Sysco Corporation (SYY) Earnings Call Transcript & Summary

Good morning, everyone. I'm Mark Carden, the food retail and food distribution analyst from UBS. We are absolutely thrilled to have Sysco with us today. Sysco is the largest foodservice distributor in the U.S. It generated over $51 billion in sales worldwide in fiscal '21 and served over 650,000 locations. We're fortunate to have 3 guests with us today. First is Aaron Alt, the company's Executive Vice President and Chief Financial Officer, who absolutely hit the ground running after joining the company in December of 2020. We also have Neil Russell, Sysco's Senior Vice President of Corporate Affairs and Chief Communications Officer; and Kevin Kim, the company's Vice President of Investor Relations. Before we start, I'm required to read a legal disclaimer. As research analysts, we are required to provide certain disclosures relating to the nature of our own relationship and that of UBS with any company on which we express a view at this meeting today. These disclosures are available at www.ubs.com/disclosures. Alternatively, please reach out, and we can provide them to you after the event.

So with that, let's dive into some topics. So Aaron, current backdrop, a lot going on. On the one hand, we've got the worst of Omicron appears to be past us. Restrictions are really starting to ease. How are customers responding to this improved backdrop in the U.S.? And then we've all seen the really sad scene begin to unfold in the Ukraine. I think everyone is trying to figure out how it could potentially impact Sysco.

Well, first, on behalf of Kevin Hourican, our CEO, thanks for having us. We appreciate the interest in Sysco as a company and are delighted to be here and talk about our business. I will tell you that in a world where there's a lot going on, Sysco is incredibly upbeat, right? We see very positive trends on the volume side of the house. If you go back to our earnings call from Q2 or, indeed, the presentation we gave at CAGNY, we referenced green shoots on our volume. And the green shoots are growing, right? They have not been shaded by the things going on around us in the enterprise. And so we are very upbeat about the future from a volume perspective. Just to maybe hit the headline with respect to the invasion of Ukraine, it hasn't really had an impact on us. And you have to understand that, for us, while we are the world's largest -- or we're the global foodservice distributor, Europe is only 10% of our portfolio. And Europe and the domestic part of our business, as I referenced, the volume has been improving. So we're pleased with that. Ukraine is a breadbasket for Europe. And indeed, it does have an impact. That conflict does have an impact on oil prices as well, but we've been able to successfully manage through that in the past and believe we have plenty of opportunities to address anything which will come our way as a result of what's going on in the Ukraine. I'm often asked, "Well, what about inflation, right?" With Ukraine being the breadbasket, won't that raise prices in Europe, and indeed, with respect to oil, won't that raise prices globally, impacting our enterprise? And the short answer is sure, yes, there'll be some price volatility that will work its way through the industry. But we've got good news in that respect as well, which is the attempts to manage inflation broadly across our product portfolio, they aren't new. We've been dealing with those for several quarters. And the tools are the same, right? The first tool is the fact that we have contracts. In many cases, that allow us to pass the product costs through to our customers. Similarly, for those customers where we don't have a contract, we have the relationship, and we have the supply chain strength. In many cases, we are the person that can provide the goods they need as well. And so we have the continued ability to pass the cost through. Now I should take a quick step back and observe that as we were seeing volumes increase, that's partly because we aren't seeing the consumer back away at all. People are still excited, with the restrictions easing, to get out, right? They don't want to be cooking at home anymore. They want to go to the pub. They want to go to the restaurant. They want to get together with their friends and family with those restrictions easing. And so that's also a driver of the enterprise as we carry forward. Now I referenced oil earlier as well. And oil is something that everyone is watching carefully, and I would offer a couple of pieces of observation there. The first is that some of our contracts allow us to actually pass increased fuel costs through in the form of surcharges. And we're taking advantage of those contractual clauses. But here's the other thing which is new news, I guess, that we -- I don't believe we've disclosed previously, which is we are 80% hedged on our forecasted fuel usage through the end of our fiscal '23, and we'll continue to do that as we carry forward as well. And so we have relative stability on what our input costs will be for oil for the next, call it, 16 months as we push ahead. And of course, as we move through that through the next several months, we'll continue to keep an eye on what oil is doing as we carry forward. Now oil, of course, is one input as we carry forward. Operating expenses are also elevated. We talked about that during our Q2, and we also referenced the fact that we've passed -- we've successfully passed through our inflation costs -- product inflation cost to our consumers. Our gross profit dollars per case are higher than they've ever been. But we've not necessarily passed through all of the operating expense increases. And we will -- I've mentioned we'll talk more about this over time. We are continuing to work aggressively on how do we bring down the operating cost increases that we were seeing as a result of impact of productivity with the new workforce that we have as well. And as we called out, we've had snapback investments we've had to make, recruiting, et cetera, that are onetime or transitory or short-term in nature. Those will come down as we carry forward. But -- and here's the other important point that I need to get to. We're playing the long game in all this. We have the scale, we have the portfolio, we have the management focus to really play the long game, and so we're investing. We're not backing away. We're not dialing things back. We are investing for the long term against the Recipe for Growth. And that's a very important point I want to make sure we get on the table even with everything going with the invasion of Ukraine, even with inflation, even with all the other things going on with the COVID recovery. So what does all that mean? In Q2, we delivered a quarter which had very positive top line momentum. We were pleased with the results we were seeing before Omicron hit. You've just heard me say that the top line recovery is back, that we're seeing the green shoots and that we're quite upbeat with those results. And what that leaves is confidence in the long term. And during our earnings call and, indeed, at CAGNY, we reinforced again we're not backing away from our long-term promise from our Investor Day from last May, which is we see the top line growing, and we also see profitability increasing well above our fiscal '19 high point. And so our commitment is more than 30% above EPS from fiscal '19. Let me stop there and take a breath.

