Sysco, the world's largest food service distributor, has deep roots in the industrial sector, operating giant warehouses and thousands of delivery trucks.
Now the Houston-based company is trying its hand with a retail storefront in a move it said eliminates the most expensive part of the supply chain.
Sysco last week opened its first retail outlet in the United States, called Sysco To Go, in a former Bed Bath & Beyond at 10515 Katy Freeway in Houston, the company told CoStar News. A second location, at 1212 Old Spanish Trail, is set to open mid-to-late summer. Sysco is leasing the locations, each covering more than 40,000 square feet.
American consumers are spending more than ever on eating somewhere other than at home, even with rising inflation. Consumers spent more than $95 billion on food and drinks outside their homes in July, a 40% increase since the start of the pandemic, according to the U.S. Census Bureau. Meanwhile, the price of food prepared outside of homes rose 0.4% in April and fell 0.4% at supermarkets, according to IFMA The Food Away From Home Association, a trade organization that represents food and beverage producers like Cargill, Coca-Cola and Nestle.
Sysco executives determined the stores were an opportunity to reach a niche market that includes smaller restaurants, food trucks and caterers — companies that traditionally haven't been Sysco customers.
Revenue from the new Sysco To Go stores will likely have a minimal effect on Sysco's financial results. The company's bread-and-butter operations include distributing food products and supplies to large restaurant companies, hospitals, schools and hotels. Sysco served 730,000 customer locations last year, according to its annual report. The company, founded in 1969, ranked No. 54 on the latest Fortune 500 list of the largest publicly traded U.S. companies by revenue, with about $76 billion for its latest fiscal year.
More locations possible
Sysco To Go stores are aimed at "smaller businesses who may not meet the minimums required to have a Sysco truck deliver to their business," Ramit Plushnick-Masti, a Sysco spokesperson, told CoStar News. Sysco plans to assess the performance of its new stores before opening more locations, Plushnick-Masti said.
"If it meets our expectations, we will consider how, where and when to expand in other markets," Plushnick-Masti said.
The stores allow customers to pay in cash — something that's not allowed with Sysco truck deliveries.
"The cash-and-carry [business model] is the fastest-growing part of the food away from home" sector, Sysco CEO Kevin Hourican said during an April 29 conference call. "By having the customer pick up the product themselves at our store location, we eliminate the most expensive part of the supply chain."
That cost elimination allows Sysco to offer its products at lower prices than when it delivers to restaurants, he added.
Sysco already owns and operates a vast supply chain network. The company owned or leased 204 distribution centers in the U.S. as of June 2024 and delivers products using its own fleet of about 18,000 trucks, according to its annual report. One of Sysco's largest distribution centers is in Houston, a 739,141-square-foot facility at 10710 Greens Crossing Blvd.
Sysco's two rival food service distributors — US Foods and Gordon Food Service — have already expanded into retail with dozens of stores.
US Foods operates Chef'Store-branded locations in 14 states, including stores in California, Texas and Virginia. US Foods will open a new Chef'Store at 102 Mason McKnight Jr. Parkway in Augusta, Georgia, at an undisclosed date, according to the company.
Gordon Food Service opened the first of its namesake stores in the Houston area in 2023 and now has more than 100 stores in nine states.
Sysco will also compete with retailers like Restaurant Depot that sell supplies, containers, uniforms, appliances and furniture to commercial customers.
Sysco To Go requires customers to apply for a membership and prove they are a small business, although memberships are free. The stores sell bulk sizes of food products, containers, paper products, uniforms and other supplies.