Performance Food Group Company (PFGC) Earnings Call Transcript & Summary

Hi. Please join me in welcoming Performance Food Group back to CAGNY. Performance Food Group is one of the largest foodservice distribution companies in North America. They participate in a significant addressable market that continues to expand through organic and strategic M&A. Its diverse channel model provides resiliency, and PFGC uses its scale advantages to drive continued operating efficiencies and margin growth. Please welcome me to the stage again, Chairman and CEO, George Holm, who is a 40-year veteran in the industry; Patrick Hatcher, who was recently promoted from COO to PFGC's CFO; and IR, Bill Marshall. [Presentation]

Hi, everyone. I'm George Holm, and I welcome CAGNY, and I'm so glad all of you came to hear from us today. The presentation that we're going to give is online on our website in our Investor Relations section. I'll start off by talking about the 3 priorities that we gave at our Investor Day back in June. Number one is consistent organic growth, something that we've been able to do since our inception. Ongoing adjusted EBITDA margin growth, which we've been very successful with, particularly of late, and reducing our leverage with a long-term goal of being in that 2.5 to 3.5x debt to EBITDA. Just to give you a kind of a company at a glance. We have 5,500 suppliers. Note with that, that when we bought Core-Mark, which was a little bit over $17 billion in sales at the time, it added very few suppliers to our supplier mix. We have 350,000 SKUs, 35,000 associates, 150-plus locations, over 7,000 vehicles and over 300,000 customer locations. We have a very diversified business model but we can kind of break that down to 3 main businesses, first being our Performance Foodservice or our combination kind of broadline and legacy Roma businesses. And that's really our growth engine, and that's where we have the lowest shares, and we have the most potential. And then our Core-Mark business, which is a combination of Core-Mark and Eby-Brown, which was our first acquisition in the convenience area. That is a very large business at just about $24 billion, but there's a little over $7 billion that is outside of nicotine. And then Vistar, which is primarily a candy, snack and beverage business, a little over $4 billion. And they're in several different channels, which we'll talk about later. We have a very diverse customer mix as well, particularly in our Vistar business, where we have large operators in the vending/OCS area. We have a good deal of value business, which is a lower-margin but a high-volume business for us, all the way to a pick and pack business, which we'll also talk a little bit more about, where we do fulfillment for third parties. And it's a very high EBITDA margin business, particularly considering we don't take -- we don't do the billing to the customer. We're only getting the fee to do that fulfillment. We also, with our 3 businesses, we go from businesses that are very centralized to our Performance Foodservice business, which is very decentralized. But the cultures are very similar, very customer-centric. We have about 12,000 of our associates that interact with customers on a daily basis and very, very heavy in product training. If you go to this first map, it's on Page 9, we have considerable white space, as you can see. These are just our broadline distribution centers. It's a significant business for us but we have very significant potential as we get into the western part of the United States. The next map, what we do there is we add these legacy Roma businesses to the map. And as you can see, the bulk of those are in the West. And also note that we are building a new distribution center, which is almost complete in Denver. We're doing a major addition in Arizona, which is also almost complete. And we're in the process of doing a new distribution center in northern California. And that will allow us to have more SKUs and address a larger customer base. To go to the next map, that is our map for Vistar, and we really have no significant gaps. A large percentage of these distribution centers have been replaced over the years. We really only have 1 that I would call an older facility and very, very successful for us. We have 3 of them which we'll talk about that are automated facilities. The next map is our convenience business. Once again, very national, no significant gaps. We're also in Canada but only in the English-speaking portion of Canada. And then the last map shows all of our businesses. We have 142 distribution centers, 5 Core-Mark combination Vistar redistribution centers, several merchants' marts, which are kind of cash and carries for the vending and OCS business, so a little bit over 150 total locations. This is our addressable market, which is very large, $633 billion in business that we have the potential to service, and $443 billion in business where we don't necessarily compete on the product. And an example would be, alcohol would be a good example. So if you look at the 3 businesses and their addressable markets, Foodservice is about $278 billion. I would note that we do very little health care, very little lodging and very little contract feeding. Most of those businesses are handled on a national basis. And as you saw from the first map, we don't have that broadline capability in the West. Then the Vistar business is very large at $140 billion, but what's addressable to us is about $38 billion and there are channels within that $38 billion where we have small shares. And there's channels that we have very, very large shares. And then in convenience, we took alcohol out. We