If you’ve ever wandered into a Seattle’s Best Coffee for your morning latte, you’ve been serviced by Sysco. The Houston-based food-service distributor is the largest in North America, with 172 distribution facilities that supply everything from chains to small private restaurants, colleges, and hospitals. Higher fuel costs weighed on Sysco’s 2006 profits, which fell 11%, to $908.1 million. Last year the U.S. trucking industry spent $10.6 billion more on fuel than in 2005, passing much of this extra cost on to its distributors, which significantly increased Sysco’s operating expenses. But the company was able to broaden its hold on the highly fragmented industry by rolling up several smaller rivals. It acquired new food service suppliers and distributors last year, giving it about 14% of the market. In many cases, Sysco was able to boost sales at those companies by giving the restaurants and institutions they supply a wider range of products from which to choose. That strategy helped sales jump 7.8%, to $33.9 billion, in 2006, more than double the 3.2% growth rate of the previous year. CEO Richard Schnieders plans to keep pushing in that direction, too: He has already paid $43 million so far this year to buy more specialty food producers, as well as a distributor.
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