That's a very thorough first response, I got to say, and extremely helpful. So in terms of the investments, I mean, one of the things that Sysco has really pointed out recently is the goal of growing faster than the market. And so you're already above your 1.2x the market target. For this year, you're planning to get to 1.5x the market. Have any of your initiatives caught on faster than you anticipated? And which ones do you see going forward being the most impactful as you try to accelerate that from 1.2 to 1.5?

That's a great question. Let me offer some perspective on that. We are the largest -- we are the only global foodservice distributor. We are the largest player in our U.S. domestic market as well. So the idea that a company of our scale will be saying we're going to grow not just faster than the market but substantially faster than the market is no small feat, which is how the Recipe for Growth that the management team launched about a little over a year ago is important. And every element of the Recipe for Growth is where we're investing, whether it is in our digital tools or in reinforcing our industry-leading sales force or in our product and assortment, optimizing that, which we take to market as we carry forward or even what we call future horizon, which is cost out in M&A. All of those things together are what will allow us and have allowed us to really light the fire under the asset base that is Sysco to drive the growth as we carry forward. Q1, we had good results from growth. We were just getting going. Q2, we were really pleased to exceed within the quarter, our 1.2 aspiration for the quarter as well, which is why we called up our expectation for the year from a top line perspective. We're announcing we're growing faster than the 1.2x during fiscal year '22, of course, moving towards the growth of 1.5x in fiscal year '24. Now it's still early days, right? I referenced before, we're playing the long game. I don't want to get too far ahead of ourselves, but I will tell you what the team has accomplished broadly globally at Sysco with the implementation of the new digital tools. But the team has accomplished broadly with respect to tweaks and changes to our supply chain environment in support of the customer. Those changes are starting to take effect, and that's why we're starting to see the goodness coming with greater than 1.2x growth in the short term.

Great. And then capital allocation, another key differentiator for Sysco. What do you believe makes Sysco really unique on this front? And then how much flexibility do you have on capital allocation? And what role does it play when you guys are determining your strategy?

