U.S. legislators are asking the Federal Trade Commission (FTC) to “thoroughly investigate” Sysco’s proposed acquisition of wholesale firm Restaurant Depot, while independent restaurants have stepped up similar anti-merger efforts.
U.S. foodservice distributor Sysco announced the proposed USD 29.1 billion (EUR 25.9 billion) merger in April, with Sysco Chair and CEO Kevin Hourican saying at the time that it “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.”
Hourican told CNBC that he is confident the FTC will approve the merger and expects it to close in early 2027.
“The entire purpose of this deal is to bring that phenomenal Restaurant Depot business model to hundreds of additional locations, which creates affordability and creates thousands of jobs,” Hourican said.
However, backlash has held steady since the announcement of the deal, with many independent restaurants expressing wariness that the acquisition would take away many of the benefits they currently enjoy working with Restaurant Depot.
Back in April, 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.”
In its defense, Sysco has repeatedly stated that the consumer base for Restaurant Depot does not heavily overlap with the same people who shop at Sysco, but IRC Executive Director Erika Polmar said that claim is baseless.
“That claim is a key piece of [Sysco’s] defense with the FTC anti-trust lawyers,” Polmar said in a letter to IRC members. “We know that's false. Most of you check prices across both every single week.”
IRC is asking restaurants to provide documentation, including orders guides, spreadsheets, and other materials, proving they are comparing prices on the same items at both Sysco and Restaurant Depot.
"As a chef, every price increase from product to protein or pantry staples hits us directly. Those margins are the difference between staying in business and keeping menu prices affordable for our guests,” Dan Jacobs, the chef and owner of EsterEv and DanDan in Milwaukee, Wisconsin, U.S.A., added in a release. “Restaurant Depot gives independent kitchens like mine a real price benchmark to push back against broadline distributors like Sysco.”
In addition to opposition from independent restaurants, legislators, including U.S. senators Tammy Baldwin (D-Wisconsin) and Cory Booker (D-New Jersey), recently demanded the FTC thoroughly investigate the acquisition.
“A single dominant company monopolizing the food distribution system will allow one company unprecedented power to raise prices and reduce purchasing options for independent restaurants. The higher food and supply costs restaurants will likely incur from this merger will almost certainly be passed on to diners, as most of these small businesses operate on the margins of 3 to 5 percent even under favorable conditions,” the senators wrote in a letter to the FTC. “Or, these combined pressures could force many independent restaurants to close, resulting in layoffs and an economic loss to their local community.”
The senators particularly pointed to Restaurant Depot’s “cash-and-carry” model, which comes with no contracts, delivery fees, or minimum orders, saying the system provides small businesses with an alternative to traditional broadline distributors like Sysco and allows them to compare prices and purchasing options.
Therefore, with no such alternative model in place, they argued the proposed acquisition would eliminate an important source of competition for independent restaurants, caterers, farmers, and other small businesses.
Georgia Agriculture Commissioner Tyler J. Harper has also sent letters to the FTC and the U.S. Justice Department, saying that the acquisition will “dramatically reshape America’s food supply chain, making it more fragile and increasing costs on American restaurant operators and their customers.
“American consumers cannot absorb another price shock in our food supply chain,” he said.
The FTC previously blocked Sysco’s proposed acquisition of fellow distributor US Foods in 2015, determining at the time that the transaction would significantly reduce competition and likely result in higher prices and lower levels of service for restaurant-goers.
