Sysco Picks Las Vegas for 600-Employee Distribution Center, New Operating Arm

Week of June 18, 2001
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Part of 'Fold-Out' Expansion

By JACK LYNE • Site Selection Executive Editor of Interactive Publishing

NORTH LAS VEGAS, Nev. -- Perhaps it's a sign of the economic times: Food distributor Sysco (www.sysco.com) is rapidly expanding, while Cisco, the erstwhile can't-miss wunderkind of high tech, is paring back.
Houston-based Sysco's appetite for expansion has surfaced in North Las Vegas, where the company has just announced that it will build a 600-employee facility. The 278,000-sq.-ft. (25,826-sq.-m.) structure will contain a multi-temperature warehouse/distribution center. In addition, the facility will serve as the administrative offices for Sysco Food Services of Las Vegas, the operating company that the parent firm will formally create in third-quarter 2002.

Operation Fits 'Fold-Out' Expansion Scheme

Both the new facility and the creation of a new operating company reflect Sysco's successful "fold-out" expansion strategy. The company usually sites a major facility in an area only after first establishing a customer base, initially building that base by using Sysco facilities in other areas. Las Vegas fits that model. While Sysco already had a specialty produce facility in the city, its Las Vegas operations were largely served from Phoenix and Salt Lake City.
"We are extremely excited to have reached this milestone," said David DeVane, president and CEO-elect of Sysco Food Services of Las Vegas. "The location of the new company will allow us to better service customers in the area, and also provide the opportunity to expand our customer base by presenting Sysco's products and services to additional foodservice operators in the region."
The geographic focus of the Las Vegas-based operating company will span southern Nevada, southern Utah and northern Arizona. The new complex will supply food and related products to restaurants, health-care facilities, schools and universities, lodging establishments, and various other foodservice operations.

New Unit's HQ City Epitomizes Demand

The new facility's design is already under way. Salt Lake City-based Big-D Construction
(www.big-d.com) has been tapped as the design/build contractor, and construction is scheduled to start in June, Sysco officials said.
Sysco's schedule calls for the new North Las Vegas facility to open in third-quarter 2002. With that opening, DeVane, now executive vice president at Sysco's Phoenix operation, will move over to take the helm of Sysco Food Services of Las Vegas.
The Nevada facility will employ 400 when it opens. Sysco's plans call for adding 200 more workers by 2005.
The local market will likely demand the added hires. Las Vegas fits the foodservice-distribution model like a hand wrapped round a pair of dice. Last year, Las Vegas attracted 35.8 million visitors, 89 percent of them non-conventioneers, according to the Las Vegas Convention and Visitors Authority (www.lasvegas24hours.com). The city is home to nine of the world's 10 largest hotels.

Success Reflects Sustained Core-Business Focus

With the Las Vegas complex, Sysco will have almost 150 facilities in the United States and Canada. Sysco's investment in the 278,000-sq.-ft. Las Vegas project will be a comparatively modest US$25 million.
Many analysts attribute Sysco's consistently strong performance to its lower cost structure and its consistent adherence to its core business. Often called "the restaurants' supermarket," the company provides an inventory of more than 275,000 products to more than 356,000 businesses and institutions.
Despite restaurant sales diminished by the one-two punch of an economic downturn and a harsh North American winter, Sysco's fiscal 2002 earnings are running more than 30 percent ahead of last year.
The long-running success of North America's largest food service distributor was underscored in a new Bain & Co. (www.bain.com) study. The Boston-based consultancy named Sysco "a sustained value creator." Among the 2,000-plus companies surveyed, Bain's study found that only some 10 percent had achieved sustained, profitable growth over the past 10 years. (Bain's standard for "sustained value creators" was a 10-year span of recording at least a 5.5 percent average annual inflation-adjusted growth rate in both earnings and revenue.)

Interestingly, the Bain study, "Profit from the Core: Growth Strategy in an Era of Turbulence," shatters the common image of growth firms. Bain found that only 20 percent of the sustained value creators were in the technology segment.
On the other hand, the Bain study found that almost 90 percent of the long-term winners had only one or two strong business offerings.
Like single-minded Sysco, those firms did only what they knew best, and they did it well.

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