Food distributor companies like Sysco Corporation, US Foods Holding Corp, and Performance Food Group Co have been seeing some interesting price action lately. Food distributors that had substantial revenues coming from hotels and restaurants have experienced difficulties during the pandemic owing to lockdowns and low footfalls. However, with vaccination efforts progressing and estimates of the pandemic subsiding some time down the line, food distributors may be well-placed for future growth. Sysco Corporation is the largest food distributor in the US and controls roughly 62% of the market share in what is considered to be a highly fragmented industry.
Advantages For Sysco Corporation
Sysco Corporation as unrivalled capabilities when it comes to distribution. It has an extensive network of 172 US-based distribution facilities. These facilities are strategically located close to customer locations. The nearest rival, US Foods, in comparison has only 72 such facilities. The sheer size of Sysco Corporation also provides it with economies of scale advantages. Its purchasing power proves to be an advantage given that the company made $42.8 billion in revenue in 2020. Only McDonalds can match that sort of size when it comes to purchasing power. Just to put things into perspective, Starbucks did $20 billion in revenue while Subway did $10 billion. Sysco shades both those companies. Sysco also offers its clients technology-based solutions that allow for better management of inventory, margins, and other aspects of their businesses. Additionally, Sysco offers consulting services to independent restaurants.
Sysco Corporation’s stock has gained more than 3% since Christmas in 2020. The stock also pays a 2.39% dividend yield. The stock is up more than 100% since the lows of March 2020 as well. US Foods, meanwhile, is up 4.29% since December 23rd, 2020. It does not currently pay a dividend but the stock has returned a staggering 180% since March 2020. Lastly, Performance Food Group Co is up 7% in a month. The stock has gained 223% since the March 2020 market crash.