With restaurants closed or resorting to takeout and delivery service to remain operational during the coronavirus pandemic, the distributors that supply them with food are feeling a ripple effect, and they're finding their own business drying up.
The two biggest food distributors in the country, Sysco (NYSE:SYY) and U.S. Foods (NYSE:USFD), are responding by changing their focus from the restaurant and food service industries to supermarkets, where business is booming.
Driving a different route
The transition is not an easy one, as grocery stores already have their own suppliers. Sysco generates $60 billion in annual revenue, 62% of which comes from restaurants. The rest comes from schools, government and healthcare facilities, and various travel and leisure outlets. U.S. Foods, which has around $26 billion in annual sales, has a similar structure focused on the so-called broadline business.
CNBC reports that Sysco CEO Kevin Hourican was personally calling the largest grocery stores in the country trying to drum up business, though he didn't say what the outcome of the discussions was.
U.S. Food was apparently successful in its efforts to begin supplying supermarkets, and was working with existing grocery distributors in transferring workers to their operations.
There is some sense in the supermarkets taking on new suppliers because of the big surge in demand they've seen, which in the early days of the pandemic led to panic buying and hoarding by consumers. While certain products are still hard to find, meat cases that were initially empty have largely been restored, and most other food items remain plentiful.