It's a great question, something I spend a lot of time thinking about with Neil and Kevin and Kevin and the rest of the team. Sysco is blessed with a strong balance sheet. We are. We're blessed with strong cash generation. And with that comes the ability to invest in the business as well as take other actions that are important to us. And so if you go back to last May, we announced our new capital allocation strategy, which had 3 parts. Somewhat in order, but it is a balance, I will tell you. And the first part is to keep in mind the 1.5x growth aspiration that I called earlier. We are going to invest to grow, right? We have the assets. We have the cash. We have the cash flow to be able to make the investments across every element of the Recipe for Growth for us to be able to accomplish that, and we're doing that. And as we sit here today, we are taking a disciplined approach, and we're able to make every investment we can identify that is a smart investment for us to make in support of that growth. And so that's the first use of our cash as we carry forward. The second use of our cash is maintaining the strength that we have. And we have a great, strong balance sheet. We levered up in advance of the COVID crisis. Like everyone else, we didn't know what it was going -- what things were going to look like. And so as part of our Investor Day last May, we committed to bringing our debt levels down, and we announced a 2.5 to 2.7x net debt-to-EBITDA leverage target. And we probably started doing what we said we were going to do, which is during the past year, we brought down our debt by $3.4 billion, and we're gradually moving in the direction of hitting the 2.5 to 2.75x. We're not there yet. We haven't made a commitment as to exactly when that's going to be at this point. It will probably be at some point during fiscal year '23. But I'm really pleased with the progress we're making on our leverage. And I would point out that one of the rating agencies actually upgraded us a couple of months ago in support of what they see us doing as far as us doing what we say we're going to do with respect to ensuring that we have that strong balance sheet. So why is that such a focus for us? Why is that second part of the capital allocation so important? Because if you go back to the first part, we always want to be in a position to, a, invest for the growth; but b, at the same time, be able to handle a crisis like COVID, right? The nice thing about Sysco with our balance sheet, with our cash flow was with everything COVID was throwing at us, we were still investing in the business, and we're going to continue to do that as we carry forward. Now the third part of our capital allocation strategy is return of capital to our shareholders. We committed at our Investor Day that if we have excess cash, we're not going to sit on it. Of course, we're going to preserve the right amount of liquidity to manage a company of our size. But we have no interest in building a cash war chest, if you will. And we have decades of increasing our dividends. We are dividend aristocrats in the markets, and that's important to us. And we raised our dividend last May at our Investor Day again, and we'll talk again this coming April with respect to our choices for our dividend as we carry forward. But I hope you noticed during our Q2 earnings call, we also announced that we had already completed $416 million of the up to $500 million share repurchase that we committed to do during our Q1 earnings call. And that gives you a sense of how this is all playing together. We're investing every dollar we need to in growth for the future. We are supporting the balance sheet by continuing to bring down our debt or, as we did in November, December, lengthen our maturities and lower our interest rates. And we're returning capital to shareholders both by buying back shares and keeping a very close eye on our dividend aristocrat status.

Fantastic. Neil, let's pivot over to you for a second. Another key differentiator for Sysco is the company's focus on both CSR and ESG. Can you walk us through how Sysco really prioritizes these functions?

Yes, thanks for the question, Mark. We start with a materiality matrix in trying to determine what matters to Sysco but, of course, what also matters to Sysco's constituencies, so for our customers and others that are watching and monitoring the business and decide where can we have the impact. And when we do that analysis, we came up with a framework that we like, which is quite simple. It's to focus on people, products and the planet. And so within that framework, we do analysis around potential goals we can commit to, and then we go public with those goals to hold ourselves accountable. And so the investor community can measure us and track our progress against those goals. We'd initially set a set of goals for 2025 to accomplish, and then we've recently accelerated that by diving deeper into 3 specific products. And those are global good, climate change and then responsible products. So those are the 3 primary focus areas now across our sustainability framework using that materiality matrix assessment. The climate change is the biggest and newest ones that we announced, and that was just in the last fall a couple of months ago, and that is in accordance with Paris Agreement, a Science-Based Target initiative for the well below 2-degree scenario. So we're very proud of that work, and it's helping to drive progress. For us, it's one way in which we live our purpose, which is connecting the world to share food and care for one another. It also naturally helps us attract and retain talent in the organization. It's a tool for us to use in that regard. But it's simply the right thing to do as well. And it matters across the space, particularly if you're in the food industry, like we are. But then lastly and importantly, for the relevance of an investor audience as well, it's going to help us grow our business. And it will help us accelerate our growth if we do this well.

Great. And then within that climate portion of the strategy, can you detail the science-based greenhouse gas reduction goal that you guys introduced in November of 2021?

