); Plant ation Foods (Miami, Florida); Texas Wholesale Grocery Corporation (Da llas); Thomas Foods, Inc. and its Justrite Food Service, Inc. subsidi ary (Cincinnati); and Wicker, Inc. (Dallas). The combined 1969 sales for the nine founding companies were $115 million.

SYSCO went public in 1970 and that year made its first acquisition, o f Arrow Food Distributor. In its early years the company grew by acqu iring a number of small foodservice distribution companies, carefully chosen for their geographic regions. These acquisitions helped to re alize Baugh's early goal of providing uniform service to customers ac ross the country. Throughout the 1970s SYSCO Corporation built many n ew warehouses to deal with this rapid expansion, later incorporating freezers into its warehouses and adding multi-temperature refrigerate d trucks to transport produce and frozen foods.

During the 1970s SYSCO grew steadily except for a brief earnings drop in 1976 caused by a canned food glut and excessive start-up costs du e to increasing capacity. One reason for such rapid recovery and regu lar growth was SYSCO's continuing diversification into new products, such as fish, meat, and fresh produce. In 1976 SYSCO acquired Mid-Cen tral Fish and Frozen Foods Inc., expanding the company's distribution capabilities around the nation. In 1979 SYSCO's sales passed the 6;1 billion mark for the first time; by 1981 the company was rated as the largest U.S. foodservice distribution company. That year SYSCO s et up Compton Foods in Kansas City to purchase meat, and began to sup ply supermarkets and other institutions with meat and frozen entrees.

1980s: Rapid Growth Through Acquisitions

In 1983 John E. Woodhouse, whom Baugh had hired as chief financial of ficer in September 1969, became CEO of SYSCO, with Baugh remaining ch airman. The following year SYSCO continued its strategy of acquiring its competitors when it purchased three operations of PYA Monarch, th en a division of Sara Lee Corporation. One of SYSCO's largest acquisi tions occurred in 1988, when the company paid $750 million for CF S Continental, at that time the third largest food distributor in the country, which added 4,500 employees and increased the number of mar kets SYSCO served to 148 out of the top 150 markets. Although much of the United States and especially Texas experienced hard financial ti mes during the 1980s, as a national company in a relatively recession -proof industry, SYSCO Corporation was not adversely affected.

SYSCO also made several smaller acquisitions of foodservice distribut ors in the late 1980s, including Olewine's Inc. (Harrisburg, Pennsylv ania), which was renamed Sysco Food Services of Central Pennsylvania, Inc.; Lipsey Fish Company, Inc. (Memphis, Tennessee); Hall One Chine se Imports, Inc. (Cleveland); and Fulton Prime Foods, Inc. (Albany, N ew York). By the end of the decade, sales had reached $6.85 billi on, making SYSCO twice as large as its closest competitor in foodserv ice distribution and second only to McDonald's in the overall foodser vice industry. Despite its size and growth (through some 43 acquisiti ons since its founding), SYSCO accounted for less than 8 percent of o verall foodservice distributor volume, a testament to the continuingl y fragmented nature of the foodservice distribution industry, and evi dence that SYSCO had plenty of room for future growth.

1990s: More Acquisitions, SYGMA, and the "Fold-out" Strategy

During the early 1990s, SYSCO made several additional acquisitions, i ncreasing the company's geographic spread still further. Among the mo re important purchases were the 1990 acquisition of the Oklahoma City -based foodservice distribution business of Scrivner, Inc., which bec ame Sysco Food Service of Oklahoma, Inc.; the 1991 acquisition of fou r of Scrivner's northeastern U.S. distribution businesses, including that of Jamestown, New York, which became Sysco Food Services-Jamesto wn; the 1992 acquisition of Philadelphia-based Perloff Brothers, Inc. , which operated as Tartan Foods; and the 1993 acquisitions of the St . Louis Division of Clark Foodservice, Inc. (which became Sysco Food Service of St. Louis, Inc.) and of Ritter Food Corporation of Elizabe th, New Jersey (which was renamed Ritter Sysco Food Services, Inc.).

In 1991 SYSCO created a subsidiary called the SYGMA Network, Inc. to consolidate its chain restaurant distribution systems and improve its service to chain restaurants. By 1997 SYGMA consisted of 11 distribu tion centers serving customers in 37 states, and posted sales of $ ;1.3 billion.

