Capital Region

Kennedy: Foodservice providers take huge hit during COVID-19 pandemic

A Sysco truck behind Siena's Manny Camper, left, and Paul Tue in a recent photo.
PHOTOGRAPHER:
A Sysco truck behind Siena's Manny Camper, left, and Paul Tue in a recent photo.

Categories: Business, News

Sysco Corp., a supplier of fresh and frozen foods to schools, restaurants, hotels and other “away from home” settings, took a hit in March as gathering places shut their doors to slow the spread of COVID-19.

How bad was the hit? Sales dropped about 60 percent company-wide in the last two weeks of March, according to Sysco.

Sysco wasn’t alone, though. Two other companies that with Sysco form the country’s Top 3 foodservice providers – US Foods and Performance Food Group – also saw sales plummet as the whole U.S. economy down-shifted.

Like Sysco, they also reported quarterly results last week that were upended by stay-at-home orders that took hold in March.

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And like Sysco, they reacted in kind: cutting expenses – including furloughing and laying off workers (at Sysco, that involved a third of the workforce); setting aside reserves to cover customer defaults; shelving planned expansions; and boosting cash on hand.

All three also pivoted from the norm by opening channels with retailers needing product, primarily supermarket chains slammed as consumers stripped shelves of pasta, toilet paper and other essentials. While none of the three claims the new sales are significant, when combined with donations to food banks and charities, the shift kept product spoilage levels low.

A spokeswoman for Houston-based Sysco, which has Capital Region roots dating to Albany Frozen Foods in the 1930s, said the company is working locally with food retailers but declined to identify them. She also declined to say how many workers at Sysco’s warehouse near Northway Exit 10 in Halfmoon were laid off or furloughed.

With restaurants as a primary customer, and with both independents and chains forced to close their dining rooms under social-distancing mandates, all three companies said they lent a hand to new takeout and delivery efforts by the eateries.

Sysco, for instance, said it developed a “Covid Package” with takeout containers, paper goods, masks and cleaning products. It also assisted in creating pop-up supermarkets in vacant dining rooms for limited pantry items.

From the restaurants’ takeout and delivery business, all three companies began to see week-over-week improvements in sales in April. That was expected to accelerate this month as more states reopen and allow restaurants to do the same.

But make no mistake that the current quarter – April to June – will still be tough for the foodservice providers.

The cost-cutting and other moves all three took at the end of the March quarter will ripple forward but will not cover the hit from the pandemic.

For Sysco, it will mean negative operating income in the current quarter, which the company said represented the downturn’s trough in light of “recent improving trends.”

“We do believe that’s the trough,” Chief Financial Officer Joel Grade said during Sysco’s quarterly conference call with analysts last week. “I think that’s an important point to re-emphasize.”

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].

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The Daily Gazette is committed to keeping our community safe and informed and is offering our COVID-19 coverage to you free.
Our subscribers help us bring this information to you. Please consider a subscription at DailyGazette.com/Subscribe to help support these efforts.
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