Speaker 1:
From the Library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years.
Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. You are now welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
An army marches on its stomach. That saying, depending on your sources, it was uttered either by Napoleon or Frederick The Great. It still rings true for armies, military servicemen and economies alike. Fortunately, feeding people across great distances has evolved from wagons and mules supplying the grand armies of the 19th century France and Russia to highly complex networks of producers, suppliers, warehousing and shipping, all held together by high-tech systems to track each tomato from field to meal.
Here in the United States, our vaunted interstate highway system was constructed in part to make sure that food goods, supplies and people could move easily across the thousands of miles that make up our continental nation. It really is also part of our national security. If you head out on any of those Eisenhower highways today, you'll inevitably see trucks emblazoned with a logo of US Foods, the large food service distributor led by our guest today, Dave Flitman.
Dave's fleet operates out of distribution centers in nearly every state to ensure that US Foods' clients, which does either include a number of military bases and thousands of restaurants and all sorts of other places, has everything they need to fill hungry stomachs from coast to coast.
US Foods also plays a central role in ensuring that the effectiveness of food supply lines improves every year given that the complexity of how the global economy increases our dependency on one another. You probably don't think about it often, but as we'll discuss, a single restaurant in Topeka depends on the fresh, timely, and efficient delivery of produce, meat and cooking oils from dozens of states, and countries too, in order to stay in business.
Our conversation with Dave Flitman, CEO of US Foods, taking on the helm of the company, feeding the country, and how US Foods supports your favorite restaurant. It's all coming up right after this.
Speaker 3:
Connecting the opportunity is just part of the hustle.
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Opportunity is using data to create a competitive advantage.
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It's raising capital to help companies change the world.
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It's making complicated financial concepts seems simple.
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Opportunity is making the dream of home ownership a reality.
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Writing new rules and redefining the game.
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And driving the world forward to a greener energy future.
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Opportunity is setting a goal...
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... And charting a course to get there.
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Sometimes the only thing standing between you and opportunity is someone who can make the connection.
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At ICE, we connect people to opportunity.
Josh King:
Our guest today, Dave Flitman, is the CEO of US Foods. That's NYSE ticker symbol USFD. Prior to joining US Foods, he was CEO of Builders FirstSource, that's ticker symbol BLDR, and held executive roles at Performance Food Group Company, Ecolab, Allegheny Power System, and DuPont. Ticker symbols PFGC, ECL, FE, and DD respectively. Dave also serves on the board of Veritiv Corporation. That's NYSE ticker VRTV.
Welcome Dave inside the Ice House.
Dave Flitman:
Great to be with you in the ICE House this morning, Josh. Thanks.
Josh King:
Your resume reads like a walking billboard for the New York Stock Exchange, so thank you very much for that.
Dave Flitman:
I appreciate it. Had some great opportunities through the course of a fairly lengthy career.
Josh King:
I mean, as noted, this is not your first visit to the New York Stock Exchange. It is your first visit as CEO of US Foods. But back in 2021, you rang the opening bell to mark the transfer of Builders FirstSource to the NYSE. How does it feel to be back in this role?
Dave Flitman:
It feels great. I'm happy to be back in the industry here. I love food service, as you mentioned in your intro. I was previously in the industry before BFS at a competitor. When I got the opportunity to come back to the industry at a company that I admired when I was here previously, I was excited to do it.
Josh King:
I read an article about your departure from Builders in early 2023 that described your tenure merging BMC and Builders and subsequent leadership of the merged company, as, I'm going to quote from the article here, "Dave Flitman proved sawdust in his veins is not a core tenet to be a successful CEO in the LBM industry."
How did a Purdue chemical engineer with DuPont find his way to food service at Performance and now US Foods with a few years in lumber in between?
Dave Flitman:
Well, that's probably a lengthy conversation.
Josh King:
Let's go for it.
Dave Flitman:
I'm a chemical engineer by background. Spent the first 20 years of my career in DuPont. The core theme throughout the course of my career, regardless of the industry, has been distribution, first in chemical distribution. Spent a good portion of my career in that between DuPont and a company called Nalco that was acquired by Ecolab, and more recently in building materials and food service.