By 1995 Baugh had assumed the title of senior chairman (he retired in late 1997), Woodhouse was chairman, and Bill M. Lindig, who had join ed the company in 1970, had become CEO. SYSCO revenues had grown to & #36;12.12 billion, but the company still held less than 10 percent of the foodservice distribution market. That year, Lindig told the H ouston Business Journal: "We could grow at 20 percent a year for the next five years and we'd still have only 20 percent of the market ." (From 1978 to 1997, the company's compound growth rate was 16.4 pe rcent.)

Also by this time, the company's management structure had grown somew hat unwieldy. SYSCO's operating companies, which by 1995 numbered 58, had always been allowed to function in a largely autonomous manner. This decentralized structure, however, meant that 58 operating compan y presidents were reporting directly to the corporate staff. With SYS CO expecting to soon have about 75 operating companies, corporate man agement decided to add four senior vice-presidents of operations, eac h of whom would have full responsibility for about ten SYSCO operatin g companies. Nineteen companies would still report directly to corpor ate headquarters.

In the late 1990s SYSCO slowed its pace of acquisition, although acqu isitions were still seen as important for growth in selected new mark ets, particularly such far-flung areas as Alaska and Canada. In mid-1 996 the company purchased Strano Foodservice of Peterborough, Ontario , which gave SYSCO a presence in the Toronto market, while Alaska Fis h and Farm, Inc. was bought in early 1997. Beginning in 1995, however , SYSCO added a "fold-out" expansion strategy as an additional method of growth. This strategy involved developing a sales base in markets distant from an existing operation, then building a new distribution center, staffing it with transferred staff, and thereby creating a s tand-alone operating company serving a new market. In 1995 SYSCO open ed its first distribution center in Connecticut through this program. Over the next four years, "fold-out" operating companies were added in Tampa and Riviera Beach, Florida; Wisconsin; North Carolina; Birmi ngham, Alabama; and San Diego.

SYSCO posted record sales of $14.45 billion in fiscal 1997, along with record net earnings of $302.5 million. Although the company 's growth had slowed somewhat in the 1990s as fewer acquisitions were made, the "fold-out" expansion strategy was still keeping SYSCO grow ing much faster than the foodservice industry as a whole. These trend s continued through decade's end as profits reached $362.3 millio n on revenues of $17.42 billion. New fold-outs were being created about every six months, and several significant acquisitions were co mpleted in 1999. As beef enjoyed a resurgence in popularity, SYSCO bo ught two leading purveyors of beef, Buckhead Beef Company, based in A tlanta, and Newport Meat Company, headquartered in Irvine, California . Also acquired that year was Doughtie's Foods, based in Portsmouth, Virginia, which was renamed SYSCO Food Services of Hampton Roads, Inc .

Early 2000s and Beyond

Lindig took on the additional role of chairman in 1999 but then retir ed the following year, when Charles Cotros became SYSCO's fourth CEO and chairman as well. Cotros, who had been the firm's president, had joined SYSCO in 1974. One of Cotros's first tasks was shepherding thr ough one of the company's largest deals, the 2000 purchase of FreshPo int Holdings, one of the biggest distributors of wholesale produce in the United States. Based in Dallas, FreshPoint reaped annual sales o f approximately $750 million selling to more than 20,000 customer s, including restaurants, hotels, cruise ships, and wholesale grocers .

Early in 2001 SYSCO acquired a group of specialty meat supply operati ons in Texas, doing business under the names Freedman Food Service an d Texas Meat Purveyors, that specialized in supplying fresh meat to u pscale restaurants. The acquired businesses generated annual revenues in excess of $200 million. Next, SYSCO spent about $200 mill ion to buy Guest Supply Inc., a New Jersey firm supplying guest-care and housekeeping items to hotels. Guest Supply's sales for fiscal 200 0 totaled approximately $366 million. Significantly bolstering it s presence north of the border, SYSCO bought Serca Foodservice from S obey's, Inc. for about $280 million in early 2002. Based in Toron to, with annual sales of $1.4 billion, Serca provided 100,000 foo d products, as well as foodservice supplies and equipment, to 80,000 customers. SYSCO's Canadian distribution operation now covered the en tire nation. In May 2002 the company opened its first niche fold-out: a Buckhead Beef branch that began providing fresh-cut meat to the Ne w York metropolitan area. Broad-line fold-out operations were opened in Sacramento, California; Las Vegas; and Columbia, South Carolina, i n 2002. In addition, SYSCO was working to expand the FreshPoint produ ce brand across North America. Late in the year SYSCO moved into the ethnic food market with the acquisition of St. Paul, Minnesota-based Asian Foods, Inc., the largest Asian food distributor in the United S tates, with annual revenues of more than $100 million.

