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Food firms weather COVID

Despite the pandemic hammering its industry and customer base, food service giant Sysco managed to eke out a small profit amidst slumping sales in the second half of 2020.

In that, it echoes the experience of other dominant food industry companies.

A huge fall in Sysco’s sales was partially compensated for by reduced operating expenses and the company’s efforts to find alternative ways to market its products through existing customers and new channels.

“We are making bold progress against our transformation agenda while managing our business in a complex climate and enabling accelerated growth by improving how we serve our customers and differentiate ourselves from competitors,” said Kevin Hourican, Sysco’s president and chief executive officer.

“Additionally, with a COVID business recovery in sight, we are preparing for the upcoming increase in demand and Sysco will be best positioned for a strong rebound due to our industry-leading financial strength and ability to invest in inventory, staffing and service levels.”

The results released Feb. 2 were for the three and six months ended December 26, 2020, which is the first six months of the company’s 2021 financial year.

Sales in the final three months of 2020 fell 23.1 percent to US $11.6 billion and earnings per share fell from 61 cents per share to 13 cents, compared to the same period a year before.

For the six months ended Dec. 26, sales fell a similar amount but operating income and earnings fell less.

Sysco has scrambled to operate during a health crisis that has disrupted its supply chain, shut many of its customers and caused myriad challenges in distributing its products from its international network.

It has undertaken a number of efforts to help restaurants move food products through store fronts, as well as launching a direct-to-consumer service in some markets.

Its president’s optimism about the post-COVID world echo the sentiments of other industry-dominating companies and analysts of the food industry who have seen large players better survive the pandemic’s challenges and strengthen their position while smaller competitors struggle to survive.

In the post-COVID world, many expect the big companies to face less competition, weaker competitors and to benefit from hard-won experience in challenging times.

Bigger companies generally have better financial resources and the ability to spread out shocks across a large organization, as opposed to smaller players who have less access to finance and are more directly impacted by specific challenges.

Some restaurant companies have sailed through the crisis far better than others. While many small restaurants have permanently closed, fast food giant McDonald’s has managed to serve hungry consumers through multiple channels.

In November the company surprised analysts by higher sales and profitability than expected following the slump of the first months of the pandemic. Its net sales only dropped two percent from a year before.

“The resilience of the McDonald’s system was on display during the third quarter as the competitive strength of our business and the 3-Ds, digital, delivery and drive thru, led to significant global comparable sales recovery,” said Kevin Ozan, McDonald’s chief financial officer, during the November results release.

Fellow burger chain Wendy’s also reported sales growth in the same period.

McDonald’s is still planning to open almost a thousand new stores around the world in 2021.

At $211 per share, McDonald’s stock is now valued about as highly as it was before the pandemic hit.

Sysco’s shares are down to about $76 per share from $85 pre-pandemic, but much recovered from the initial slump to $35 that occurred when COVID-19 struck.

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