Yes, for sure. It starts with a major commitment to reduce our own greenhouse gas emissions by 27.5% over the next decade. And that will be accomplished by doing primarily 2 things within our own scope 1 and scope 2 operations, and that's a 100% renewable energy commitment, number one; and number two, a commitment to have 35% of our U.S. Broadline fleet be electric vehicles. So we had previously placed an order with Tesla. We're now working with Freightliner on other types of vehicles to bring into the fleet, and we have a very specific fleet plan on which locations by which year that fleet will come in. So that will help us with our scope 1 and scope 2 part of that. But again, being in the food industry, scope 3 ends up being the vast majority of your carbon footprint. And so for us to achieve ultimate success, we need help from our supplier partners. And so we've committed for 67% of our supplier base submissions to also commit to an SBTi target, and that will help us reduce our total footprint by doing that. And good news is we're off to a great start there. We already have about half of our suppliers who have made that commitment to now have a plan in place to get the remaining suppliers to do that by 2026. That's going to help us a lot back to this growth point because if you think about where Sysco sits in the value chain, we're obviously between our customers and our suppliers. And so we are scope 3 for our customers. So think of any large, sophisticated customer who is also making a climate change commitment. They're going to need their supplier to commit to a goal like we just have. And we are the only U.S. foodservice distributor to have made this commitment because we can. It requires that balance sheet that Aaron just referenced. So if we partner with our suppliers, that could be a fuel for growth for them, and we're the only distributor to have that commitment. Our customers will need to rely on us for that. So we sit in the middle of the value chain, and we've purposely made that commitment. That's going to help us accelerate our growth beyond being obviously the right thing to do.

Okay. Great. And then how do your diversity, equity and inclusion activities really help impact your competitive positioning in your view?

Yes, it's part of the goals that I mentioned. We really have 2 layers to DE&I commitments. One kind of internal, if you will, which is for 62% of our own U.S.-based associates to be either gender- or ethnic-diverse, and we're doing well in that regard. We're up to 58% since we set our goals. So we're working our way towards that commitment and feel good about the progress we're making. And the second part of it is the more external side, if you will, which is a supplier diversity commitment, and that's to grow with diverse suppliers by 25% compared to when we started this, which was 2018, by 2025, and we're making progress there. And one of the reasons why we're making good progress internally and externally is because we've brought on board a very experienced veteran in this regard, our own Chief Diversity Officer. Adrienne Trimble is her name, and she's got tremendous experience in driving progress both within our own walls and externally with our partners. An example of what she's done is to create a council of DE&I within Sysco. And when we said we're going to create a council and we announced this within the organization of how can we drive behavior change and progress within our own organization, we had more than 600 associates volunteer within the first week to be part of that council, which is tremendous. We've got great momentum is the point within the organization. And then the second part is we have what we call associate resource groups or ARGs. And these are groups of different organizations within our own employee population where people can feel like they belong within different groups and be part of something to drive change and drive behavior within the organization. And data will tell you that employees that are part of groups like that have much higher retention rates. And so that helps our business. I'm personally the executive sponsor of HART, which is our Hispanic Associated Resource Team. And so I see this play out under Adrienne's leadership and the activities that are planned and the progress that we see. So there's always more work to do in this area, for sure, but we're very pleased with the progress that we're making.

Fantastic. Aaron, back to you. On wage pressure, we touched on that a little bit earlier, topic of discussion, of course, across the food distribution space. So far, Sysco seems to have weathered the pressure a bit better than some others. You've also noted that you haven't been immune at the same time. Where are the greatest pain points today on the labor front? And how do you think about whether more of the pressure is either transitory or structural in nature?

Yes, it's a great question. To answer it effectively, I have to do a bit of a compare and contrast between us and some others that you're hearing news about. Sysco has been an employer of choice for a long time, right? Our benefit -- our wage rates and our benefit packages have been much higher than what you would see in, say, the restaurant industry. And so while it is certainly the case that the restaurant industry, many of our customers are dealing with a watershed moment from a labor strategy perspective and the ability to obtain the employees that they need to staff their locations, Sysco is a little bit different place. We're not immune, but we're in a different place. So far, our need to adjust wage rate has been occasional and select and immaterial from a financial perspective where we do a market analysis site by site. And we've been doing that as we've been working through the last couple of years. And where we need to act, we have. We have to keep in mind that our drivers and our selectors are earning, what is it, $23, $24 already. And so the conversation around getting to $15 or raising minimum wage, that's not where we are from a wage rate perspective. And our benefits are generally better than many in other industries as well. And so that's helped to offset some of the pressure that others have faced. As I said, the changes we've made so far have been immaterial. The other important point is that we started cost-out 1.5 years ago or 2 years ago now. And we believe that the combination of the cost-out work we've been doing has helped to offset the pressure we've gotten. And you may have heard me refer to productivity efforts that we have underway. We're going to continue to be relentless on our productivity efforts to help us to offset any further wage pressure we see as we carry forward. So, so far, it has not been material, not to Sysco.

