Sysco Corporation (SYY) Earnings Call Transcript & Summary

All right. If everyone could take your seats for the next presenter. So next up, we're very excited to welcome Sysco back to the CAGNY conference. Before I do my full intro, please join me in thanking the company for generously sponsoring tonight's dinner. I've seen the menu and let's just say I'm excited.

Thank you, Andrew.

So on to the intro. It's great to welcome Sysco back to the CAGNY conference, a company that last year generated nearly $69 billion in sales with a market cap of nearly $40 billion. We're joined here by Kevin Hourican, President and CEO; Neil Russell, Interim CFO; and Kevin Kim, VP of Investor Relations. 3 years ago, Kevin Hourican, joined Sysco and was kind enough to present here just weeks into his tenure. At that time, he shared a platform for growth for Sysco. Since then, Kevin and the team have proven just that. That platform now recognized as the Recipe for Growth has enabled Sysco to gain share and perhaps, most importantly, do so profitably. Please join me in welcoming Sysco. And with that, I'll turn it over to Kevin.

Okay. Great. Thank you, Andrew. Appreciate Andrew and the CAGNY Board having us here. It's an honor and privilege for our opportunity to be here with you again. It's nice to be back in person 3 years since the last time we were together, our 2 virtual years in a row. It just does not replace or match the opportunity for us to be able to be in a room, and we look forward to the breakout that we have directly after this. And as Andrew just said, we're really looking forward to dinner. Our culinary experts will be in that room. We've got cuisine stations from across our portfolio of products, and we look forward to having the opportunity to talk with you one-on-one this evening, if you are able to make it. So without further ado, let's go ahead and jump in. Many of you know a lot about Sysco. But as I talk about Sysco and communicate who we are to our employees, to our investors, I start with this, which is we are a 50% a supply chain organization, and we are 50% a food sales and marketing company. We need to do both, and we need to do both extremely well to continue to lead the industry. And today, I'm going to talk with you about how we are doing exactly that, the transformation that is happening within our supply chain and the transformation that is happening within our food sales and marketing group. But let's start with some of the most basic facts. We are today the leader in this industry. We have the most broad and capable supply chain with the most number of distribution nodes in the industry. What that means specifically is that we are the closest to our end customer, which means we can get there at the lowest net landed cost and an extremely high level of service. We have the largest sales organization on the planet from a food distribution, food away-from-home perspective, 7,500 sales rep-strong, best trained in the industry. And statistically, they have the highest Net Promoter Score by a wide margin in the industry. So robust, strong capabilities and the Recipe for Growth that Andrew just communicated a moment ago is how we're going to take those capabilities to the next level. So a little bit more about Sysco and who we are. Again, where we are the global food service distributor. We call ourselves the backbone of the food-away-from-home industry. Some just fun stats on the chart from the overall size of the company. To the number of countries we compete within, to be crystal clear on this component, we operate within 10 countries, but we do business in 90-plus countries. And the difference between those 2 things is the food export business that we own called IFG, which is a nice little growth engine for our company, based in Florida but expanding its reach across the world. 71,000 colleagues, as I mentioned, 7,500 sales reps who are absolute experts in food. They are ex-chefs, they are ex-restaurant owners, they are culinary school grads, they have a tremendous passion for food. And our delivery partners are the face of this company. They are who in our customers' place of business every week, and they create lasting relationships with our customers. Our total addressable market is more than $350 billion, and we are the industry leader, but yet we have only 17% market share. Highly fragmented market, a growing market, which I'm going to get to in a minute, and we have an opportunity to do really, really strong profit business growth in this space. I love this chart. The left-hand side is a 30-year span. The bottom line going upward is the food-away-from-home percent to total sales. The other line is the grocery store channel and it's been coming down over that same period of time. That huge dislocation was 3 years ago, 1 month from today, when COVID hit, we were all told to go home, stay home, don't leave your homes. And obviously, you can see that had a tremendously negative impact on our business for a reasonably short period of time. The punchline here is the industry is back. We are back as a company. The industry is back. We are above where we were at the high watermark pre COVID. And if you look at that January statistic, January was particularly strong with a really strong performance. And that's just not Omicron overlap [ virus ] versus 2019, January was a very strong month. So a little bit about who we are as a company. I like this chart a lot. It shows the 10 segments of business that we operate within. As I mentioned before, we are fully diversified. We are the backbone of the food away-from-home channel. We are #1 in 8 out of the 10 segments that are on this chart. And for the 2 that we're not #1, we have a strong position. More importantly than that, 66% of our business is restaurants, but our ability to grow profitably not just in the restaurant business but across the food away