took some of the DSD business out where we don't see a potential for that manufacturer to get out of doing their direct distribution. And then we have some large chains that are self-distribution. The next 2 slides are interesting. It really displays the number of opportunities for a consumer to come in contact with our product on a weekly basis. And I think we're unique to our industry that we touch that many different channels and that many opportunities to purchase our product. The next slide just kind of shows how intertwined the 3 businesses are. We have a lot of overlaps in products, in channels that we serve and in suppliers that supply us. We have accounts that at that individual delivery point are serviced by more than one of the businesses. And then we have a common shared services. And I think that one of the areas of savings that you'll see from us in the future is doing more and more of the non-customer-facing functions across all the businesses, and that's a long journey. We're in it. Basically accounts receivable, accounts payable. But if you do a poor job at just about anything that's not customer-facing, it becomes customer-facing like in a nanosecond, so we're really cautious as we move down that path. I got some good cross-selling examples. We're going to talk in Patrick's session. He's going to talk to you about our customer first initiative where customers can buy across all the businesses. We also have combined a lot of our procurement, not so much sourcing, but more around negotiating, and done a lot more with best practices. Give you a few good cross-selling examples. One would be a convenience chain called Rutter's. They're in Pennsylvania. They're actually now going into some other states where Core-Mark had a long relationship with them. And one of our foodservice competitors had the foodservice business, and we were able to take their relationship and our product capabilities and we were able to pick up their foodservice business, which is real significant. They have a big commitment to foodservice. So it's an example of 1 where we do deliver them out of both businesses. And we're working on a program with them where we'll deliver from 2 but we'll give them 1 invoice, and kind of deliver on a bill of lading and then invoice them at the end of the week for their purchases from both, and be a great accounts payable savings for them. And then Gopuff. Probably all of you know who Gopuff is. But all 3 businesses sell them. There's certain pack sizes that they use in the candy snack beverage area that fit Vistar. Some of it fit Core-Mark and then they have a pizza program and some other foodservice offerings that we do out of Performance Foodservice. And then a third one to highlight would be QuickChek. A lot of you are from the New York area, that's where their stores are. And it's the opposite situation as Rutter's, where we had a long-term relationship at Performance Foodservices, supplying their foodservice product. And they were supplied by a competitor of ours in the convenience area. And once again, we were able to take those relationships and combine it and do both businesses and do it once again out of both distribution centers. We feel that this broad base gives us some recession resilience. If you think about going through COVID, we're very large in the pizza business and pizza really flourished during that period of time. Value stores are doing particularly well right now as we have some economic challenges and people are doing some trading down. And then on the brands, we're starting to share brands across the businesses as well, typically different products but use of the same brand. This page here is -- leans more towards our Performance Foodservice business and a bit to Core-Mark. We make sure that we have somebody that runs every one of these distribution centers. We actually have a president at each of the distribution centers. And the employees at that center, whatever their function is, they all report up to that position. And we think that local touch that we have is very important. So we have a VP Operations that runs warehousing and delivery. We have a VP Purchasing that runs that merchandising area, and we have a VP of Sales, very important position in our company. And as I mentioned earlier, we've got about 12,000 people that come in daily contact with the customer. Okay. This next 1 is -- another 1 of these I would call very important slides. This is our sales force. You can see since 2012, we've gone from 1,400 people to 2,850 people. We've been able to take our turnover downwards less than 14%, and that was a long road to get there. I mean, that's still 1 in 7 people each year but that does include people that are promoted or people that retire. And it's a very demanding job, and we've been able to get to a point where we have a real good feel as we hire people, those that will be successful. Another note is that when you go back to 2008, we were running about $24,000 per week per salesperson. Last year, we ran over $90,000 per week per salesperson, so a big increase in productivity. And right now, we're at an all-time high as far as increasing salespeople. As of today, we have 11% more salespeople than we had this day a year ago. So a big commitment there. Our brands, we have 25,000 SKUs under our brands. We do $5.9 billion to independent restaurants. We do very little outside of independent restaurants because we're not in those channels I mentioned earlier to any great extent. And Reinhart has adopted the brands very quickly. We kept many of the brands that they own as well. If you look at the top right under Roma, we have 3 pretty distinct tiers of quality