Great. And then as a reminder to everyone, please feel free to submit some questions on the app, too. We've got one so far that we'll leave in later in the conversation. But I wanted to put a reminder on that. Next, in terms of fill rates, how are they comparing to what you saw pre-COVID? Are you able to meet most of your demand at this point? Or do you think you're still leaving some sales on the table?

What I'd say is it depends on the supplier, right? The good news is we are seeing improvement from where -- from earlier in the COVID disruption. And the other good news is given our scale, given the size of the orders that we're deploying, and we can tell this from our NPS scores as well, we're in a better position to serve than anyone else in the industry, right? We made a purposeful choice early on in the COVID recovery hunt to invest in the inventory upfront to partner with the suppliers in new ways to change how we do our ordering patterns to make it easier for them so that we would get the benefit of our scale to get better service levels, and we are seeing the benefit of many of those actions as we carry forward. And so we're pleased with the results. We think that's part of what's helping us to hit the growth numbers that we are delivering. It's certainly been helpful to the volume recovery I referenced before and why we're so optimistic and upbeat on where this is going as we move past the impact of Omicron on the business.

Mark, if I could just add one thing in regards to what Aaron just said there. What -- another part we're pleased with is, so there's fill rate from the supplier, which is at a certain level. There's also then fill rate from us to our customers, which is higher than the fill rate to us from a supplier, and that's because of the wide variety of products we have that Aaron just pointed out. So because we have plenty of quality substitutions and a qualified sales force that helps educate our customers on, if this doesn't work for you, how about that and help them with their menu design and change, that allows us to have an even higher fill rate to our customers even if there's a challenge with fill rate from our suppliers. That's an advantage for us.

Definitely helpful context. Pivoting back to inflation, again, we touched on this a bit earlier, but even outside the Ukraine situation, inflation has been quite elevated, impacting really not just food-away-from-home, but the broader economy as well. Are you concerned that we might be approaching a point where consumers start to turn away from the food-away-from-home channel just to save on costs? Are you seeing any evidence of demand destruction emerging? And are you surprised at all about how resilient the customer has been to date?

There's a lot there. Let me try to unpack it. Look, we start with the data we've got. So far, we're not seeing the consumer domestically or internationally backing away from eating out, right? Our assessment is that folks are tired of eating at home, right? They want to get back to their lives as they were, and one of the ways they do that is to go out, whether it's to a restaurant or to a pub. And so we're seeing no sign post-Omicron that consumer demand is being impacted by other things going on. And the green shoots are growing, as I said earlier. I think there's a couple of things that's important to get on the table about the consumer as well because sometimes, the conversation becomes binary. They're either eating out or they're not, right? And that wasn't even true during COVID, where the business didn't come to a complete halt during COVID. People just sometimes change their choices, right? And I think Neil alluded to the fact that with the breadth of our portfolio, we're able to offer a broad offering. And that's important because partly in response to inflation earlier on, we started working with our restaurant customers on what was their -- what were their own menu choices. We've helped them to optimize their menus to maintain their profitability. We've helped to optimize -- we've helped them to optimize their menus to narrow them to make their operations easier in that context. And that's equally true from a consumer perspective where we believe that consumer won't go from on or off. They will go to -- they might trade down from a stick joint to a fast casual or from a fast casual to a QSR, right, or from a QSR to bodega. And the nice thing about our model is we serve all of them, right? And so we saw this during the COVID crisis, where our -- the SYGMA business for us, which services QSR long-haul, it exploded, right? And it was -- that was in part driven by consumer shifting. And so we think inflation hasn't impacted them yet, but there's more to go that we have the ability to pass through the cost that are coming our way, that we're going to work with the restaurants to give the consumers whatever they want at whatever value point they're at, which will continue to help to drive our volume. And our portfolio is uniquely positioned because we want to grow in all those areas to be able to overcome the impact.