I love that model of distribution. It's an efficiency model. Customers are at the center of everything that you do and you have to be really good in terms of high quality products and getting them efficiently to your customers. That theme throughout the 37 years that I've been working has been a constant in various industries and I just love that business model.
Josh King:
The nature of distribution as an engineer, do you owe that entirely to Purdue, or was something farther back in your background that made you sort of a geek for getting things to places?
Dave Flitman:
You solve problems as an engineer, and that's the one things regardless of. When I started at DuPont, I was a chemical engineer and the first thing they taught me was to be a mechanical engineer and size a pump. It's really about solving problems. As I mentioned that theme around efficiency, driving improvement in productivity is something that I've done throughout the course of my career and getting great products in a great product portfolio like we have at US Foods is very exciting.
Something I can get exciting about, as you mentioned in your intro, feeding America is a theme that is something that is exciting for me and our 29,000 associates in the company, making sure that we're taking care of people every day.
Josh King:
Before we get to US Foods and what we're doing about feeding America every day. To your prior role in that relatively short stint in materials, you managed to merge two companies, acquired several others, and according to one report I read, cornered the truss market. How did that experience help you develop as a CEO and a leader ready for US Foods?
Dave Flitman:
It was a fantastic experience. The merger is something that was the largest that the industry had ever seen, so the opportunity, I actually ran the smaller company prior to the merger, BMC. BFS was twice our size and just the opportunity to create an outsized, high scale, great quality company was fantastic. I learned a lot about culture. Culture is very important to me and that's one of the reasons I chose to join US Foods at an exciting time in the company's history here.
Being able to take that company to market, continue to drive outsize growth and profitability at a time that was pretty volatile in the industry coming out of COVID. The industry shut down for a short period of time, and then it went gangbusters and supply challenges were prevalent all over the country in every portion of what we did. Between labor and supply challenges, it was tough to keep up, and our organization did a great job through the course of all that.
Josh King:
The US Foods move was eight months ago. What went into the thinking about returning to food service?
Dave Flitman:
I had a great thing going at BFS, and I wouldn't say that the work was done there, but we had successfully, as you highlighted, merged the two companies, had very, very strong momentum. We bought back something like $4 billion of stock in two and a half years and things were going really well. I left the company in very, very good shape and it was really for me about the opportunity to come into this organization that really, quite honestly, had underperformed its potential through the course of the past several years, but has a great core in terms of the people, the culture that I mentioned. The opportunity to take this organization from good to great and get back to an industry I loved is really what brought me here.
Josh King:
We talked about how visible US Foods are to a lot of people, rolling up and down the highways, but to get beneath the surface of that a little bit for our audience who are likely familiar with the fleet, not the full operation. Can you briefly share the scope of the operations both on and off the highway?
Dave Flitman:
We're one of the largest food service distributors in the country. We have 29,000 people. To your point around size and scale, we operate in all regions of the country through 70 broadline distribution centers. In addition to that, we have a very healthy online digital presence to connect to our customers. Importantly, we also have a retail operation where we have 85, what we call chef stores, where the public can walk in and buy some of our goods there, as well as some of our existing restaurant customers.
Josh King:
Those chef stores are under the US Foods brand. Where do we find them? Are they concentrated or all over?
Dave Flitman:
All over the country, primarily in the western half of the United States, but we've also been recently adding locations, organically east of the Mississippi.
Josh King:
We've had Thomas Healy of Hyliion on the show, as well as Schneider's CEO, Mark Rourke, where, as you can imagine, where people are purely focused on the transportation. The conversation turned to alternatives to fossil fuels. Earlier this year, US Foods added its first electric truck to the fleet. What does fleet electrification, lower carbon, alternative fuels have on your CSR strategic focus for products, people and planet?
Dave Flitman:
It's very, very important and we were excited to announce our investment in that portion of the business earlier this year. We've got more than 30 of those vehicles. We started in the West Coast driven by the early adoption of regulation out there. That's been several months now in the making and we're excited about what we see here. We will continue to invest in all areas of people, planet, and product with a strong theme towards sustainability.