from home sector is robust and strong. Even in the sectors where we are #1, we still have enormous headroom still to go. And what I love about this chart is the diversification and the type of different business sectors that we serve from the government all the way to single mom-and-pop operated restaurants. Many of you know us, Sysco, as a broad line distributor, a broad line range of products delivered on a tri-temperature truck, in a timely manner, filled in full. What you may not know as much is that we are the leader in what we call specialty foods. We own and operate the largest specialty produce business in the U.S. We own and operate the largest specialty center of plate business in the United States, and we have supplemented that over the last year through the acquisition of an Italian distributor platform called Greco, and I'm going to talk about that more in a minute. Sysco purchases more local, fresh produce than anyone in the industry, 10 million cases of local produce purchased from over 500 local farms and that matters. It matters because the freshness that we're able to bring to our customers, and it matters because restaurants desire to be able to have produce that's been sourced locally on their menu. And we are working to expand our local and our fresh assortment. Another key component of our growth and our profitability is Sysco brand. So we really appreciate and admire the companies on the left-hand side of this page, household names, foundation brands in our country and across the globe. On the right-hand side, you can see the quadri of Sysco brands. And on the top, if you look $18 billion of sales, $18 billion of sales coming from Sysco Brand. One brand alone, Sysco Classic, is over $5 billion per year. And it's more than 50% of the cases that get delivered to one of our local customers are from one of the Sysco brands that you see on the right-hand side. And as I mentioned, the Greco acquisition that I described earlier, we were able to bring to our family Bellissimo and its family of products as well as Greco and its family of products to significantly improve our Italian offering. And you'll see those brands meaningfully grow over time. The importance of this component is the Sysco brand case that gets put on that truck is meaningfully more profitable than a national brand case. And we have growth potential in Sysco brand even though we are already at 50-plus percent. I'd like to talk a little bit about national sales. National sales is about 50% or CMU as we call it, contract bid business is about 50% of our business. It is a large and important component of what we do. The punchline is Sysco is winning meaningfully in national sales. The why deserves a little bit of a discussion. Number one is the national reach and scale, the ability to go coast to coast. Many of these customers don't want to work with multiple distributor partners. They want to have one partner. They want to have deep integration with your technology tools. So there's frictionless ordering for their operators. They want reliability of on time and in full of a broad assortment. We, Sysco, can check all of those needs. They want fulfillment strength. They want to never be out of stock, and they don't want for their restaurants ever to have to food -- not have a product and do a substitution on their menu coast to coast. We're winning meaningfully. They also want dedicated sales reps who are knowledgeable about them specifically and what their needs are, and we're checking each of those boxes in a meaningful way. What is important is on the right-hand side of the page. We're meaningfully improving the profitability of national sales. How? further penetrating Sysco brand, working on introducing specialty. So perhaps they were buying frozen and dry from us for a long time. Now we're deeply penetrating in produce and protein. And those are higher margin, higher growth categories for us. And be working on each and every one of those contracts for margin optimization. We are pleased that year-to-date, we are ahead of both budget in volume and in margin rate from our contract bid business. Let's talk about our total business across the entire enterprise. As Andrew said, 3 years ago, we stood up on stage and talked about Sysco being the biggest in the industry and the, by far most profitable in the industry from an EBITDA as a percentage of sales perspective, but we wanted and needed to become a growth company. The best companies in the world are growth companies in the industries with which they compete within. And this chart does all the talking that I needed to do. We are meaningfully outperforming the industry in total and have been doing so now for meaningful consecutive quarters. We are pulling away from the pack. And I'd like to talk with you about how and why. The how and why is what this chart shows, which we call internally the Recipe for Growth. Yes, it's a play on words. It's in our nod towards food, but it literally is, our recipe for how we will drive growth. It starts with our purpose, which is at the top of the page, connecting the world to share food and care for one another. Those words, carefully chosen, motivate our employees. They motivated us to go the extra mile, to help a supplier, to help a customer, to do more than those we compete against to provide what our customers and our colleagues need to be successful. Importantly, it's a growth wheel. Each of the 5 elements, which I'm going to walk you through today feed each other. They work in concert with each other. And it's the aggregate of all of them working together that creates differentiation from those that we compete against, which is allowing us to win share. So I have a video I'd like to show that does a better job than I can have, explaining this through the eyes of what our customers see. You could roll the video, please. [Presentation]