And then in prior situations where we've been lapping such high rates of inflation, do you guys run into deflation? And how would that impact your model?

It's a great question. It's not something I think we're going to have to address in the short term, unfortunately. A couple of quarters ago, we were talking about inflation being transitory. I think the practical reality is as the world economy -- as things have evolved, what we had hoped was going to be a short term is going to be more of a medium-term thing. A little bit of inflation is a good thing for our industry, right? We've been constant on that for years. The high rates of inflation we're seeing now, the double-digit rates, it will start to come down over time, but we don't think it's going to come down anytime soon. And so we don't have to address the deflation impact in the short term.

Cool. Then in terms of another area where Sysco has placed some additional focus recently has been on growing its specialty cuisine capabilities. So Greco, of course, is a great example of this. What have you been able to learn, thus far, from your Greco acquisition? Are you finding much opportunity for cross-selling customers? How's brand recognition in areas where the Greco name might be new? And then how are you thinking about complementing Greco with other specialty cuisine purchases?

Great question. I'll start and see if Neil wants to add anything to it. We are really excited about the specialty acquisitions we've done. Greco, in particular, was the first one we executed. It took Sysco, the Broadline business into a key element of the cuisine types with the Italian, and the acquisition is already performing far better than our acquisition models. We're estimating it will be $1 billion plus in fiscal '23 for us as well. And that's just within the Greco platform. That's not counting the benefits which were part of our deal model of how does Greco help to make Sysco better, right? Greco is a -- is in part of the U.S. It's not in all of the U.S., and so we're now looking at their assortment. We're looking at how they go to market. We're looking at team-based selling models, the Greco sales teams and the Sysco sales teams. We're looking at the introductions across customers that Greco doesn't serve that we do, customers that Broadline -- our Broadline business doesn't serve that Greco does. And we're seeing a lot of goodness in that model. And we're going to continue to expand in that area. We're very focused on driving more as part of the -- future part of our Recipe for Growth. And we're actually adding to that as well because you will have noticed in the last month or so, we announced the acquisition of The Coastal Companies, right? We currently have 4 parts of a cuisine type from a specialty portfolio. We have the Italian business I've just talked about. We just acquired The Coastal Companies, which fills an essential geographic white space for what was already under -- an underappreciated asset, which is a high-margin business called FreshPoint within Sysco. It's actually one of the largest fresh produce distributors in the country, right? And we've added to that now with 2 acquisitions, first in the form of The Coastal Companies, which just closed, which will be $600 million plus in our fiscal year '23 as well from a revenue perspective. And we also -- just before we did that deal, we did a geographic add-on in the Pennsylvania region, which supports that deal as well called Paragon. And so we're going to continue to invest in those key areas as we push ahead. We also have a nice business in the Asian specialty business as well, which has been -- which was the product of an acquisition from several years ago. And so what I want you to take away is we're learning a lot. It's -- we're able to grow the platforms. More importantly, from my perspective, from a materiality perspective, the acquisitions are improving Sysco, right? And we're able to -- we're going to be able to drive a lot of growth and a lot of nicely profitable growth because these tend to be higher-margin businesses, particularly on the specialty needs, which I didn't reference, or the fresh produce business I did reference earlier. Neil, do you want to add anything to that?

Just coming back to Greco for a second. The Italian segment is a great segment. It's a fast-growing segment. And we're very pleased, as Aaron said, with the performance. He gave the number of $1 billion plus. That number is greater than what the annualized sales were of Greco before the acquisition. And that's a proof point of the product type, Mark, that you asked about. So Greco is an example of a specialized Italian distributor that has fantastic, unique specific specialty products within its portfolio that we can bring some of those products now within the Sysco platform and expand that growth, and we're seeing the benefit of that. So it has a multiplier impact for us, and it's been playing out very well.

That's great. And then related ones come in. In terms of Sysco has got a pretty diverse set of businesses today, how much of an opportunity do you see for growth in additional channels? And then how do you weigh the benefits of adding channels versus adding complexity to your business?