there, but I would note that we have 11 different cheese brands. I mean, this is just our own brand with a heavy degree of training and many are very specialized for a certain type of oven. And then I'd like to just quickly talk about 5 of the brands that we have underneath there, because 4 of these 5 are growing at greater than 20% this fiscal year. And that's through 32 weeks, so it's a long period of time. Braveheart is a Black Angus Beef program that we also do in retail and we're doing very significant retail business. It's niche, it's not big chain. It's been very successful for us. Allegiance is a pork product. It's -- kind of built it on the same premises as the Braveheart where we DNA-test the product. And it just has some great qualities with it, including being able to go back to the source and follow the animal all the way through the system. We have Bay Winds, which is basically our shrimp line. We have other items in there. Contigo is our fastest-growing brand today and that's into the Hispanic markets. Just doing fantastic. And then Bacio which is a very high-priced pizza cheese. There's really -- there's a very high-quality, high-priced national brand out there that we compete with. And this product has been growing year in and year out, over a 20% gain so it's just been fantastic for us. Some of the things with our brands and I would say purchasing in general, but with our brands. We really rarely change suppliers. Sometimes you have to. Maybe they've slipped or sometimes reputationally, if you don't change very often, you can pay more money. So we aren't adverse (sic) [ averse ] to it but we rarely do it. We want that consistency. And we also rarely dual-source. Now it makes it a little easier for us because we don't do that much in the West. But we have found it's difficult even to get the same company to give you the same level of quality out of 2 different manufacturing facilities. And we feel that's really helped us with our brand. And then the fact that almost all of our brands goes to independent restaurants, that's what we build the product for, and we don't have to concern ourselves with maybe what a nursing home would find the price value to be or a school or maybe a mid-scale hotel. As far as supporting our brands, our salespeople are the biggest key. We do a lot of data sourcing for them. Incredible amount of very intense product training and it's constant. And when you do very little changing of product, you can really focus on it and make sure that they have the knowledge that they need when they get out there. We do some digital, social media type. We probably have a long way to go there because primarily, we're marketing these products to our salespeople and our salespeople are, in turn, marketing it to the customer. And then the graph here shows our growth in our brand, which the latest month, we were 51.9% of our independent business. And we certainly are not anti national brands, so we're really proud of getting to that number. Reinhart has been fantastic with it. What we did there is we kept the brands that they own and kept the people involved with that. And then we just cut loose on certain brands that we had them stock, and they have just embraced it and done extremely well. And we see them -- although they're included in these numbers, we also see them getting above 50% [ in ] the brands. And we have 5 distribution centers today that are over 60% so we feel we've still got some headway to continue to improve that. We'll turn to the convenience business. The nicotine part of that business, certainly, the cigarette part of that business will -- is declining at a rate much more than it has in the past. It didn't decline very much during COVID. I think that's part of the reason, part of it is catch-up. We expect that to just continue to decline. We spend very little time on it. I can assure you, I spend none of my time on it. But I think that in the long run, that's going to help us because it just gives such a need for these convenience stores to do better in the food business, and they're embracing that and we're getting some great success stories because of that. And our non-nicotine in the Core-Mark world grew mid-single digit -- mid-teens last year, and we are growing, so far this fiscal year, once again, in mid-teens so it's been great for us. And our synergy is on target. As I said, we've converted the Eby-Brown to Core-Mark as a name, and we're, on a kind of a gradual basis, we're putting those 2 organizations together. We are done the sales function and the purchasing function. As far as the opportunities in the convenience store landscape, foodservice is our biggest opportunity. There's a lot of large ones that self-distribute. But it's in that independent world where I think we have -- and the smaller chains, but where we have the most potential for the future. But it's a $48 billion business, so there's a lot of potential. And then they're also -- do business with directly from the convenience store to the consumer through DoorDash, through Gopuff, as I mentioned earlier. And then Walmart is a fairly significant customer for us. We do basically candy and tobacco and some snack type items. But just kind of a snapshot of where we're at now. Last year, sales were $23.6 billion. We have 60,000 customers, 48,000 of which are convenience stores. We have 11,000 associates and we have 40 distribution centers. As far as the product offering, you can see with the tobacco area, the cigarettes, it's a very large percentage of our sales at 64.5% and declining, as I said, but it's only 36% of the gross profit dollars. And that bottom right shows you that 56% of these