Okay. Great. What I love about that video is it brings forth the ethos of who we are as people, what we are as a company and what we're doing to better serve our customers. From experts in food to experts in supply chain to going the extra mile by having a later in the evening order cutoff and doing what's necessary to earn every last case from every customer we serve, in aggregate, that's the Recipe for Growth. I'd like to take a quick turn through each of the 5 pillars, highlighting 1 or 2 things from each of them that can help you understand the full spectrum of the story that we are building at Sysco and why it's winning in the marketplace. The first is digital. And the reason we started here is our digital tools, going back 3 years ago, did not meet our expectations for how we wanted to serve our customers. And we have made remarkable progress across the past 3 years. Our goal here is to improve the purchase experience, remove friction, make it easier for our customers to do business with Sysco, inspire them to buy more products from us and, most importantly, personalize their experience because our website is a 1:1, B2B website. It can be customized for each and every customer we serve. The e-mails they receive from us are customized to the type of cuisine they buy. The pricing they see on our website and in those promotional e-mails is unique to them, understanding the elasticity of that item for them. As I said, we made substantial progress in digital over the past few years. The second is products and solutions. We're in the food business. Tonight, we'll be able to enjoy many of our best products. We wouldn't be who we are without having the broadest assortment in the industry. The improvements that we've made over the last year was we put tremendous effort, especially in the face of stiff inflation, to improve our partnership with our suppliers through what we call strategic sourcing, to create value to be able to pass that value on to our customers. No one in the industry that we compete within should be able to buy food at a better cost than Sysco. Second is advancing Sysco brands. We're making meaningful progress in the penetration of Sysco brand cases. Why is it important? Retention of that customer is higher. Profitability is the case of the higher. And their trust in Sysco goes up, more Sysco products they make. One of the things I'm most proud of is the next sector down, which is the growth in cuisine segments. The purchase of Greco Foods and the expansion of that platform across the country, we have doubled our Italian share in the last 18 months, doubled our Italian share. So I'd like to go on to supply chain. This is a core strength of our company. As I mentioned, we have more distribution nodes than anyone we compete with across the globe. We are closer to that end customer than anyone. But we're not satisfied with where we are. We are innovating our supply chain to allow us to efficiently have a late in the evening order cutoff deliver 6-plus days per week and to do so in a more flexible manner to meet our customers where they are. We recently launched our first what we call omnichannel pilot, which is to separate the front end from the back end of our supply chain. So let the customer be delivered from the closest distribution center to where that restaurant is but stock the inventory where we find it to be most optimal. So essentially, cross-stocking merge-in-transit is what we now have. It will lower transportation costs. It will increase product availability to our customers and it will lower our networking inventory capital investment. It's a win-win-win. This is a relationships business. I hope you saw that in the video, Neil's got a great video that he's going to show that's going to bring to life even more. This is a relationships business. 7,500 salespeople strong. We are increasing the penetration of what we call specialists. So that's in produce. That's in center of plate, and that's in Italian. We are investing to grow each of those 3 sales force presences and then combining them with what we call the generalist who owns the accounts to do team-based selling. And we have a team that sits above those professionals that essentially is the quarterback that allocates that talent to the right restaurant, at the right time, with the right skill set. Imagine a customer that's been buying from us from Broadline from years and has not brought producer specialty protein. Our ability to have a targeted visit with a targeted reason to buy from Sysco today is what we are doing better than ever at Sysco, and it's paying big dividends. Last but not least, on the 5 Recipe for Growth tours around the wheel is what we call future horizons. And it's a combination of 3 things. First and foremost, it's structural cost out. It's about being relentless, relentless, relentless at taking out cost to invest into growth. Number two is tuck-in M&A to help grow our ability to better serve our customers or expand into adjacent businesses or expand into white spaces from a geography perspective. We've done good work over the last few years in acquisitions, and there's plenty of great work still in front of us with Joel Grade, leading the charge, running business development for Sysco. And last but not least is sustainability. And Neil is going to talk a lot about sustainability when he comes up, so I'm not going to steal any of his thunder, but we are proud to be the first in our industry to make a science-based commitment goal to reduce our greenhouse gas emissions and we're pleased and proud to be doing that work. So this is my last slide. And as I go to wrap up, my key message here is it's only at Sysco can you expect all of these 5 things coming together, working in concert to create the differentiation because it is differentiation that creates a durable, sustainable competitive advantage, and that is what we are building at Sysco. We're already the largest and by far most profitable on an [ EBIT ] percent of sales. And when you combine growth orientation on top of that bedrock foundation of financial strength, we have the opportunity to pull away and gain even more share in a highly fragmented $350 billion business. We have the opportunity to continue to expand our assortment. I mentioned our expansion into more local fresh. We talked about being right on price, using best-in-class technology to provide each customer item-specific pricing. We're talking about taking our supply chain already a robust strength for the company and increasing the number of distribution nodes we have, which Neil will talk about but more importantly meeting the customer where they are. What they've told us is they want a later in the evening order cutoff. Think about on how basic that is. If the evening was busier than they expected, and they run out of salmon, they want to know that Sysco has their back and that we're going to be there tomorrow morning to bring them fresh fish to keep their business running. We're going to talk about that in detail as time goes on, but the best proof point of that project is what we call Sysco Your Way. And Sysco Your Way is a program that we rolled out this past year, and it is creating a step change level of customer service to our customers. Late in the evening order cut off, 6-plus day per week delivery, dedicated driver, dedicated sales partner. We are posting double-digit increases in top line and bottom line growth in the Sysco Your Way neighborhoods, and we have launched more than 300 of those neighborhoods since the pilot began a little over a year ago. The second example is a program that we have called Sysco Perks. Sysco Perks is for a customer that is outside of a Sysco Your Way neighborhood but they have a profit profile that is rich to us. It's a VIP invitation-only loyalty program, loyalty club. We launched it in the fourth quarter of last year, and we have enrolled more than 10,000 customers in Sysco Your Way in less than 90 days. Why? Because it meets exactly the needs that they have, and we are extremely pleased with the lift that we are posting in top line and bottom line with the customers that we have enrolled. And for every other customer that we serve it's about being right on price, having the broadest assortment, having a relationship with them and being there for them by delivering on time and in full. And we are pleased and proud of the progress that we're making that we have become a growth company. And with that, I'm going to turn it over to Neil, our interim CFO, who is doing an outstanding job and my partner in helping run the company. So Neil, come on up.