At the beginning of 2003 Cotros retired and was succeeded as chairman and CEO by Richard J. Schnieders, who had moved up to president and COO since joining SYSCO in 1982. The company stayed the course under CEO number five, continuing its string of acquisitions, mainly seekin g to fill in gaps in its geographic reach in the broad-line distribut ion sector in North America. In July 2004 SYSCO went further afield w hen it bought International Food Group Inc., of Plant City, Florida, distributor of supplies to quick-service chain restaurants in Central and South America, the Caribbean, Europe, Asia, and the Middle East. International Food reported 2003 revenues of $77.8 million. By l ate 2004 SYSCO had consummated 121 acquisitions over the course of it s 35-year history.

To improve efficiency, SYSCO launched a national overhaul of its supp ly chain that included the construction of as many as nine regional r edistribution centers over a ten-year period. These regional centers were designed to supply a number of SYSCO operating companies within a certain geographic area. The first, opened in February 2005 in Fron t Royal, Virginia, was slated to serve 14 broad-line SYSCO companies in the firm's northeast region (which encompassed Virginia, Maryland, Delaware, Pennsylvania, New Jersey, and western New York State). Sch nieders called this "the largest strategic project in SYSCO's history ." In August 2005 SYSCO announced that it had selected Alachua, Flori da, as the site for its second redistribution center, which would ser ve the Southeast with an anticipated opening in the fall of 2006.

By fiscal 2004 SYSCO's steadily rising revenues had reached $29.3 4 billion, a 12.2 percent increase over the previous year, while earn ings rose 16.6 percent, to $907.2 million. Fourth-quarter profits , however, failed to meet Wall Street expectations in part because of a high rate of inflation on the food it bought from suppliers. To co ntrol expenses during the next fiscal year, SYSCO cut 1,500 jobs from its payroll late in 2004. SYSCO managed to achieve gains in both sal es and earnings for the 29th straight year in fiscal 2005, but the ga ins were very small, 6 percent for earnings, which totaled $961.5 million, and just 3.2 percent for revenues, which nevertheless passe d the $30 billion mark for the first time. SYSCO was likely to ke ep a close eye on expenses while continuing to emphasize customer ser vice and relying on its strong management team, a team that had been strengthened over the years by a company policy of retaining the mana gers of acquired firms, to keep the firm moving forward. SYSCO was we ll-positioned to maintain its record of steady increases in its share of the foodservice distribution sector, which had reached 14 percent by 2005.