convenience stores out there are independent, and I think that's our best opportunity for growth. And Core-Mark is a company that has been great at fulfilling demand for many, many years. They've been first or second every year in sales into convenience stores. And we're having to take this sales force, and it takes time, but convert them from people that are filling demand to people that can create demand. And I think there's a lot of demand that we can create with some of our programs in the foodservice area. So as far as expanding foodservice into convenience, many, as I've talked about with QuickChek and at Rutter's, many we deliver out of both distribution centers. But at the same time, we're doing that where there's foodservice business but maybe not significant commitment to foodservice and more of it being fresh prepared product. We do that through Core-Mark and they have 5 redistribution centers and we buy that product fresh. We run it through there, and we can turn it around quick and get it into the customer with plenty of shelf life left. We also have some turnkey programs in pizza, chicken, barbecue, Hispanic, deli. Surprisingly, the first 1 we did, we call Perfectly Southern, was a chicken program. We actually, to this day, sell more into our Foodservice business than we do into convenience stores. It's very turnkey. It's fresh product but it's a component program. We actually do a lot with it into ghost kitchens. And then we have a center of excellence, which any of you that were at our Investor Day were able to see. It's got a great test kitchen. It's got a convenience store within the building that's obviously not open to the public, but we set that up from a schematic standpoint, similar to what the visitor has in their store but put out those other options that we want them to see. Vistar, you can see there's several channels that we operate in. Originally, vending and OCS were the big ones. We do a great deal of theater business, value businesses I mentioned. Corrections is a fast-growing part of our business and e-commerce is a very fast growing part of our business. If you look at the next page here, which is 31, I think this is a real key page to understand what we do. If you go back to 2000, the year 2000, 96% of our business was vending and office coffee service. Also, it was an $800 million business with less than a 1% EBITDA. We made a lot of improvements up until 2008 when we did the purchase of Performance Food Group. And if you look at today, in significant number of channels, it's a $4.1 billion business and it runs between a 6% and 7% EBITDA depending on kind of what the customer mix is at that time. We now carry between 6,000 and 9,000 SKUs in each one of those buildings. So I had mentioned that we really only have 1 that I would call an older building, and that building was real oversized at the time. We are in the process of replacing it. The others, we put in significantly larger freezers, coolers as we expanded this channel base. Quite a great success story. The next slide here, I want to talk a little bit more about our fulfillment business than we probably have in the past. We did the first 1 right as we were going public. Pat Hagerty was running Vistar at the time, and he came to me with his dream with this and he felt that it would do really great. And we put 1 in Memphis -- or Mississippi right outside of Memphis. Then the second 2 we did in Lebanon, Pennsylvania and in Reno, Nevada. These are $35 million investments. Very painful at first, as you would expect when you're doing new technology and you're somewhat in a new business. But today, they are more profitable than Vistar, as far as EBITDA returns, than Vistar as a whole. And we hope to get to 6 of those. Quite frankly, I wish we did -- just had a little bit more confidence and we'd have 6 now. But we do third-party fulfillment. We do some for our customers, for our suppliers and third-party operators, and we look forward to adding more of these. So I'm going to close with the same thing I started with, because I think it's so important from our Investor Day, and that's what our priorities are today. And it's that consistent organic sales growth, something that we've always been able to do, a particular emphasis on independent Foodservice business. But across all our businesses, we're a growth company. Expansion of our EBITDA margins, which we've always been able to do that from an EBITDA margin standpoint, not for the businesses themselves, but we took a step backwards as we bought Eby-Brown and as we bought Core-Mark, because you have such low EBITDA margins on the tobacco part of the business that has huge case cost. And then the other important 1 is reducing leverage. We've always been a company, going all the way back to our inception in 2002, where we would be fairly highly indebted, private, private equity owned. And we would pay down debt and we would acquire. And we'd pay down debt again and then we'd acquire again. And a couple of times, we had opportunistic ones where we got levered as high as 6x. As a public company, we certainly don't want to do that. So our goal is to reduce leverage. It's to continue to be opportunistic from an acquisition standpoint and keep ourselves in that 2.5 to 3.5x leverage of debt to EBITDA. And with that, I'm going to turn it over to our new CFO, who is certainly not new to the company. Patrick was the CFO of our Vistar business for years. He was Senior VP of Sales and Marketing, kind of a different change to make with somebody, but we knew he had great potential. And then he was the President of our Vistar division before coming in as our CFO. So I'll turn it to Patrick.