Thank you, Kevin. Appreciate that. To all of you listening to us on the webcast, either live or on a recorded basis, thanks for joining us. Glad to have you. And for those of you in the room, it sure is great to be back live at CAGNY here with you today. And I know if you're in the room, what you're thinking, wait, are those 2 speakers different heights? The answer to that is, yes. So I'm actually stalling for a minute here to give Mark and team sometime in the back to lower their camera. So are we good? Okay. Let's go ahead and dive into some financial information here. I'm going to do my presentation in 2 parts. Let me talk to you about the first half of the fiscal year for us. For those of you that don't know us that well, we're a fiscal year company. So when I say first half, I'm talking about the 6 months that ended December. And then as Kevin said, I'll spend the second part of my presentation talking to you about sustainability and DEI at Sysco and why that is so important to our long-term future and growth. Starting with the financials and looking at the slide that's in front of you. We had a tremendous first half of the year. Sales growth was more than 15% for the first 6 months compared to the prior year, and volumes in the U.S. for us grew 6.3%, and local volume increased 4.3% for us. Very healthy top line, very healthy volume growth for us throughout the first half of the year that we're very proud of. That led to gross profit dollar growth. That was very strong for us for the first 6 months of the year as well. Gross profit dollars grew nearly 17%, and gross margin as a percentage of sales gained 24 basis points despite relatively high inflation growing to nearly 18% or a little more than 18%. Inflation did moderate as we went through the first 6 months of the year, but it's still fairly high single digits for us. And we would expect that to continue to moderate just a little bit further as we work through the end of our fiscal year. We've done a very good job as a company, continuing to pass the inflation through both with the CMU type customers that Kevin talked about as well as those local independent customers. Our teams have done a very nice job managing inflation throughout the process. That leads to very strong profit growth for us. So adjusted EBITDA grew nearly 15%, and earnings per share grew about 26% for the first 6 months of the year. The second quarter for us was the most profitable second quarter we've ever had in the company's history, and that's going back 53 years. So the company is performing very well, and we've had tremendous profit growth. Let's go ahead and talk a little bit about expenses and some of the drivers that are alluding to that strong profit growth. We've talked to you about 3 different key expenses we've had in the business, snap-back costs, which were generally cost related to the great resignation and the recruitment and staffing of the operation like we, and many other companies have faced. I want you to think about sign-on bonuses, retention bonuses, recruitment fees, advertising fees, marketing fees to get jobs back into the business. That is what we call snap-back costs. We've also had productivity costs as part of the business because think about the large wave of new colleagues we have in the business and their relative productivity compared to the average tenure associate and what that means in terms of cost for our business. And we also have what we call transformation costs, purposeful investments into the long-term growth of the business. You can see on the chart here that, across the last couple of quarters, we've had more than $60 million decrease in those expenses. In fact, those snap-back costs that I mentioned, they're now eliminated in the business. So we've worked through that process. The productivity costs, as you can see, are now about half of what they've used to be. So the productivity is increasing throughout the operation, and we feel very good about the trajectory there. You can see a small decrease in the transformation cost, and that's planned and purposeful as part of our trajectory. But we will always have some amount of those transformation costs because, as Kevin just walked you through that Recipe for Growth, we're going to continue to invest in the long-term health of our business, and these costs are coming down in the right trajectory that we'd like to see for the long-term health. So we're very pleased with what we see across these 3 specific costs. But while we're on the topic of cost, let's talk about what we call cost-out across the business. So now I want to pivot to more of a structural cost conversation. And different from those 3 categories I just spoke to you of, structural costs that we've taken out of the business have now totaled more than $750 million across the business. So what kind of costs are structural costs that we've taken out? I want you to think of things like administrative staffing positions, back office type support functions where we've gotten better at automation using AI and other things to permanently take staff out of the operation and reduce our costs even lower. I want you to think about things like supply chain efficiencies that we've improved on, invested in, digital technologies that we've invested in that are driving costs lower on a permanent basis. And we've also done things that we call regionalization across our U.S. business