Sysco 2013 Annual Report Download - page 29

SYSCO CORPORATION-Form10-K18
PARTII
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
plan withdrawals. These pension plan provisions generally occur when a collective bargaining agreement is being renewed. Pay-related expenses have
increased primarily from acquired companies and within delivery areas of our business, however these have been partially offset by lower costs in the
selling and information technology areas due to initiatives from our Business Transformation Project. Fuel costs have increased due to both increases
diesel prices and gallon usage.
Our retirement-related expenses consist primarily of costs from our company-sponsored quali ed pension plan (Retirement Plan), our Supplement Executive
Retirement Plan (SERP) and our de ned contribution plan. The net impact in  scal 2013 of our retirement-related expenses as compared to  scal 2012 was
an increase of $31.3million. At the end of  scal 2012, we decided to freeze future bene t accruals under the Retirement Plan as of December31,2012
for all UnitedStates-based (U.S.-based) salaried and non-union hourly employees. Effective January1,2013, these employees were eligible for additional
contributions under an enhanced, de ned contribution plan. Absent the Retirement Plan freeze discussed above, net company-sponsored pension costs
would have increased $106.9million in  scal 2013, however because of the freeze the costs decreased as compared to  scal 2012. Our expenses related to
our de ned contribution plan increased in  scal 2013. During  scal 2013, we approved a plan to restructure our executive nonquali ed retirement program,
including the SERP, by freezing bene ts. We believe this restructuring more closely aligns our executive plans with our non-executive plans. As a result of
this restructuring, we incurred $21.0million in charges in  scal 2013. We expect our retirement-related expenses will decrease in the range of $75million
to $85million in  scal 2014 as compared to  scal 2013. A greater portion of the decrease will occur in the second half of  scal 2014 due to operation of
our enhanced, de ned contribution plan for a one-year period. Excluding the $21.0million restructuring charge in  scal 2013, the decrease is expected to
be $50million to $60million in  scal 2014. Over the long-term, we believe the changes to all of these retirement programs will result in reduced volatility
of retirement-related expenses and a reduction in total retirement-related expenses.
We expect gross margin pressure to persist in  scal 2014; however, we intend to achieve sales case growth and to reduce costs per case to improve our
earnings performance trends in  scal 2014 as compared to  scal 2013.
Strategy
We are focused on optimizing our core broadline business in the UnitedStates, Canada and Ireland, while continuing to explore appropriate opportunities to
pro tably grow our market share and create shareholder value by expanding beyond our core business. Day-to-day, our business decisions are driven by our
mission to market and deliver great products to our customers with exceptional service, with the aspirational vision of becoming each of our customers’ most
valued and trusted business partner. We have identi ed  ve strategies to help us achieve our mission and vision:
• Profoundly enrich the experience of doing business with Sysco: Our primary focus is to help our customers succeed. We believe that by building on our
current competitive advantages, we will be able to further differentiate our offering to customers. Our competitive advantages include our sales force of
over 7,000 marketing associates; our diversi ed product base, which includes quality-assured Sysco brand products; the suite of services we provide
to our customers such as business reviews and menu analysis; and our wide geographic presence in the UnitedStates and Canada. In addition, we
have a portfolio of businesses spanning broadline, specialty meat, chain restaurant distribution, specialty produce, hotel amenities, specialty import
and export which serves our customers’ needs across a wide array of business segments. Through our Sysco Ventures platform, we are developing a
suite of technology solutions that help support the administrative needs of our customers. We believe this strategy of enriching the experience of doing
business with Sysco will increase customer retention and pro tably accelerate sales growth with both existing and new customers.
•Continuously improve productivity in all areas of our business: Our multi-year Business Transformation Project is designed to improve productivity and
reduce costs. An integrated software system is included in this project and will support a majority of our business processes to further streamline our
operations and reduce costs. These systems are commonly referred to as Enterprise Resource Planning (ERP)systems. We view the technology as
an important enabler of this project; however the larger outcome of this project will be from transformed processes that standardize portions of our
operations. This includes a shared business service center to centrally manage certain back-of ce functions that are currently performed at a majority
of our operating companies. This project includes other components to lower our cost structure through improved productivity without impacting our
service to our customers. We continue to optimize warehouse and delivery activities across the corporation to achieve a more ef cient delivery of products
to our customers and we seek to improve sales productivity and lower general and administrative costs. We also have a product cost reduction and
category management initiative to use market data and customer insights to make changes to product pricing and product assortment.
•
Expand our portfolio of products and services by initiating a customer-centric innovation program: We continually explore opportunities to provide new
and improved products, technologies and services to our customers.
•
Explore, assess and pursue new businesses and markets: This strategy is focused on identifying opportunities to expand the core business through
growth in new international markets and in adjacent areas that complement our core foodservice distribution business. As a part of our ongoing strategic
analysis, we regularly evaluate business opportunities, including potential acquisitions and sales of assets and businesses.
•
Develop and effectively integrate a comprehensive, enterprise-wide talent management process: Our ability to drive results and grow our business is
directly linked to having the best talent in the industry. We are committed to the continued enhancement of our talent management programs in terms
of how we recruit, select, train and develop our associates throughout Sysco as well as succession planning. Our ultimate objective is to provide our
associates with outstanding opportunities for professional growth and career development.