How many times do you eat out a week? For the average American, that number is between 4 and 5. Have you ever stopped to wonder how all that food gets there: The chicken in your spicy chicken fajita? The trout in your almandine? The bison in your burger? Chances are pretty good it got from farm to fork courtesy of a company called Sysco. And, like pretty much everything else this season, including waistbands, Sysco just got a lot bigger. It made a deal to buy its closest rival US Foods for $3.5 billion.
Sysco and US Foods are the two biggest foodservice distributors in the US.
"They are very much like a FedEx or even an Amazon of food," says Gary Stibel, CEO and founder of New England Consulting Group. "They are buying huge quantities of merchandise and they are shipping to any restaurant, a case of this and two cases of that."
Together, Sysco and US Foods ship $65 billion a year worth of ketchup, napkins, chicken wings, silverware and just about everything else to restaurants and other eateries.
"Many of the customers of Sysco have also been customers of US Food," explains Stibel. "That means duplicating all the 'windshield times', which is the time it takes driving trucks to and from restaurants all over country, a lot of that will be eliminated."
"There will be cost savings generated from the merger,"says Jack Russo, senior consumer analyst at Edward Jones. "Perhaps some of that can flow down to the customer level."
"When you take two major competitors and you combine them, they don’t have to compete on price anymore," says Phil Lempert, editor of The Lempert Report and Supermarketguru.com
Lempert says this merger could create more room for independent distributors, but not until the merger passes anti-trust inspection next year.