and across Canada, where we've taken groups of sites and put a group management team over instead of a singular management team. And that's been very successful for us. Not only it's helped us reduce cost, it's helped us improve the flow of decision-making and the accuracy in which we're handling the operation. Those are examples of things that we mean when we say structural cost-out. And we've delivered this goal earlier than planned, and the team has done a really nice job managing these costs for us. And what are we using this to do? We're using this to fund our future. So when you hear us talk about the Recipe for Growth, the supply chain transformation, the digital technologies, things like Sysco Your Way that Kevin just described, we are funding all of that work through these type of structural cost-out, which is not only allowing for near term but long term profitable growth for us. So very pleased with the numbers that we have here, the pace in which we've done it and any guidance we provide to you, all of this is included within the guidance. We are funding our long-term growth. It's part of our guidance, and we're very pleased with the trajectory that we have here. So what does that mean in terms of profitability for the business? This is a chart that we're very proud of because we'd love to show EPS charts that have a trajectory up and to the right, and that's what you see here. Now we offered guidance at our last earnings call just a few weeks ago, and that's what you see on the far right here is an annualized number and the guidance we gave. We gave a range for earnings per share for this fiscal year of $4 to $4.15 per share. And so let's call it the midpoint that you see here on the $4.07, and we're here today to tell you that we remain on track for that, and we feel good about the trajectory of the guidance for this year. And you can see how that compares to the prior year is obviously the dip related to COVID. But looking back over time and comparing to the prior year, 25% earnings per share growth, and that number will also represent 15% earnings per share growth compared to the all-time high that Sysco had in 2019. So this is going to be a very strong year for Sysco, tremendous growth, not only compared to prior year, but compared to all-time high with the earnings per share. So what do we do with that earnings that we generate as a business? We have a very balanced approach to capital allocation and the priorities in which we speak to. And so let me talk about each of these, and I'll give you some examples of a couple of these as well. First and foremost, as you can tell based upon the comments Kevin and I are giving you today, we are investing in the business. We are investing in long-term growth. Think about our fleet, think about our facilities, think about the technology that's needed to continue to advance the business and growing over time. That is the first priority for us. And included in investing in the business are things like what we call the smaller tuck-in acquisitions. And as commented, in our industry, we have a full pipeline of good opportunities. Kevin mentioned Joel Grade, who's running that part of the business for us. He's doing a fantastic job with different types of specialty companies, smaller Broadline companies, different geographies that make sense for us. So investing in the fleet, the facilities, the technology and the smaller tuck-in type acquisitions is the first priority to grow the business for the long term. Second is to maintain that strong balance sheet. We have a targeted leverage ratio range net debt to adjusted EBITDA of 2.5 to 2.75x. And we ended in that second quarter at right at 3x. So we've taken debt down meaningfully over the last couple of years and are very much on a path and trajectory to fall within what we feel is that very appropriate and good range for our balance sheet. And speaking of debt, and on that debt side, we have a lot of confidence and feel very good about where we are because 95% of our debt is of that fixed nature. So even though we're reducing debt and reducing that risk on the balance sheet and bringing that down to this really good range, what debt we do have is of the fixed rate variety, so we feel good about that. Third, and importantly, is our ability to return value to shareholders. And as we think about this, we think about it really in 2 forms, the dividend, which I'll speak of and also share repurchases, which, as you know, for this year, we committed to up to $500 million worth of share repurchases for this fiscal year, and I'm proud to announce today that we're actually active back in the market, working our way towards that goal. So we're actively buying back our shares as I speak to you right now. Looking at that first priority of investing in the business, also glad to announce today that we actually have 7 new buildings underway for us to expand Sysco. And that's across the business segments and portfolio that we have that you can see on the bottom of the slide. Those are Broadline facilities. Those are SYGMA facilities. It's Greco facilities, some of our specialty meat companies and even our business in Sweden. And then, of course, because of that, you can see it's across geographies. Across the United States, we have different locations where you see those Sysco labels. And Sweden and then Ireland, all new buildings going into place for us as we