All right. Well, thank you, George, and good morning, everyone. I'm excited to be at CAGNY, meeting many of you for the first time as the CFO of Performance Food Group. As George just outlined, we have a great story with huge potential for growth for many years to come. Our growth opportunities come from -- are supported by our strong financial position that allows us to invest behind the business and drive both top and bottom line growth while creating value for you, our shareholders. So we'll jump into it. Now you've already seen this slide a couple of times but it just speaks to how important these initiatives are for our organization. And what I'd like to do is walk you through each 1 of these with more of a financial lens and then also talk about our progress to date in each 1 of them. So consistent sales growth. We consider PFG, first and foremost, a growth business. This starts with our top line organic sales growth, which we achieve through a combination of market share growth and pricing. We have been successful growing share through relentless customer support and high-quality execution from the company. The second, adjusted EBITDA margin expansion. We're not just growing the top line but we're growing in areas that provide the highest mix and margin profile, including independent restaurants, Performance Brands, as George highlighted, high-margin Vistar channels and then food and foodservice into convenience. The result is year-over-year margin improvement, as you can see in the slide behind me, of our adjusted EBITDA margins. Most importantly, we see a long runway for continuing to grow in these areas, which we believe would bring long-term margin improvement. And finally, our third priority, reduce leverage. As George just mentioned, we're aiming to be at 2.5 to 3.5x net debt to adjusted EBITDA target. And we were able to move within that target at the end of our first quarter fiscal 2023. It was sooner than we anticipated. However, we continue to make progress. In the second fiscal quarter, we ended at 3.3x net debt to our trailing 12-month adjusted EBITDA. We believe in this current interest rate market, that it's important. this is a very important area for our company to focus on. Now leverage reduction will remain one of our key priorities, but there are several disciplined uses of cash that we believe create value. The first use of cash will be reinvestment back into the business. As George talked about, growth is our #1 priority. So to support that sales growth and margin expansions, we are consistently investing in our building capacities, in our fleet capacity, and technological capabilities to support the organization. Disciplined M&A strategy. Our company is looking to M&A, strategic M&A specifically, to support our long-term growth. We are a seasoned acquirer and we have a strong track record of M&A and integration. Our success, we believe, in this area is underpinned by a disciplined process of identifying potential targets that are aligned with our growth strategies, market dynamics and are a compelling fit for our organization. And on this last point, it really is important to us that there is a cultural fit with the targets. If you look at our track record, we believe successful M&A only occurs when the organizations are working together to bring both their strengths to the table. We've seen this play out with Reinhart, then with Core-Mark and several other smaller transactions that we've done recently. We have great integrations going on with Core-Mark and the Reinhart integration was very successful. We are constantly reviewing deals, but we'll stay focused on our internal process that has brought such a strong track record. I'm going to shift gears just a little bit and talk about our customer-centric approach. Our focus is to meet our customers where they are. Their success is our success. So the data on this slide, you saw it back at the June Investor Day. And so we've updated since then, but you can see the message is the same. When we ask our customers, how are we performing in the market compared to our competitors? We consistently come out on top on the key areas that we believe that matter the most, things like business relationship, food quality, value. We strongly believe that our relentless focus on taking care of our customers is the primary reason that we have been so successful in the market, and it's also why we believe we have a good deal of runway. I'm also going to talk about our ordering platform, as George mentioned. We call it customer first. We continue to augment our sales team with technologies and tools that allow them to do their job better, but most importantly, make it easier to work with the customer. At Investor Day, we started to talk about customer first digital platform. The project is ongoing. It has significant potential for both our customers and our selling organization. We are currently rolling it out right now. And not only does it provide a better online customer ordering experience, but it ultimately will allow our customers to order across all 3 business segments. We expect this to increase the order size, to improve customer retention and to generate new business wins. The system is very intuitive, very easy to use. It offers benefits like suggestive selling and provides a whole host of features that make it a great customer experience. Now before going to questions, I want to just review our financial guidance for our fiscal 2023 and beyond. This morning, we reiterated the fiscal 2023 guidance that we discussed in our 2Q 2023 earnings call a few weeks ago. As we mentioned on that call, we are off to a strong start in calendar 2023, with a strong January and those trends continuing into February. We are very confident in PFG's execution and our business's ability to do well in a range of operating environments. We feel very good about how we are tracking towards our 3-year targets that we laid out in June. We continue to expect to achieve the $62 billion to $64 billion in net revenue in fiscal 2025 with adjusted EBITDA in the $1.5 billion to $1.7 billion range. So in summary, our future is bright, supported by our customer-centric culture, our significant addressable market and our broad channel exposure from our 3 operating segments. We believe we will continue to build upon our success and drive sustained top line growth, expand our margins and reduce leverage. I want to thank you for your time today. We appreciate your interest in Performance Food Group. And with that, we'd be happy to take your questions.