It's a great question. And I'm going to go back to what I said before, which is we have a large business. We have access to many channels already, specialty or Broadline, domestic or international. And what we're doing within the Recipe for Growth is really solving for where is the highest and best use of our capital. And so we have -- as I said, we have plenty of capital to invest, but we're being very disciplined in where do we do that. It's all in service of gain of that 1.2x to 1.5x goal by the end of fiscal '24. So that will take a number of forms. It will take the forms of us improving the technology as we called out because we all know from retail days, and many of us come from a retail background, that consumer or customer journey is very important. We're going to continue to invest in those digital tools that support the customer or the consumer. Some of that will come from a sales force perspective. Some of that will come from front-of-house or back-of-house capabilities. Similarly, we're going to invest in expanding our network. You just heard me talk about The Coastal Companies acquisition being a geographic play for us in the specialty business. But what that also does is it enables us to sell more specialty into our Broadline operations because of the team-based selling there. And so that's a mixing the channels, if you will, versus investing in new channel. We're equally excited about our Latin American business. Many may not realize that we actually have a Cash & Carry business in our Latin American operation in Costa Rica and Panama. We're -- that is a great business for us that we're experimenting with to better understand how do we grow that enterprise while, at the same time, we're going back and improving the existing operations we have. And so we're trying to be very careful of we need to achieve our growth objectives. We can do a lot of it through our portfolio, and we have a lot of things that we need to do within the portfolio to enable the base as we carry forward. What we're not going to do is get distracted with a shiny object. And Kevin has been very clear with our team in this respect that we have our plan. We're going to execute against our plan. And doing things like a large European acquisition, not in the cards, right, not what we're after. Now we have plenty to do in Europe already, but we are excited about the opportunities we've got. Neil, would you add anything to that?

No, I think that's great. Well said.

Great. And then in terms of post COVID, do you guys expect restaurants to return back to most of their pre-COVID distributors as life increasingly returns to normal? And Sysco has obviously taken a lot of steps to try to ensure that a lot of these customers stick with the company as life returns to normal. How do you think about that, give and take?

I start with the fact that Sysco is a different company now than it was before the crisis in so many ways, right? The -- really starting with Restaurants Rising, which Kevin and Neil announced, what was it, 18 months ago now?

Yes.

And then leading into the announcement of the Recipe for Growth as we build those capabilities as we partner with the customers differently. I mean we're still the only national distributor that doesn't have a minimum order size, right? We're in the face of everything going on. And so I -- we would say that we are doing everything that we should be doing to ensure that everyone who was with us, stays with us. Everyone who wasn't with us should want to work with us, and we're going to put the proof points on the table. We're going to be the easiest partner to deal with, and we're going to have the right inventory in the right place at the right levels, investing our cash and the right working capital to be able to get there so that it's not a conversation of what did they use to do. It's a conversation of what should they do now. And we think we've built up a lot of loyalty over the crisis to support that effort. Neil, would you add anything to that?

And we have the proof points that it's working. You can see in our slides on our website, we've got a graph that shows a bit of an X, and the line that's going down are the independent customers that are not working with Sysco, and the line that's going up forming that X are the customers working exclusively with Sysco exactly to the point Aaron just raised and building that loyalty through some of the programs we've put in place like ensuring we don't have an order minimum. That loyalty is paying off in terms of that X graph that you can now see.

One of the things that gets me excited as CFO is for a $51 billion company last year, it will be much bigger this year, of course, with 17% market share. I mean $50-plus billion and 17% market share, the balance sheet we've got, the plan we've got in place, there is -- in my view, there is significant upside relative to where we can go with this overall effort.

So you talked about some of the initiatives that are unique to Sysco in terms of no delivery minimums, more frequent delivery windows than, of course, a lot of your competitors have. Do you think these offerings have been more impactful on the new business front or getting more business from existing customers, presumably both have an impact, but where are you seeing more of an impact between the 2?

I think we're seeing the impact across the portfolio. It certainly has not hurt the acquisition of new customers, as Neil referenced, referencing some of the materials we disclosed in our last earnings call. We're seeing good adoption by customers that we have not worked with before. And that's true in the independence. It's also true in the FSM business, which has yet to be fully recovered. It's equally true in education and health care and the other parts of the portfolio that we haven't been as focused on in the past as we are now. And so for us, it will be get the new customers, drive the penetration with the existing customers and, to your point earlier, add those channels, right, as we carry forward. And they're all opportunities for Sysco. Given the resources we have and the management team that Kevin has assembled and the plans that we've put in place, we're quite excited about it.

