Issue #90: Sysco Depot?

This week, some seismic news shook the food distribution world. Sysco announced it was purchasing Restaurant Depot for $29B, in a mix of stock and equity in Sysco. Sysco shareholders did not like the move into retail, as the stock is down 14% this week. In food distribution, there are traditionally two types of distributors. There are those, like Sysco and US Foods, which mainly cater to larger chains, with multiple locations and high volume, who deliver directly to the location of the restaurant and offer the products on credit. Then, on the other side of the equation, there are cash and carry distributors, like Restaurant Depot. Similar to the cash and carry distributors covered in Issue #56, diving into bodegas, these are not distributors in the traditional sense. Instead, restaurants, typically smaller and independent ones, can go there to shop at wholesale prices. The restaurants pay cash up front and have to do the transportation of the goods themselves. They are also utilized by many non-profits and schools. With the announcement this week, these two models are now merged under one company.

Why would Sysco want to enter the cash and carry distribution space? The answer is simple. It is a high-margin, large market that it has yet to tap into. The cash and carry business is higher margin, mostly because they don’t have to eat up the margin with delivery costs. According to Sysco estimates, this market size is an additional $60-70B addressable market. Rather than building out the entire infrastructure themselves, it was easier to acquire someone who had already built out the infrastructure. Restaurant Depot operates 166 warehouse stores across 35 states, serving over 725,000 restaurants and foodservice operators. In 2025, Restaurant Depot generated approximately $16B in revenue, approximately $2.1B in EBITDA, and approximately $1.9 billion in free cash flow.

Going forward, there is a lot to unpack here. First, this deal will need to pass a regulatory review, as it consolidates a huge chunk of the restaurant food distribution under one company. Assuming it passes, then, Sysco will have to face what US Foods has already gone through. In March 2020, US Foods, Sysco’s biggest competitor, purchased Smart Foodservice Warehouse Stores from Apollo Global Management for $970M. These 88 stores now serve as a competitor to Restaurant Depot. However, clearly it was not as successful as US Foods had hoped or was taking up too much bandwidth, because recently US Foods put it back on the market. Merging these two types of businesses is very difficult. In the commodity business of food, that is where all the value is, as they can buy products in even bigger bulk. Suppliers are going to feel the squeeze here as Sysco tries to renegotiate. In order for this merger to succeed, there will need to be synergies unlocked, otherwise, we may be looking at a similar situation to US Foods trying to spin off the division shortly after acquiring it. Ultimately, I do believe this acquisition will be successful due to the strength of Restaurant Depot, but it will certainly be interesting to follow along.

In 2022, husband-and-wife duo Dan and Sienna McCormick founded Create. Dan was a power user of creatine powder, and felt there was an opportunity to make it more user-friendly by putting it in gummy form. Creatine is a supplement very popular with people who frequently work out. This round was led by Alliance Consumer Growth, with Impact Capital Private Equity (Mike Repole's family office) and Unilever Ventures (the large health and wellness conglomerate). Dan was right, and the business has since exploded. Currently, retail-wise, Create is sold through The Vitamin Shoppe, GNC, Wegmans, Sprouts Market, and Target. Plans are underway to utilize the capital raised to fuel further retail expansion. Since launching in Target in October, they have been the top-selling creatine gummy. This month, they are going from 3 SKUs to 8 nationally. Plus, they are launching a new brand to go along with their new product line, a single-use, stick pack that has creatinine and electrolytes. For new brands in the CPG space, there is a ton to learn from Create. What they have done in both retail and eCommerce strategy has enabled them to be so successful early on.

Bilt Rewards skyrocketed in popularity as the credit card you could pay your rent with. It had some insane rewards too, which helped boost the popularity even further. Well, unfortunately, all good things must come to an end, or something like that. The underlying bank was losing a ton of money on the deal, so recently, Bilt shifted its model and removed many of the strong perks around paying your rent, which caused many people (like myself) to stop using it. Still, Bilt is trying to find a way to keep users/winback users/get new users. Enter the hospitality plan:

What are they actually doing? Bilt is connecting all the disparate systems restaurants use to deliver a better customer experience. Middleware is a pain point for restaurants, so if they can connect to all the options, there could be some value there. For diners, Bilt is supporting their side too with features to make the entire experience more seamless. Seemingly, both sides of the experience are powered by AI and agents in the background. Overall, I would say I am skeptical that this will be able to generate enough value for both sides to last long term, but it will certainly be interesting to follow along in the interim.

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