SYSCO Corporation History

Address:

1390 Enclave Parkway
Houston, Texas 77077-2099
U.S.A.

Telephone: (281) 584-1390
Fax: (281) 584-2880

Public Company
Incorporated: 1969
Employees: 32,000
Sales: $14.45 billion (1997)
Stock Exchanges: New York
Ticker Symbol: SYY
SICs: 5141 Groceries, General Line; 5149 Grocers & Related Products, Not Elsewhere Classified

Company Perspectives:

As the leading foodservice supplier in North America, SYSCO is well-positioned to anticipate and respond rapidly to customers' menu requirements. This may be arranging for products to be custom-tailored to meet an emerging trend in a certain market segment or bringing to market new products that will benefit a broad customer base. Perhaps it is developing easier food preparation methods or creating initiatives and having products developed to address customer concerns. For all of these and more--SYSCO is the leading source.

Company History:

SYSCO Corporation (an acronym for Systems and Services Company) is the largest marketer and distributor of foodservice products in North America. With 70 distribution facilities serving more than 150 of the largest cities in the continental United States and parts of Alaska and Canada, SYSCO provides food and related products and services to approximately 270,000 restaurants, schools, hospitals, nursing homes, hotels, businesses, and other organizations. The company's line of products includes about 200,000 items, including fresh and frozen meats, seafood, poultry, fruits and vegetables, baked goods, paper and disposable items, chemical and janitorial products, beverages, dairy foods, and medical supplies. Founded in 1969, SYSCO has grown steadily ever since--mainly through dozens of acquisitions of smaller distributors--with annual increases in sales and earnings of 20 percent almost 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 food 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 nine companies, forming what he hoped to mold into a national foodservice distribution organization, one that would be able to distribute any food despite its regional availability. The other eight original companies were: Frost-Pack Distributing Company (Grand Rapids, Michigan); Global Frozen Foods, Inc. (New York); Houston's Food Service Company (Houston); Louisville Grocery Company (Louisville, Kentucky); Plantation Foods (Miami, Florida); Texas Wholesale Grocery Corporation (Dallas); Thomas Foods, Inc. and its Justrite Food Service, Inc. subsidiary (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, of Arrow Food Distributor. In its early years the company grew by acquiring a number of small foodservice distribution companies, carefully chosen for their geographic regions. These acquisitions helped to realize Baugh's early goal of providing uniform service to customers across the country. Throughout the 1970s SYSCO Corporation built many new warehouses to deal with this rapid expansion, later incorporating freezers into its warehouses and adding multi-temperature refrigerated 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 due to increasing capacity. One reason for such rapid recovery and regular growth was SYSCO's continuing diversification into new products, such as fish, meat, and fresh produce. In 1976 SYSCO acquired Mid-Central Fish and Frozen Foods Inc., expanding the company's distribution capabilities around the nation. In 1979 SYSCO's sales passed the $1 billion mark for the first time; by 1981 the company was rated as the largest U.S. foodservice distribution company. That year SYSCO set up Compton Foods in Kansas City to purchase meat, and began to supply 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 officer in September 1969, became CEO of SYSCO, with Baugh remaining chairman. The following year SYSCO continued its strategy of acquiring its competitors when it purchased three operations of PYA Monarch, then a division of Sara Lee. SYSCO's largest acquisition to date occurred in 1988, when the company paid $750 million for CFS Continental, at that time the third largest food distributor in the country, which added 4,500 employees and increased the number of markets SYSCO served to 148 out of the top 150 markets. Although much of the United States and especially Texas experienced hard financial times 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 distributors in the late 1980s, including Olewine's Inc. (Harrisburg, Pennsylvania), which was renamed Sysco Food Services of Central Pennsylvania, Inc.; Lipsey Fish Company, Inc. (Memphis, Tennessee); Hall One Chinese Imports, Inc. (Cleveland); and Fulton Prime Foods, Inc. (Albany, New York). By the end of the decade, sales had reached $6.85 billion, making SYSCO twice as large as its closest competitor in foodservice distribution and second only to McDonald's in the overall foodservice industry. Despite its size and growth (through some 43 acquisitions since its founding), SYSCO accounted for less than eight percent of overall foodservice distributor volume, a testament to the continuingly fragmented nature of the foodservice distribution industry--and evidence that SYSCO had plenty of room for future growth.

