Rosemont Illinois based US Foods has agreed to be taken over by Sysco, the largest non-gracery wholesale food distributor in the United States. KKR and the other PE firm will get $500 million in cash, assumption of the existing debt and a bit over $2 billion in Sysco stock.
Why would anyone here care? You probably don’t 😉
This unexpected announcement either means I won’t be working in 2014 and resume having no income, or I’ll be so busy that you won’t see me until 2015. My guess is that I’ll be spending less and less time thinking about my year in Chicago.
My inside source says the CEO told the employees the company was no longer viable and they had no real choice but to be taken over. You have to wonder if they are scared about Obamacare. They were already in difficulty trying to do all the new food safety regulation stuff.
Well Horse’s ass, Art ! That’s crap. US Foods has a big distribution center there in Hickory on U.S. 321. Looked like a lot of people worked there. There is a US Foods distribution center nearby in Salem Virginia. It use to be Monarch, if you remember them. Does K & W use U.S. Foods ?
Bummer you have this flux in your life after settling back in the land of ‘milk and honey’. (that what my cousins that live in NC call NC)
Last year the monster company I worked for spun off the division and we were bought by a Canadian company. Only one day off for Christmas this year boys.
Well it may not be much Art, but you still got ‘us’ radio friends here on SRG.
Best regards
parrott
Oh, I think I’ve given the wrong impression. I didn’t go to Chicago because I needed to work for the money. I did it to reconnect with 2 old friends and to get the hell out of Connecticut. US Foods wanted me to stay there, but I chose to not renew my contract. It was left that after I moved, I could talk to them about doing more work for them. My two friends are now on part time status – one is now a retired employee working part time, the other had been a full time contractor for 20+ years and turns 65 in a month.
One of their challenges is they are using a computer operating system that was big in the 1980s (Tandem Guardian). HP acquired Tandem in the 1990s (along with DEC and Compaq). While HP is keeping it alive, it’s frozen in time. The SQL it uses was based on the early 1990s, which means it lacks pretty fundamental capabilities. Unlike MySQL, the statements in a COBOL program have to be compiled ahead of time, which makes it very hard to be useful. For example, where I have column headings to let you sort by a field, all that needs is “order by $fieldname”. To do the same in tandem SQL, I have to repeat the entire SQL statement (which might be a multi table join). Each possible option that affects the query (where live = TRUE) would require doubling the permutations of possible SQL queries.
So the system is very static, using 24×80 character mode screens and pressing Function Keys and looking at cursor positions or putting an X in from of your choice. At 58, I’m one of the younger people who still remember how to do this (although there was a time when everyone tried to outsource to India with disastrous outcomes).
They tried several times to figured out how to get away from their system with no obvious answer. Sysco is trying to implement SAP, a very expensive solution that requires you to modify the way you organize and run your business.
The wholesale food business is still (I think) governed by Atlas Shrugged style dog eat dog regulations. To fight infiltration of the food industry by organized crime, a % cap was put on wholesalers of how much markup they could charge. The result is food distribution turned into a “cost plus” business – the government legal maximum became the effective minimum. There was no incentive to put pressure on the prices charged by suppliers nor to make operations more competitive. At the end of the year, you hoped you made a small profit.
I think I said on the past that I concluded having a national food wholesaling company buying up all the regional companies was not a good thing. While it might make it easier for the command and control top down federal regulators, it doesn’t have obvious benefits if the company can’t lean on folks like ConAgra, Tyson and Heinz to get better prices and more efficient distribution.
Another motivation for going there was if the SHTF (particularly if Obama had lost in 2012), societal disruption might cause these fragile systems to fail. They break too often and the entire operation is dependent on basically one guy who knows how to fix it for that day, but never tells anyone what he does and no permanent fixes are done in part because they don’t want to spend money in things they can’t capitalize and would come out of EBITDA. The tax dog is wagging the operations tail motivated by the short sighted objectives of private equity thinking.