George, Patrick and Bill. I've got a question that relates to market share. It does seem like the category has meaningful opportunities. Again, the big 3 players, publicly traded players have about 35% market share, which would obviously imply the remainder have 65%. But it would seem like coming out of COVID, the challenges that some of the bigger players faced would have been accentuated by some of the smaller players. And now going into a potential macro slowdown, it would seem similarly that the bigger players would likely be taking share. So I'm just wondering if you could talk about the opportunity that you see, whether for yourself or for the big 3 to take further market share over the next few years. Where do you kind of see that playing out?

Well, we get a report that's been only a few years but it's nice to get, that all the broadliners do report into -- it doesn't really have the smaller specialty guys. But when you get the numbers for the total industry and you take into account the numbers for the 3 large distributors, obviously people are struggling. I mean, it's very obvious when you look at those numbers. So I think the industry will continue to consolidate. Not that -- I mean, there's some really good ones below those top 3, but the industry is definitely consolidating. We tend to grow our share the best within the independent restaurateur. We're doing a little better when you get to like the 15-, 20-unit guy and the 50-unit guy than we have in the past, and extremely low shares in the noncommercial part of the business. So we're going to stay focused on what we do well. We do real well in pizza. We do real well in Hispanic. We're going to continue to be heavily focused there. And I think probably anybody that's got scale is going to have some good growth.