Josh King:
Have you taken rides in these trucks? How do the truckers feel about the...?
Dave Flitman:
The truckers love them so far. I think one of the things we have to make sure that happens is just the infrastructure across the country to keep up with the increase in demand. We had to wait a little while to get those vehicles, as you can imagine, we're not the only company that considered sourcing them. There's going to be some challenges, I think just with the supply chain here ramping up. But so far we've gotten what we need and we're going to continue to invest aggressively through the course of time.
Josh King:
In July, you acquired Renzi Foodservice to give you a distribution center way Upstate New York off Interstate 91 near Watertown and Fort Drum. Brothers Mike and Roy Renzi founded Renzi Brothers in 1977, and it really achieved the American dream. How does acquisitions like that fit into your strategy for US Foods?
Dave Flitman:
Importantly, Renzi was the first acquisition that the company had done in about three years, and it was the first broadline acquisition that we'd done in about six years. Getting back into the M&A game I think is important for the company, and Renzi was fantastic. It was exactly the right target, and I think you can think about what we're going to do in the future in terms of M&A by looking at Renzi.
What that did for us was, first of all, we looked for companies that have great management teams, a strong culture that matches our own. My experience in my lengthy career is one of the core things that makes acquisitions go poorly is if you don't have really good cultural alignment. We found a fantastic partner in Renzi.
Then importantly for us, I talked about our footprint earlier, the 70 broadline distribution locations across the country. I love our national footprint, but the game with our customers is going to be won on a local basis, making sure that we have the size and the scale and the product offerings locally to be very competitive and give our customers what they need. That's where Renzi solved a problem for us.
We were actually in that Upstate New York market, but we were serving it from two distribution centers outside of that area. We were getting to that market, but we were doing it in an extremely inefficient way, adding a lot of miles to get there. It wasn't good for us, it wasn't great for our customers, and so Renzi helped us solve that problem.
Josh King:
I went on the Renzi website this morning getting ready for this conversation. I'm curious, are there more Renzi Brothers in the future for you? And what's that case study if you have, you're trying to serve Upstate New York and it's a lot of land and spread out population out there. Bring us behind the curtain of you guys looking at your footprint and how you isolate a place like Watertown, New York, Fort Drum, and you find a place like Renzi and you actually call them up and say, can we go have a conversation?
Dave Flitman:
Importantly, we know a lot of the smaller players in the industry, we compete against them today on a local basis. To your first part of your question, I think there are more opportunities like Renzi. When I think about the market share, this is still a very fragmented industry despite the scale that ourselves and our two large competitors have. We only have about 40% of the market, and so 60% of the market is made up of smaller competitors like Renzi. Some that are slightly bigger than them, some that are slightly smaller. My point around saying that it's very fragmented, there's still a lot of acquisition opportunity here.
Then as we look at our footprint to the second part of your question, it's exactly what I said earlier is we look at that local market scale and we might be serving a market inefficiently like we were with Renzi. Importantly, it might be in a large urban area, urban city where our footprint is on the wrong side of where the growth is, wrong side of that market. Just getting a location that's closer to the customer, we always have a make versus buy decision in that regard. But given the brand recognition and the strength of the customer base that Renzi brought to US Foods, it was absolutely the right thing for us to do in that market.
Josh King:
Here at ICE, Dave, we've implemented a lot of post-COVID remote work measures to keep a smart balance between what we can do efficiently in the office, and also about our culture and mentoring and things like that with other remote opportunities. On your last earnings call, you mentioned flexible scheduling for your associates. How does that fit into your service strategy?
Dave Flitman:
It's a fantastic question. I'm very excited about our flexible scheduling program and when the pandemic hit, we had challenges like every other industry in terms of retention of employees, attracting specifically drivers and selectors. These are very physically demanding jobs, working in our warehouse, delivering products, loading and unloading our trucks for the customers.
We've continued to ramp up our retention and productivity through the course of the last couple of years, but importantly, we thought we needed to get creative. Pay is important, but that's not everything that today's employee is looking for. We came up with this concept around flexible scheduling to really give the right work-life balance for our associates. As I said, these are hard jobs.
