A problem facing Sysco in 2004 is the possible restriction of seafood imports into the United States. In 2003, according to the American Seafood Distributors Association (ASDA), the Southern Seafood Alliance filed a petition against shrimp imports from six countries: China, Thailand, Vietnam, India, Ecuador, and Brazil. The first pages of Sysco’s 2003 Annual Report advertise its seafood brand Hidden Cove and mentions that “customers depend on Sysco’s Hidden Cove brand for fresh jewels of the sea.
” By placing this information at the beginning of its report, Sysco intimates confidence that seafood will be a major contributor to their sales in coming years. According to the report, seafood is listed as number eight in the sales mix for main product categories during the three years ending with the publication of the annual report on June 28, 2003. The average seafood sales for Sysco in 2001, 2002, and 2003 was $1,034,390. 50 (in thousands), which has contributed to a consistent six percent in total sales over the three year period.
The ASDA states that 90 percent of all seafood-principally shrimp-is imported. Sysco is a major distributor of seafood in the United States. In 2002, the U. S. imported $3. 6 billion worth of seafood, which makes an extremely important contribution to many sectors of the economy. According to the Government, imports grew 36 percent in 2003. According to the ASDA, this economic activity benefits food distributors like Sysco tremendously.
The American Seafood Distributors Association (ASDA) states that the consumption of shrimp alone has exceeded one billion pounds since 1998. In 2002, the per capita consumption of shrimp was 3. 7 pounds. If trade restrictions are imposed, Sysco’s seafood branch, Hidden Cove, will suffer losses. Granted, seafood sales only make up six percent of Sysco’s sales mix generating just over $1 billion, but, all facts considered, this amount will still damage Sysco’s bottom line and consumer confidence in its seafood label.
Also this potential problem demonstrates the need for Sysco to remain vigilant in protecting all segments of its sales mix. It is our recommendation that Sysco pays careful attention to the possibility of trade restrictions and work closely with the ASDA to ensure that alternatives to importing seafood be investigated such as domestic seafood production. Analysis and exploration into domestic seafood markets would be a wise strategy for Sysco to pursue to protect its niche in the seafood market.
The following graphs demonstrate the decrease in sales of two types of shrimp imported and distributed by Sysco. The dip in sales in late 2001 may be a reaction from the events of September 11, but still sales in 2002 and 2003 are lower than previous years. Perhaps by placing its seafood label at the beginning of its annual report, Sysco is hoping to instill investor and shareholder confidence in Hidden Cove. “Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995.
They include statements about anticipated sales growth, industry growth and increased market share, SYSCO’s long-term growth objectives with respect to sales, earnings, return on equity, long-term debt and capitalization, anticipated capital expenditures, ability to meet future cash requirements and remain profitable, completion and expected benefits of redistribution centers, and completion, timing and anticipated benefits of fold-outs and acquisitions. “These statements are based on management’s current expectations and estimates; actual results may differ materially.
Decisions to pursue fold-outs and acquisitions or to construct redistribution and other facilities and expenditures for such could vary depending upon construction schedules and the timing of other purchases, such as fleet and equipment, while redistribution facility, fold-out and acquisition timing and results could be impacted by competitive conditions, labor issues and other matters. The ability to pursue acquisitions also depends upon the availability and suitability of potential candidates and management’s allocation of capital.
Industry growth may be affected by general economic conditions. SYSCO’s ability to achieve anticipated sales growth and other long-term growth objectives, increase market share, meet future cash requirements and remain profitable could be affected by competitive price pressures, availability of supplies, work stoppages, success or failure of consolidated buying plan initiatives, successful integration of acquired companies, conditions in the economy and the industry and internal factors such as the ability to control expenses.
” Conclusion The present Sysco’s ratio analysis indicates that the company has the financial health and efficiency in operations to meet the growth and profit goals described in the annual report. The company’s financial information demonstrates a yearly revenue and net profit increase over the past five years, which suggests it will continue with this positive trend.
The company is performing well above the median in the industry, while maintaining a positive growth rate. However, the industry’s higher standards suggest that the company still has room for improvement. Sysco’s management still faces the challenge of meeting the company’s full potential by continuing to supporting growth and performing above the competition.