Ann Gurkin with Davenport. I have 2 questions. One, you put up the slide showing the number of salespeople you've hired and the acceleration. So may I just get an update on realizing productivity from those more recent hires? And is there more productivity to come from that segment? And then secondly, you put up white space opportunities. So how do you see expanding into that white space, more through M&A or more through self-growth opportunities?

Well, we'll start with the salespeople. We don't know where we can go from a productivity standpoint with existing people, but certainly, at the levels that they're at now from a sales and from a compensation, it's harder. And that's why we've ramped up and we're up to 11% more people than a year ago. We actually, for the first time ever, are -- we're growing our number of people. It has been at a higher rate than our case growth, but our case growth of late has exceeded it. But I think we might be in a little, up against Omicron bubble there. And as far as the white space, we have -- we see a path to get to having national coverage based on the independents that are out there. I think that they know we're interested. We know who they are. And hopefully, 1 day, we'll fill that space in.

Carla Casella from JPMorgan. Two questions. First, on tobacco, which it looks like for Core-Mark is 75% of sales, if you look at cigarette plus the other tobacco. Can you talk about, as that shift goes away from cigarette and to other tobacco, how that affects maybe either your average retail unit or margins in that category?

As I said, I don't really spend any time on that so I'm going to just reiterate what I picked up on. The nicotine complex doesn't go down, if that's the right term, anywhere near as fast as cigarettes go down. Our margins are better when you get outside of the cigarettes, but the gross profit per unit is not as good. As low as the margins are, the gross profit per unit is higher in cigarettes. But like I said, it's just something we're just not focused on. We have people that are, that have been at it for a long time and know what they're doing. But it's probably -- it would be accretive as the business goes away from cigarettes more towards the alternatives, but not probably EBITDA per case, if you know what I mean there. Okay.

Okay, great. And then just 1 other 1. You have a couple of categories, probably more with Vistar, travel hospitality, that I'm assuming are still recovering from pre-pandemic levels. Can you talk about like what percentage of your business you look at as in categories where there's still kind of recovery upside?

Yes. The travel is, I would say about back to normal. And remember, we're not supplying the restaurants in the hotels for the most part, it's the pantries. And those are mostly in mid-scale ones that have really come back. Theater is still running significantly behind '19 and so is office coffee service. So those are the areas that I would call weaker. The fastest-growing part of our business, I would suspect, is the micro markets. And the reason I say I suspect is that it's typically vend OCS operators who service those. And we're seeing great growth within those customers but we don't necessarily know if it goes in a vending machine. But when we run a SKU and look at the sales by SKU, and you know what doesn't go in one, it's substantial growth. And for right now, that has offset the weakness in theater and in office coffee. And Vistar is just -- they're just doing fantastic versus 2019.

We'll take 1 more.

[ Christina Han from White ]. George, I wanted to talk about the customer first initiative because I thought one of the advantages of PFG was the sales force and the experience and longevity, tenure of the sales force. So how does the sales force work with this system? And then how does the system -- how is it differentiated versus other digital offerings from your competitors?

I'd tell you, Pat's been much more involved with that, and I'm going to have him answer that.

All right. So actually, I'm really glad you brought up that point because as we said, this is really all about making the customer's life easier. If they want a digital platform, we're giving them a digital platform. And if you look across all 3 different segments, if you take Vistar, there's definitely a need there that they do want to move customers on. Foodservice, the AM will continue to work with that customer and that is exactly what the customer wants. Now if they want to also jump on the digital platform because it's after the end of the restaurant day and they want to throw something on their order, they certainly can do that. So again, it's really just finding a platform that's incredibly easy to use. It's very intuitive, as I said, and it's just there if the customer wants it.

And with that, thank you very much, Performance Food Group, for a great presentation. We'll move it out to the breakout session.