Fantastic. And then Sysco is able to centralize some field roles first in the Broadline organization and then, more recently, in some of your specialty operations. Probably, this makes a lot of sense just in terms of being able to roll out initiatives in a more nimble fashion. Are there still many opportunities on this front? Or is most of the low-hanging fruit already been picked at this point?

Well, let me give a new-guy answer, and then I'd love to get Neil's perspective, someone who's been at the company a little bit longer. Look, the practical reality is we didn't centralize per se. We regionalized. And the regionalization within our Broadline business or even our specialty operations wasn't to bring things to the center. It was to allow our business locally to serve the customer as they are, right? And if we have 3 -- a region now within our Broadline operation is 3 to 5 operating sites. That's because many of our customers were ordering from the sites around, not just from one site, which was how the business was developed before. And so part of what we're doing is trying to meet the customer better and how they need us to operate to change our model to meet their needs as we carry forward. There's absolutely an efficiency element to that, right? It brings -- it helps the cost structure, but we're using a lot of those -- we're using most of the savings right now to invest back in the business as we carry forward. You raised the point, though, from a transformation perspective, and I'm going to kick it to Neil. There's a lot of change underway. One thing which isn't changing is our focus on having local customer relationships and having the local customer relationships owned and driven locally, right? That's why the sales team, our industry-leading sales team, is so important to us. We've changed the incentives of the sales team to be able to drive that growth as well. And over time, there will be -- we will be pushing the capabilities down into the field to help drive the success as well. Neil, what would you add to that?

Mark, back to your question, are there other areas of the business where we could do more of that? Yes. There are -- and to the point Aaron made, you think about programs we've talked about over the last several months, the pricing program that we've implemented and that rolled out across the U.S. The fact that we've regionalized the business has streamlined the capabilities of the organization to be able to implement that more efficiently than we otherwise would have been as 80 independent units. Now with the regional aspect to it, we rolled that out quite effectively. And in a time line that prior to the organization, to Aaron's point, we would have not been able to do as quickly and as efficiently as we have now. Now it's up and running and doing well. So that regionalization helps us with decision-making and execution.

Maybe a last point on that because I did not talk earlier, and I should have talked about the progress against our cost-out objective, right? We have the great balance sheet. We have the great cash flow. We're investing in the business. Part of why we've been able to respond the way we have to the crisis, part of why we are confident in the future, in particular, hitting the EPS targets we've got out there is our progress against our cost-out objectives, right? And we committed at our Investor Day in May that we would execute against $750 million of cost-out savings by the end of '24. We are well down that path. Some of it is being hidden right now by the $73 million of snapback investments, by the transformation investments, the $4 million plus of transformation investments, by the productivity gains. But the team has made excellent progress on our cost-out efforts, really across the enterprise. And we are always looking for more opportunities on how can we optimize, how can we make our operations more efficient while serving the customer better because that's where we're starting. It's how do we serve the customer better and how can we free up the resources to be able to do just that.

Great. And then as a last question kind of tying into that. In terms of your personalization efforts, it's another area where Sysco is differentiated a bit. How has the early response been? And how does that compare to what you guys were expecting?

Personalization is an awesome opportunity for Sysco. And we have a Chief Commercial Officer in the form of Judith Sansone, who is a 40-year-plus veteran of CVS, who ran ExtraCare, who did this for CVS in the retail environment. And she's coming in and bringing the capabilities, the knowledge, the -- how might we, too, drive better personalization for the restaurants and the way that she did from a consumer perspective. At the end of the day, it's humans on either side of the equation, whether it's our industry or the retail industry. And I would tell you, we're still early days. We're seeing the early wins in connection with building the technology and driving the personalization. And as we move up that curve, the personalization effort will be one of the biggest -- will have one of the largest impacts to our top line that the recipe growth -- Recipe for Growth has outlined, and we'll be a better company as a result.

Fantastic. Well, exciting times for Sysco. Aaron, Neil, Kevin, thank you guys so much for joining us today. I think we've got a lot of investors who'll be joining you guys on one-on-ones throughout the day. I hope everyone enjoys their time up here in Boston, and we'll wrap there.

Great. Thanks for having us.

Thank you.

Thank you, everyone.