Wholesale retailer Sysco announced in March its $29.1 billion acquisition of one of its primary competitors, Restaurant Depot. Although the deal is yet to be finalized, small business owners in the Capital Region say the acquisition could raise prices in an already difficult market.
Among them is Layla Aburas Khafaga, the owner of Meezan Kitchen, a Middle Eastern bakery and catering business in Niskayuna.
“The general feel from a lot of local restaurant owners, bakeries, anyone in the hospitality business that does not use Sysco or US Foods [is] it came as a huge shock," she said.
Meezan Kitchen is not retail-facing like other small businesses that rely on Restaurant Depot’s cash-and-carry option, but Khafaga is concerned about a shrinking wholesale market.
“You have a few other distributors, but for the most part that walk in, grab, and go, especially in the Capital District area, Restaurant Depot was it,” she said.
To Khafaga, the acquisition is a sign of a growing monopoly in the wholesale retail business. She is a member of the Independent Restaurant Coalition, which represents more than 500,000 small businesses and restaurants in the hospitality industry across the country.
Sysco accounts for nearly 18% of the wholesale market. Sysco also tried to acquire US Foods in 2015, but the deal was blocked by the Federal Trade Commission on antitrust grounds.
The coalition is calling on the FTC to block the Restaurant Depot acquisition, saying it would create a monopoly in the wholesale market. Restaurant Depot allows small businesses to buy only the specific amount of products they need, as opposed to Sysco, which delivers to restaurants and businesses that require a higher volume of products.
Independent Restaurant Coalition Executive Director Erika Polmar said Sysco already dominates the market, and a rise in prices or the closure of Restaurant Depot warehouses would make supply for small businesses harder to obtain.
“If you think about somebody operating a food truck or a small cafe, they most likely don't have a lot of storage space," she said. "So they will not be meeting the minimum delivery requirements of someone like Sysco, and so they depend more on those wholesalers.”
She said food is not the only product businesses purchase from wholesalers.
“I think the other thing that's really confusing people is that when you think about a restaurant operating, you think about them buying produce and proteins," she said. "You don't think about them buying cleaning supplies and containers and plastic wrap.”
One major concern for Khafaga is the availability of halal meat. Halal translates to “permissible” in Arabic, and primarily refers to Islamic guidelines for slaughtering meat. Restaurant Depot sells halal meat in quantities that she said are more affordable and convenient for small businesses.
However, Aneesa Waheed, owner of Moroccan restaurant Tara Kitchen, which has locations in Troy, Schenectady, Guilderland, and New York City, said Sysco has been accommodating of different cuisines.
“I never, ever felt that I couldn't have access to what I needed or wanted. Doing Moroccan food, you would think — I mean, people automatically assume that it might be some weird stuff that we need or something that's not easily procured — but at the end of the day we're still just cooking with onions, tomatoes, potatoes, you know, that kind of stuff," she explained. "But for me, dried fruits, you know, is sort of important in my cooking; halal meats are important in my cooking.”
Waheed buys from both Sysco and Restaurant Depot. While Sysco can accommodate large deliveries for her location in New York City, she said low prices are the reason she frequently buys from Restaurant Depot.
“To me, as the consumer of this brand, the biggest thing that would make a difference is a change in their price structure, so by the fact that they're not giving me customer service, and I'm totally OK with it, because of the deep price cuts," she said. "So, if that's going to go away, then you know my team and my shopping habits are going to change.”
Polmar said the merger's impacts would be felt by customers too.
“Ultimately, what will happen if food prices go up for restaurants and bars is that food prices will go up for the American consumer," she said. "Anyone who dines in a restaurant is going to, unfortunately, see increases in their menu prices, because there's just no way that restaurants can continue to absorb all of the cost increases that are happening in the market, as I mentioned earlier. You know, labor's tight, credit card fees are high, insurance is high.”
In a statement, a spokesperson for Sysco said it was not planning to close any Restaurant Depot branches, and is planning to open more than 125 Restaurant Depot warehouses nationwide over the next 20 years. The spokesperson also said Sysco would continue to provide “a variety of Halal and other specialty meats.”
The deal is still under review, but Khafaga said the consolidation of the market is a worrying addition to costs for small businesses.
“Any business owner who really wants to see their business succeed and grow over the years, it's just going to make it really hard," she said. "What's going to be left is only these big brands, these large corporations, and those who have unlimited funds, which — nothing's wrong with them — they just don't always provide the best quality, and they're not always looking out for the local community like a small business owner is.”
