U.S. foodservice distributor Sysco has announced plans to acquire wholesale firm Restaurant Depot in a deal that would see the latter firm’s shareholders receiving USD 21.6 billion (EUR 18.7 billion) in cash proceeds and 91.5 million Sysco shares, representing a total enterprise value of around USD 29.1 billion (EUR 25 billion).
Restaurant Depot operates 166 large-format warehouse stores across 35 U.S. states, servicing more than 725,000 independent restaurants and foodservice operators with such products as food and beverage items, kitchen equipment, cleaning supplies, and more.
According to a joint release from the two firms, Restaurant Depot’s customer group is complementary to Sysco’s higher-volume customers “seeking delivery and white glove service.”
“Together, Sysco and Jetro Restaurant Depot will enhance value for small independent restaurants and the consumers they serve by expanding access to more affordable, fresh food products and delivering more choice and convenience,” Sysco Chair and CEO Kevin Hourican said.
Some independent restaurants and other industry stakeholders have expressed wariness that the acquisition would take away many of the benefits they currently enjoy working with Restaurant Depot. More specifically, according to Restaurant Business, the Independent Restaurant Coalition (IRC) said that the acquisition would functionally result in the elimination of Restaurant Depot, which they called “the one meaningful wholesale alternative in many regions that independent restaurants have used for decades to avoid the minimum order requirements, delivery fees, and pricing power of the nation’s largest food distributor: Sysco.”
“For decades, Restaurant Depot has been the great equalizer for independent restaurants, the place where a small operator could walk in and get the same price as everyone else – no contract, no negotiation, no leverage required,” IRC Executive Director Erika Polmar said in a statement. “Sysco’s acquisition of Restaurant Depot doesn’t just limit competition, it changes the playing field entirely in Sysco’s favor, leaving independent restaurants with fewer real choices.”
In response to such criticisms, Hourican contended that the combined company would have increased purchasing efficiencies, enabling lower prices for more customers.
“Even more importantly, we see a long runway of opening new Jetro Restaurant Depot warehouses, bringing the industry leader in affordability to hundreds of new communities and creating thousands of new jobs. This will allow us to create significant value for our company, our customers, and our shareholders,” Hourican said.
Polmar, however, said that while Sysco is telling investors the deal will generate USD 250 million (EUR 216 million) a year in savings through combined purchasing power, those funds will largely go toward rewarding shareholders and servicing the billions in new debt that the acquisition would bring forth, not toward lowering restaurants’ invoices.
The acquisition still has to secure regulatory approval before moving forward, and the U.S. Federal Trade Commission (FTC) has opposed mergers in the space before, including in 2015 when the agency challenged Sysco’s proposed acquisition of US Foods. At the time, “the math showed that too many smaller and independent operators [would be harmed] and overall prices would go up,” Pacific Management Consulting Group President John Gordon told SeafoodSource, adding that it will be “interesting to see what the math will be” regarding the Restaurant Depot deal.
Gordon further explained that if the merger goes through, the efficiencies to which Hourican alluded may include job cuts, and it is, as of now, unclear which efficiencies end consumers will ultimately benefit from.
“In my opinion, Sysco has to prove to customers that they will benefit from this; they have to prove that there will be customer synergies, not just corporate synergies,” he said.
Channel Fish CEO Tom Zaffiro told SeafoodSource that the success of such an acquisition will largely depend on whether Sysco can preserve the differentiated role Restaurant Depot has historically played for restaurant operators while still achieving the efficiencies it has emphasized will emerge from the deal.
“Financially, this is a major strategic bet for Sysco, and it is financing a large part of the deal with new debt,” Zaffiro said. “That suggests strong conviction in the long-term value of the cash-and-carry model, but it also means execution will matter.”
He added that he sees both risks and opportunities for Channel Fish should the deal go through.
“As a growing seafood manufacturer, we work with the gamut of companies – from one-unit local restaurants to retail and restaurant chains with thousands of units,” Zaffiro said. “What matters most to our company is that our values align with the people we do business with. We value relationships and partnerships and have been successful growing our business with these values in mind.”
Zaffiro said his hope is that Sysco would allow for a broader set of suppliers to compete, ultimately ensuring affordability for the consumer and growing demand for seafood products in the U.S.
Although greater scale can create efficiencies in sourcing and distribution, which can benefit the market, Zaffiro said Restaurant Depot has been an important alternative channel for independent operators and a competitive check in the system.
“In seafood, where conditions and markets can shift quickly, preserving multiple viable routes to market matters,” he said.
Vnay Bedi, the senior vice president at Tampa, Florida, U.S.A.-based shrimp firm Cox’s Seafood, said he is optimistic about the merger.
“I understand the move. Anything that brings more scale and alignment to distribution tends to benefit both suppliers and operators,” Bedi said. “From a seafood standpoint, consistency and speed to market are everything. If this helps strengthen the supply chain and improve access, that’s a win for everyone involved.”