speak. And in addition; to the 7 new buildings, we also have expansion underway in several other facilities. This is growth that's concentrated really in high potential markets and cuisine segments that we feel very good about. We've analyzed specifically where to put these new buildings, and they're going to help us reduce costs. We're going to reduce our cost to serve. We're going to reduce our stretch miles, and we're going to get better at how we're operating. And so we're bringing down costs, we're bringing up the opportunity to serve our customers more with these types of expansions. But we're prioritizing these investments. This doesn't particularly mean a large increase in capital spending. We're falling within the ratios that we've set and that we've guided you towards over time. So this is not incremental increase. It's prioritization of the choices for the right long-term growth for Sysco. As we think about that return to shareholders, and as I said, it's a balance between the dividend and the share repurchases, you can see another nice up and to the right chart here with over time, the amount of value that we've returned to shareholders. So over the last 9 years, over $14 billion returned to shareholders through both of those forms of share repurchases and dividends. We remain committed to the share repurchases I've said, and the dividend is a priority not only to pay, but to increase over time with the Board. Speaking of dividends, Sysco is a member of the Dividend Aristocrats, and that's a pretty exclusive club. To be a member of this club, you have to increase your dividend for 25 consecutive years. Now Sysco has actually more than doubled that. We've been increasing our dividend for 53 years. And to increase your dividend more than 50 years, there's only 8 consumer stocks that can say that. And there's only another 4 that are actually here at CAGNY this week. So very proud of our commitment to return value to our shareholders through the dividend and its increase, and we're proud to be a member of the Dividend Aristocrats. The commonality across these companies is you need to have a very resilient business model, which is what we have. And you also need to be able to generate a lot of cash in order to make that type of commitment, and we also have that. So it's a fantastic opportunity for Sysco to have such a strong, resilient business model that generates as much cash as we do and to be able to share that return with you along the way and to have the commitment to continued increases as we do that. Why is that important? I'm sure, as you know, if you were to look at the grouping of companies that are the Dividend Aristocrats and compare that to the performance of the overall market, the Dividend Aristocrats performed more than 700 basis points better than the overall market in just the last year alone. So again, a very exclusive club to be part of and something that we're very, very proud of. Now let me pause for a minute here and change gears and talk about sustainability. And why do we spend so much time talking about sustainability at Sysco? Well simply put, and I could just stop after saying the following sentence, it's the right thing to do. But we take that further. It actually is obviously very important to all of us and important to where we go from here because we know that environmental, social and governance issues are important to the long-term health of your company and the ability to continue to grow. So not only is it the right thing to do, it's good for business. That's why we're committed to it, and that's why we spend so much time on it. Now like Kevin did, for me, there's going to be a video that I'm going to show you that, that can do a better job describing how this plays out in our business than I can. So let me set this up for you a little bit. I want to introduce you to Marty. Marty is a sales consultant of Sysco. She works up in Oregon. And she's so good at supporting her customers that one of her customer locations, the owners wrote her a letter to thank her for their support. And I want to introduce you to Dimple and Sumesh, immigrants who had a dream to come to America, open a restaurant and live their dream of sharing their food and their passion for cooking with others. No sooner did they open their restaurants, then the next day in Oregon, a forest fire ravaged the town. All around them was destruction. You can stand on the front porch of their restaurant called Gather and see nothing but destruction. But somehow, some way, their facility survived. And they relied on Marty to help them figure out where do they go from here, what tools does Sysco have? What product does Sysco have? How can we help them in such a time of stress that they never would have imagined would be part of their portfolio and how can they help their community? That's why that purpose that Kevin spoke of is so, so important to us. We are going to drive the business. I'll take you back to the line chart that Kevin showed you and showed Sysco growing at a certain pace and a gap to the market. We're going to continue to do that. We're going to continue to outpace the market with our growth, but we're going to do it the right way, thinking about the long-term health of the enterprise and the future generations that are going to follow us, and I think this video does a nice job showing that to you. Mark, let's queue the video. [Presentation]

