Merger Mania in the Food System Continues
Giant food companies are once again trying to consume their competition as Foodopoly 2013 continues. On Monday, the number one food distribution company in the United States, Sysco, announced it was buying its only major competitor, US Foods, for $3.5 billion plus all of US Foods’ debt, bringing the value of the deal to $8.2 billion.
Restaurants, hospitals, schools, hotels and even the military need to get their food from somewhere, and Sysco is already the dominant player in foodservice distribution. Their distinctive chrome-sided trucks can be seen making deliveries all over the country, and if you or anyone you know works in the food service industry, you’ve probably dealt with Sysco at some point. Even high-end restaurants get at least some of their food from Sysco.
The usual excuse companies use to justify mergers is once again on display here – achieving “synergies.” Companies, including Sysco, explain that these synergies will save them lots of money, presumably because they now get to lay off a significant number of “duplicate” staff, and in this case, no longer have a major competitor to worry about. Their customers, on the other hand, won’t be getting any sort of synergy to help them out; in fact they may end up paying higher costs for their food. Just last month, a Sysco subsidiary settled a case in which it was alleged to have overcharged the military after acquiring a different company several years ago.
There are a number of small regional players all around the country, but they do not play nearly as significant of a role in foodservice distribution as do Sysco and US Foods. If this merger gets approved, the lack of competitive alternatives for institutions needing to purchase foods will drop significantly, and Sysco will essentially have a lock on the industry, potentially increasing prices that these institutions must pay.
These mergers need to stop. The Federal Trade Commission needs to start doing its job and preventing this opportunistic monopolization from taking over our food system.
Learn more about the Foodopoly we’re living in—take our quiz now to see how well you know everyday items sold by just a handful of companies under thousands of brands.