Sysco's Recipe for Growth Bolsters Its Scale-Based Cost Advantage and Market Leading Position

We believe Sysco possesses a narrow moat, rooted in its cost advantages. We surmise the firm benefits from lower distribution cost given its closer proximity to customers, augmented by scale-enabled cost advantages such as purchasing power and resources to provide value-added services to its customers. While COVID-19 created a very challenging environment, the U.S. food-service market has fully recovered, with volumes exceeding pre-pandemic levels as of March 2022. Sysco has emerged as a stronger player, in our view, with $2 billion in new national account contracts (10% of pre-pandemic national account sales) and a 10% increase in independent restaurant customers.