We started a pilot earlier this year in several markets in the southeast, and what we found was giving the physical workforce the opportunity to work a three, four or five day schedule depending upon their personal needs, was exactly what the employee base was looking for. Where we've done that, we've seen improvements in safety, we've seen higher retention levels, and obviously a knock-on effect of higher productivity for our associates, and we've got a happier employee base.
What I did say on the second quarter call is we've done enough piloting of the concept now. We feel very good about it, and we're starting to scale that across the country to the point where we'll have half of our markets by the end of this year up and running on flexible scheduling. It's just an attempt by the company to really strike that balance between what the company needs and what our associates are asking.
Josh King:
Pete and I pick up on that on your second quarter call. How do your 29,000 associates get that message? As an engineer and as a leader, what's your strategy for communication broadly to 29,000 people?
Dave Flitman:
I think it's important that leaders are transparent and engage with the workforce. We do a lot of things. I have many vehicles of communication to the masses. It's hard for me to be everywhere, as you imagine with all the locations we have. We have quarterly town halls with all our associates. I'll do email communications. I do video communications broadly to communicate messages to the team, but importantly, I get out and about. I visit our distribution centers. I want to understand whether what I'm hearing from my management team is actually what's going on on the shop floor.
I'll just give you one example around flexible scheduling. When I was out in the Atlanta market a few months ago, I got to talk to one of our warehouse associates about why they liked the flexible scheduling option. He just shared a very personal story with me that his wife had started a catering business and she was really good on the food side of it, but she wasn't so great at running a business. He was a little frustrated not being able to spend more time working with her.
He was an 11-year employee and he took the weekend shift, he took the four days through the course of the weekend. It might be odd with somebody with that tenure picking a weekend, but he said it gave me the opportunity to spend time with my wife during the week, helping her get her business up and off the ground. It just underscores the importance of relating to all employees and really understanding what their personal needs are, which vary greatly.
Josh King:
A couple of months ago, US Foods released its yearly survey on American Dining Habits, and one of its findings was the pattern of takeout and delivery preference over the in-restaurant experience from the pandemic, really has become a sustaining trend. How does your company help restaurateurs with what's happening in dining these days, through support of what Pete and I have explored through a couple of previous episodes, ghost kitchens and point of sale systems?
Dave Flitman:
We have great work that's going on there. First of all, I'll talk about our technology a little bit. Last fall, we rolled out an improved digital capability for all of our customers, and we branded that MOXē. MOXē, if I had my phone in my hand, I'd show you. It's like having our entire supply chain in the hands of our customers. It's highly differentiated. Our customers can search for products. Importantly, they can order, they can track their order, and something that we've done that's really unique in the industry is we've given real time visibility to our inventory to our customers. Not only can they share interest in a product or maybe want to order it, they can actually see if we've got it in stock and how quickly we can get it to them. The technology is important.
Other things that we do to help our customers solve their labor challenges. We have labor challenges, our customers have those labor challenges, is spending time with them, with our restaurant operations consultants, working to understand their menu profitability. The great products, we innovate. Two to three times a year, we'll bring out 40 to 50 new products a year. All of that is aimed at saving back office labor for our customers.
I'll just give you one example. We just recently came out with a kimchi rice offering that was pre-cut, pre-seasoned, pre-packaged, and so it takes all of that work out of the operator. Innovative, creative ideas like that. Leading first with great quality products, it really tastes good, and then helping our customers solve those labor problems is really, really important.
Josh King:
I mean, talking about great products that taste good. Another trend that we've discussed on a bunch of our prior shows from across the entire spectrum of the food and restaurant area is plant protein. Your website includes not just the product specs for buying Molly's Kitchen meatless breaded wings, but suggested recipes as well. Can you talk about your food fanatic chefs, your on-trend recipes, and the other support you provide really to be a one-stop shop for a restaurant?
Dave Flitman:
We really are, and that is our exact desire is to be that one-stop shop, regardless of how our customers want their products delivered. We've got omnichannel capability, so if they want their products delivered from a standard truck two to three times a week, we do that through our broadline operations. If they want more frequent, smaller deliveries, we have an offering called Pronto. Smaller trucks in urban markets. We can be there every day if they want the fresh real-time product every single day.