1990s and Beyond

During the early 1990s, SYSCO made several additional acquisitions, increasing the company's geographic spread still further. Among the more important purchases were the 1990 acquisition of the Oklahoma City-based foodservice distribution business of Scrivner, Inc., which became Sysco Food Service of Oklahoma, Inc.; the 1991 acquisition of four of Scrivner's northeastern U.S. distribution businesses, including that of Jamestown, New York, which became Sysco Food Services-Jamestown; 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 Elizabeth, 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 distribution 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 joined the company in 1970, had become CEO. SYSCO revenues had grown to $12.12 billion, but the company still held less than 10 percent of the foodservice distribution market. That year, Lindig told the Houston 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 percent.)

Also by this time, the company's management structure had grown somewhat 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 company presidents were reporting directly to the corporate staff. With SYSCO expecting to soon have about 75 operating companies, corporate management decided to add four senior vice-presidents of operations, each of whom would have full responsibility for about 10 SYSCO operating companies. Nineteen companies would still report directly to corporate.

In the later 1990s SYSCO slowed its pace of acquisition, although acquisitions were still seen as important for growth in selected new markets, particularly such far-flung areas as Alaska and Canada. In mid-1996 the company purchased Strano Foodservice of Peterborough, Ontario, which gave SYSCO a presence in the Toronto market, while Alaska Fish 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 new stand-alone operating company serving a new market. In 1995 SYSCO opened its first-ever brand-new distribution center in Connecticut through this program. Over the next four years, "fold-out" operating companies were added in Tampa, Florida; Wisconsin; North Carolina; Riviera Beach, Florida; Birmingham, 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 growing much faster than the foodservice industry as a whole. With its attention to customer service and it strong management team--a team that had been strengthened over the years by a company policy of retaining the managers of acquired firms--SYSCO was well-positioned to continue into the new millennium with a steady increase in market share, which stood at about nine percent for the 1996 calendar year.

Principal Subsidiaries: Arrow-Sysco Food Services, Inc.; Baraboo-Sysco Food Services; Cochran/Sysco Food Services; Deaktor/Sysco Food Services; Hallsmith-Sysco Food Services; Hardin's-Sysco Food Services, Inc.; Lankford-Sysco Food Services, Inc.; Maine/Sysco, Inc.; Major-Sysco Food Services, Inc.; Mid-Central/Sysco Food Services, Inc.; Miesel/Sysco Food Service Company; Nobel/Sysco Food Services Co. Albuquerque; Nobel/Sysco Food Services Co. Denver; Robert Orr-Sysco Food Services Co.; Pegler-Sysco Food Services Company; Ritter Sysco Food Services, Inc.; Smelkinson Sysco Food Services, Inc.; Strano Sysco Foodservice Limited (Canada); The SYGMA Network, Inc.; Sysco Food Services-Albany; Sysco Food Services of Arizona, Inc.; Sysco Food Services of Arkansas, Inc.; Sysco Food Services of Atlanta, Inc.; Sysco Food Services of Austin, Inc.; Sysco Food Services of Beaumont, Inc.; Sysco Food Services of Central Alabama, Inc.; Sysco Food Services of Central Florida, Inc.; Sysco Food Services of Central Pennsylvania, Inc.; Sysco Food Services of Charlotte, Inc.; Sysco Food Services-Chicago, Inc.; Sysco Food Services/Cincinnati; Sysco Food Services of Cleveland, Inc.; Sysco Food Services of Connecticut; Sysco Food Services of Dallas, Inc.; Sysco Food Services of Eastern Wisconsin; Sysco Food Services of Grand Rapids, Inc.; Sysco Food Services-Horseheads; Sysco Food Services of Houston, Inc.; Sysco Food Services of Idaho, Inc.; Sysco Food Services of Indianapolis, Inc.; Sysco Food Services of Iowa, Inc.; Sysco Food Services-Jacksonville, Inc.; Sysco Food Services-Jamestown; Sysco Food Services of Los Angeles, Inc.; Sysco Food Services of Minnesota, Inc.; Sysco Food Services of Montana, Inc.; Sysco Food Services of Oklahoma, Inc.; Sysco Food Services of Philadelphia, Inc.; Sysco Food Services of Portland, Inc.; Sysco Food Services of St. Louis, Inc.; Sysco Food Services of San Antonio, Inc.; Sysco Food Services of San Diego, Inc.; Sysco Food Services of San Francisco, Inc.; Sysco Food Services of Seattle, Inc.; Sysco Food Services of South Florida, Inc.; Sysco Food Services of Southeast Florida, Inc.; Sysco Food Services-Syracuse; Sysco Food Services of Virginia, Inc.; Sysco Food Services-West Coast Florida, Inc.; Sysco Intermountain Food Services, Inc.; Sysco/Konings Wholesale (Canada); Sysco/Louisville Food Services Co.

SYSCO Corporation History

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