Principal Subsidiaries: Abbott SYSCO Food Services; A.M. Brigg s Inc.; Baugh Northeast Co-op, Inc.; Buckhead Beef Company; Buckhead Beef Florida; Buckhead Beef Northeast; Freedman Meats, Inc.; Freshpoi nt, Inc.; Fulton Provision Company; Guest Supply, Inc.; Hallsmith Sys co Food Services; Hardin's Sysco Food Services, LLC; Lankford Sysco F ood Services, LLC; Malcolm Meats; Nobel Sysco Food Services; Pegler S ysco Food Services Company; Robert Orr Sysco Food Services Company, L LC; Robert's Sysco Food Services, Inc.; SYGMA Network, Inc. - Columbu s Central; SYSCO Asian Foods, Inc.; SYSCO Food Services of Alaska, In c.; SYSCO Food Services of Albany; SYSCO Food Services of Arizona, In c.; SYSCO Food Services of Arkansas, LLC; SYSCO Food Services of Atla nta, LLC; SYSCO Food Services of Austin, LP; SYSCO Food Services of B altimore; SYSCO Food Services of Baraboo; SYSCO Food Services of Cent ral Alabama, Inc.; SYSCO Food Services of Central California, Inc.; S YSCO Food Services of Central Florida, Inc.; SYSCO Food Services of C entral Pennsylvania, LLC; SYSCO Food Services of Charlotte, LLC; SYSC O Food Services of Chicago, Inc.; SYSCO Food Services of Cincinnati; SYSCO Food Services of Cleveland, Inc.; SYSCO Food Services of Columb ia; SYSCO Food Services of Connecticut; SYSCO Food Services of Dallas , LP; SYSCO Food Services of Detroit, LLC; SYSCO Food Services of Eas tern Wisconsin; SYSCO Food Services of Grand Rapids, LLC; SYSCO Food Services of Gulf Coast, Inc.; SYSCO Food Services of Hampton Roads, I nc.; SYSCO Food Services of Houston, LP; SYSCO Food Services of Idaho , Inc.; SYSCO Food Services of Indianapolis, LLC; SYSCO Food Services of Iowa, Inc.; SYSCO Food Services of Jackson; SYSCO Food Services o f Jacksonville, Inc.; SYSCO Food Services of Jamestown; SYSCO Food Se rvices of Kansas City, Inc.; SYSCO Food Services of Las Vegas; SYSCO Food Services of Los Angeles, Inc.; SYSCO Food Services of Louisville ; SYSCO Food Services of Metro New York; SYSCO Food Services of Minne sota, Inc.; SYSCO Food Services of Montana, Inc.; SYSCO Food Services of New Mexico; SYSCO Food Services of New Orleans, LLC; SYSCO Food S ervices of Northern New England, Inc.; SYSCO Food Services of Oklahom a, Inc.; SYSCO Food Services of Philadelphia, LLC; SYSCO Food Service s of Pittsburgh, Inc.; SYSCO Food Services of Portland, Inc.; SYSCO F ood Services of Sacramento, Inc.; SYSCO Food Services of St. Louis, L LC; SYSCO Food Services of San Antonio, LP; SYSCO Food Services of Sa n Diego, Inc.; SYSCO Food Services of San Francisco; SYSCO Food Servi ces of Seattle, Inc.; SYSCO Food Services of South Florida, Inc.; SYS CO Food Services of Southeast Florida, LLC; SYSCO Food Services of Sp okane; SYSCO Food Services of Syracuse; SYSCO Food Services of Ventur a, Inc.; SYSCO Food Services of Virginia, LLC; SYSCO Food Services of West Coast Florida, Inc.; SYSCO Intermountain Food Services, Inc.; S YSCO Newport Meat Company; Watson Sysco Food Services, Inc.; North Do uglas SYSCO Food Services, Inc. (Canada); SYSCO Canada; SYSCO Food Se rvices of Atlantic Canada; SYSCO Food Services of Calgary (Canada); S YSCO Food Services of Central Ontario, Inc. (Canada); SYSCO Food Serv ices of Edmonton (Canada); SYSCO Food Services of Ontario, Inc. (Cana da); SYSCO Food Services of Quebec (Canada); SYSCO Food Services of R egina (Canada); SYSCO Food Services of Sturgeon Falls (Canada); SYSCO Food Services of Thunder Bay (Canada); SYSCO Food Services of Toront o (Canada); SYSCO Food Services of Vancouver, Inc. (Canada); SYSCO Fo od Services of Winnipeg (Canada); SYSCO HRI Supply, LTD. (Canada); SY SCO I & S Foodservices, Inc. (Canada); SYSCO Ontario Produce, Inc . (Canada).

Principal Competitors: U.S. Foodservice, Inc.; Performance Gro up Company; Gordon Food Service.

Chronology

• Key Dates:
• 1969: John Baugh, owner of Zero Foods Company of Houston, is t he guiding force behind the creation of SYSCO Corporation from the co mbination of nine small food distributors.
• 1970: SYSCO goes public and makes its first acquisition, Arrow Food Distributor.
• 1979: Revenues surpass $1 billion.
• 1981: SYSCO becomes the largest U.S. foodservice distribution company.
• 1988: CFS Continental is acquired.
• 1991: SYSCO creates a subsidiary called the SYGMA Network, Inc . to consolidate its chain restaurant distribution systems.
• 1995: Company launches its "fold-out" expansion strategy as an additional method of growth.
• 2000: SYSCO acquires FreshPoint Holdings.
• 2002: Canadian operations are vastly enlarged through the purc hase of Serca Foodservice.
• 2005: The first SYSCO regional redistribution centers open.