If you go into a restaurant and the sugar packets are Monarch, that’s a pretty good sign they are a US foods customer. Sysco pretty much owns the institutional business (colleges, prisons, hospitals, school lunches)
One of the companies that is part of the mess of the corporate history that created US foods was Bigger Brothers, based in Charlotte. In the 1970s, I was the geeky hamburger flipper dealing with putting the stuff away when the Bigger brothers truck showed up.
My sense is K&W has their own purchasing and distribution operation. It’s not uncommon for places to pick and choose which things they get from different suppliers, but that also makes the logistics and ordering more complicated. K&W’s menu is very static – it’s pretty much the same things every day, with extra fish entrees on Friday. If you run out of something, there are always other choices and people aren’t shocked by that, especially as you get closer to closing time. K&W closes between lunch and dinner. That’s partly to cut waste from holding food hot when few people eat, and the line servers likely eat their own lunch and do other things like cook dinner or wash the dishes.
Hang in there, Art. Life is full of changes. All these growing regulations influenced by lobbiests are very effective in meeting their goal of squashing competition from new and smaller firms because there is a fixed cost to comply and that fixed cost is huge unless you are already a huge company. .. hence the lobbyists and campaign contributions.
The odd part is while the food laws are putting the small producers and distribution channels out of business, they also want consumers (especially things like schools) to “buy local”. It is almost like their vision is food produced locally by government organized and managed “collective” farming operations.
Art, this news is a real stunner. For U.S. Foods to sellout would indicate government regulations was responsible for making it no longer viable. The FDA Food Safety Modernization Act bill passed the Senate on 12/23/2010. It is chock full of onerous government regulation, supposedly done to protect us from the big, bad, food producers and distributors. Is it that difficult to comply with?
In my profession, I never know when my next little job will be offered. It has been that way for a long, long, long time. Based on your experience of working for a broad range of companies I certainly hope everything goes well for you.
My decision to move to NC was a pretty solid indicator that I and US Foods were not going off into the sunset together. I had moved to Chicago very much to facilitate becoming an employee when the time came. So when the time came, the short version of the negotiations went like this:
Them: So do you want to become an employee?
Me: Perhaps – what are you offering? What would be my role?
Them: I just explained it – you would be an employee.
Me: I need more details like my job title, how much you’ll pay me, will I be supervising others? Will I be on call during non working hours?
Them: Never mind. I thought you were interested in a job, I guess not
Me: You haven’t offered me a job if it has no description
Them: Whatever…
I know the routine well.
Caller: We need this job done. Do you want it?
Me: How much will you pay me?
Caller: The usual amount.
Me: Where do I have to go?
Caller: 123 Backcountry Rd
Me: I know where that is located and I know it’s a difficult area to work in. I will need more than the usual amount. When is the deadline to get it done?
Caller: You have to do it in 4 days. I’d have to find out if they will approve more money.
Me: That’s the minimum amount and it could take extra time.
Caller: We’re OK with a couple extra days. But I will call back if the extra money is approved. click…..
I got the vintage song to play when you read this part of the blog:
http://www.youtube.com/watch?v=nEDB62oKv2M
‘ CC kid was a fried of mine’ LOL
Hadn’t heard that song since , heck, Jimmeny carter was president ?
Far out man ,
parrott
I wonder how close that is to the Tandem Non-Stops that we used in the mid-90’s. Tandem’s OS was geared for real-time operations and lots of handshaking at the endpoints.
Tandem Guardian is what I do – it’s not what I want to do, but it has become a rare skill that becomes a trap. If I were to call a broker, it’s the only thing they’ll notice on my work history. Because it is now owned by HP and things like RAID and server clustering have become cheaper and simpler solutions for continuous availability, it’s a dead end – most work will be doing things to transition applications away from Guardian.
The pedigree of their software is complex, but it goes back to the late 1980s. My first experience on Tandem was in 1982
Sysco is looking out for you, just like Monsanto.
Are you saying you want prisoners to be GMO free?