I mentioned our online ordering capability. We also have US Foods Direct where some of the products that you mentioned and many others, over a hundred thousand. They can order directly from our website and have them shipped directly to their operations. However, they want that product, our goal is to get that to them in time, high quality, the way they want it delivered. A great opportunity for us to continue to grow through that multichannel omnichannel offering.
Josh King:
If you are operating a single restaurant or a chain of restaurants in the future, where is this...? I mean, you must give a lot of keynote addresses at trade shows and things like that. Where do you see the future heading for this industry at large?
Dave Flitman:
Well, Americans love to eat out, regardless of economic cycles. I would just point back to the great recession. We saw only as difficult as that was economically, we saw only a small load of mid-single digit decline in our volumes through that time. I think that just underscores Americans are going to cut back. They may not take that vacation, they may not buy that new vehicle, but they love a dining out experience, and that's a way to go spend a little bit of money and have an enjoyable evening with their family and their friends.
Independent restaurants is a core part of our focus. Increasingly, diners are looking for an experience, not just filling their stomach so to speak, and the independent restaurants really lend themselves to that. We spend a lot of time and energy making sure that we're focused on that part of the market. In particular, some of the trends that we're seeing there. You mentioned the takeout. People were thinking that was going to go away after the pandemic. I've talked to restaurant operators who prior to the pandemic, maybe 10% or 15% of their business was takeout. Now it's a third of their business. It really has been a trend that's stuck.
Then importantly, we're seeing casual dining, a little bit of a move away from the white tablecloth into more of a casual dining experience, so consumers are going for casual experiences and convenience.
Josh King:
A guy in your industry from Chicago, I have to ask. Have you spent much time watching The Bear on Hulu?
Dave Flitman:
I have.
Josh King:
The flipping residents.
Dave Flitman:
A little bit.
Josh King:
I mean, talking about independent restaurants and the trials and tribulations of trying to keep the doors open and the food on the plate, it's amazing.
Let's just wrap up here though, because from a guy with your career, your experience working in places like Rosemont, Illinois, and going to school in places like West Lafayette, Indiana, trying to get out to see all of your places. You also must be a connoisseur of a lot of food service establishments around the country. If you're here in New York or Rosemont or Purdue, where are your favorite places to go and eat? What do you like?
Dave Flitman:
I'm a big fan of our Stock Yards offering. We have great premium beef, so anybody that buys our Stock Yards, I love to dine in those restaurants. I'm a pretty casual eater, so I'm a meat and potatoes kind of guy. Don't get too creative. Probably too old to change my stripes at this point. I love some of those great longstanding dining establishments, and you can find them, and thankfully we serve them in many parts of the country.
Josh King:
As we wrap up, we're here to ring the closing bell to mark Hunger Action Month. What is the month first established in 2008 by Feeding America mean for US Foods and all your employees around the country?
Dave Flitman:
Well, it's very important, and as excited as I am about our business model and the fact that we serve more than 250,000 food service operators around the country, it's an important thing to remember that probably around 34 million Americans today suffer hunger every day. I'm proud of the work that our company has done to partner with Feeding America to not only provide products, and we provided about $13 million worth of products through Feeding America partners last year.
But importantly, a large portion of our 29,000 associates volunteer their time and their personal funds to get involved and help solve this problem. There's a lot going on. It's important for the company, and we'll continue to lean into helping America solve that hunger problem.
Josh King:
A great message as we wrap up, Dave. Thanks so much for joining us inside the ICE House.
Dave Flitman:
Appreciate it. Thanks so much, Josh.
Josh King:
That's our conversation for this week. Our guest was Dave Flitman, the CEO of US Foods, NYSE ticker symbol USFD.
If you like what you heard, please rate us on iTunes so other folks know where to find us. If you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected], or tweet us @ICEHousePodcast.
Our show is produced by Pete Asch with production assistance, engineering and editing from Ken Abel and Ian Wolff. I'm Josh King, your host, signing off from the Library of the New York Stock Exchange. Thanks for listening. We'll talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of length or clarity.