We never imagined a company as big as Sysco could treat us like the family we've become. That's why we do that work the way we do. So as we think about sustainability, there are 3 primary pillars we think about and categorize the work: People; products; and planet. And we have categories of work within each of those pillars, and there's a lot of details within it. This work is important to our customers, of course, as you just saw. It's important to our colleagues. There's not an interview I have with someone joining the organization that doesn't say to me, "I read your sustainability report, and I have a question about this." It's important to our communities, of course, and it's important to our planet. If we want to continue to source the produce that we're sourcing, there is no Planet B. There's no other choice. We have to do this work. And at Sysco, there's one table, and everyone has a seat at Sysco's table, which is why I'm proud to announce today our new sustainability platform and our north star of how we think about our work going forward for the next generations to follow us, and that's one planet, one table. And that's a north star in which how we're going to think and make decisions going forward. Sysco sits in the middle of the supply chain. And so transitioning a bit to the importance of the business aspect of this work, we have customers who have set their own goals to make progress in this area. They need a distributor partner, a supplier who has also signed up for those goals and can help them advance their own business. We have supplier partners that have set their own goals and want to grow. They need to grow with a customer who is also set their own goals to help them. And that's how it's going to work across the supply chain. You're either in or you're out. And the long-term growth is if you're in. And that's a tremendous opportunity. And we're happy to take that leadership position. For others that will follow in our footsteps, we're glad to have them join us on the journey to make everything better for all of us. A few examples of some of the work that we've done. We've partnered with Cargill on some fantastic work in the Southern Grasslands in the United States and 10 ranchers who are moving their herds around and actually reducing greenhouse gas emissions with the work that they're doing relative to that. We have solar facilities going in place across our enterprise. There is one on the example screen here in the GB for us, and we have Canada and United States facilities underway. And think of the really cool future for us where our electric trucks, which we have an LOI for more than 800 of them out there right now, to be charged by solar on our roofs. And really cool at dinner tonight in addition to the awesome food you're going to have and the fantastic chefs and the interaction you're going to have, that electric truck is here with us tonight, and it's parked outside, and you're going to get a chance to see it. And so we're excited to be able to share that with you. What I'm most proud of is what's on the far right, and that's how we set our goals. You can see it by 2030. We could have chosen 2050. We could have chosen 2040, but we chose 2030 because it's going to be this management team that's going to make it happen. It's not a hope and wish. And it's not a problem for the next management team to solve for. It's this team that's going to get it done. DEI is also extremely important to us. We want a workplace where our differences are valued and celebrated, and we're creating that inclusive culture. Our customers need to see themselves in our products, in our colleagues and in the way in which we operate. Again, everyone has a seat at our table, and we're holding ourselves accountable to this. We're setting goals and we're publishing updates against that. We published our first ever DEI report. It's available on the website, and I encourage you to go see it. One small example is we had a gender and diversity goal set for 2025, and we've already achieved that goal. So now we're hard at work, setting what the next goal is going to be for us because, we need to make continuous progress in this area. And speaking of diverse, I just want to spend a quick minute on our Board of Directors. This is a diverse, independent and experienced Board. The last 3 Directors we've added have added strong capabilities in each of these areas to us that are highlighted in blue on the chart. We have a 10-year policy for our Board, which is rare for public companies. And so our Board is relatively refreshed. Think about restaurant experience, consumer experience, retail experience, technology experience. We've got all of that on this fantastic board. It's a unique set of experiences and capabilities, and they give the management team challenges, good questions and full support, which is the way how it should be with a great Board of Directors. So let me leave you with this. As we think about our investment thesis and going forward, we have tremendous growth opportunities across both the top and bottom line. We are a stronger company today than when we were here 3 years ago. Our Recipe for Growth transformation is working, as evidenced by the share gains we have relative to the rest of the industry. We are very much focused on the long-term growth opportunities across the business, and we're committed to returning that value to you with those strong shareholder returns that I mentioned. We've got a couple of minutes for questions. So I'm going to turn it over to Kevin Kim to lead us through that.

