Md. firm awarded 'gem' of contract U.S. Foodservice wins $900 million pact with Ruby Tuesday

Food distribution

May 12, 1998|By Ted Shelsby | Ted Shelsby,SUN STAFF

U.S. Foodservice Inc., a Columbia-based food distributor, announced yesterday that it has received a five-year contract, valued at about $900 million, to supply the Ruby Tuesday restaurants across the country.

Ruby Tuesday, based in Mobile, Ala., operates 388 restaurants in 33 states.

U.S. Foodservice, which changed its name in February from JP Foodservice Inc., has been serving Ruby Tuesday restaurants in the Northeast for about five years, said company spokeswoman Bonna Walker. The new agreement triples U.S. Foodservice's business with Ruby Tuesday, making the restaurant chain one of its top five customers.

"This is part of what they have been trying to do," Godfrey M. Birckhead, an analyst with Blaylock & Partners L.P. in Baltimore, said of the Ruby Tuesday contract. "They have been wanting to become a national company as opposed to a regional operation, and now they are able to serve customers on a national basis."

This was made possible, according to Birckhead, by U.S. Foodservice's $1.4 billion acquisition in December of Wilkes-Barre, Pa.-based Rykoff-Sexton Inc. The acquisition made U.S. Foodservice the nation's second largest company in the $140 billion-a-year food-distribution business.

The industry leader is Houston-based Sysco Corp., which serves 270,000 restaurants and posted sales of $14 billion last year.

U.S. Foodservice serves about 130,000 restaurants and expects its sales to jump to $5.3 billion for the fiscal year ended June 30 from $1.7 billion last year.

"Since our acquisition of Rykoff-Sexton we have been able to leverage our national presence to renew and expand relationships with several existing chain-account customers," Chairman, President and Chief Executive James L. Miller said in a prepared statement.

Walker said the Howard County company will supply the restaurant chain with everything it needs to run its business, from meats, seafood, produce and beverages to cooking pots, silverware and glassware.

U.S. Foodservice has about 12,000 employees nationwide, with 898 workers in Maryland. Walker said there may be some new hires at its U.S. distribution centers as a result of the Ruby Tuesday contract.

Birckhead said he expects more national contract announcements from U.S. Foodservice.

He said U.S. Foodservice will likely make more acquisitions as the food-service industry continues a period of consolidation. "The industry is fragmented, and we expect the consolidation movement to pick up, to accelerate from here on," Birckhead said.

U.S. Foodservice's stock rose $1.50 to close at $36 in trading yesterday.

Pub Date: 5/12/98

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