Great. Let's go with the first question over here. Lauren? Let's wait for the mic.

So you've gained a lot of market share over the last couple of years in an environment that's been relatively favorable for Sysco given your size and scale. You're looking to accelerate that market share now that the supply chain is normalizing broadly. Can you just talk about your confidence in being able to accelerate that market share given a relatively less favorable environment?

Lauren, thank you for the question. I think I'll start with the Recipe for Growth is cumulative building platform. We stated a couple of years ago what our goals were. We said we'd grow last year at 1.2x the industry. We posted a 1.3. We said this year, we'd grow at 1.35x the industry. We're on track to be able to do that. And we actually said next year, in the third year of the 3-year plan, we would grow at 1.5, and we're committed and confident in our ability to do that. And the why, Lauren, the Recipe for Growth is still in the very early innings. People ask me all the time in a baseball game like what inning are you in. Kind of calibrated this morning, probably the third-ish, omnichannel hasn't even been rolled out nationwide. Sysco Your Way, kicking in. We just launched it in Dublin. We launched it in Toronto. We're about to launch it soon in Paris. We're about to launch it soon in Stockholm. Sysco Perks just rolled out in November. The good news here specifically to the future growth. Each of these initiatives has been piloted. They've been tested, and we can see the very specific empirical outcomes. So these are not hypothesis-based projects. They are specific projects with proof points backed by data. And we're in rollout mode right now. So yes, our strength of supply chain over the past 18 months has contributed to market share gains. The Recipe for Growth is what's going to create the share gains into the future years, and we're confident in our ability to hit our targets. Thank you for asking.

Okay. Let's go with one more question over there, Jeff.

Great. Thank you very much. Just Kevin, because you were here 3 years ago and it was your pretty much first intro. Obviously, it's been an interesting 3 years. I'm just wondering if you could maybe briefly compare and contrast your outlook for the business today versus 3 years ago. And what do you think is the greatest hurdle you're going to face over the next 12 to 18 months in terms of the greatest headwind? Obviously, you faced plenty of headwinds over the past 3, what are you anticipating the biggest headwinds for the next 12?

Jeff, thanks for the question. Maybe I'll start, I'll toss to Neil to see if he has things to add. I said on stage here 3 years ago, why I joined the company, and that was my excitement to be in this industry. Food is a great space to be in. Supply chain is my passion and my work and in my career. And we are a growth company and a very large business with "only 17% share." 3 years later, Jeff, I'm even more excited than the day I arrived. There is so much growth potential. We haven't talked a lot today about international. International is contributing meaningfully to us this year on a year-over-year profit growth and year-over-year sales growth perspective. Our ability to profitably grow internationally is significant bolt-on acquisitions. Growth opportunity is significant. The work we've done with the Italian platform that we've doubled our market share in the past 18 months, and we're not even close to complete with that work yet. Largest, most profitable in our space with meaningful growth prospects and opportunities, and we're not even close to done, aka inning 3. And by the way, halfway through the game, we're going to come up with additional new growth ideas for the company. So I'm even more confident than I was when I joined. It's a great company with great people, tremendous passion for our customers. Neil, I'll toss to you for additional comments.

Yes. Thanks, Kevin. So Jeff and actually, Lauren, I'll build on your question 2, 3 things real quick. One is that growth versus market. So when you hear us talk about that, Lauren, I heard your question about the macro. So it's relative to the market, right? So whatever you're going to see the market doing, our growth is going to exceed that. So the market's up, we'll be up even more, et cetera. So that growth versus the market is something that is important for us to measure and a key goal for us that, again, as Kevin said, we're on track for it. Point two is that cost-out program that I mentioned. We've got work to do, so there's more to come in terms of our ability to take even additional costs out, and we feel good about the work that we're doing to identify those incremental opportunities. But as I said, that's helping to fund all of this work that we're doing. So we'll have a source of funding to be able to make those investments to advance the business going forward. And then thirdly and importantly, our international business is performing really well. And I think that's part of the equation here to think of International has had tremendous year-over-year profit growth, and we're seeing the turn there with that performance. We're very pleased with where international is going for us.

I think we'll wrap it up there. Please join me one more time in thanking Sysco for they're sponsoring the dinner tonight and continued support in the conference.