Performance Food Group Company (NYSE:PFGC) Q2 2023 Earnings Call Transcript

Page 6 of 12

And that’s the position we were in. And we just did it pursue some business, as heavily as would in the past. We think we’re getting there, where maybe we can be a little bit more aggressive. But there’s still a high cost that we’re dealing with and to have, I guess, to bring on business that is going to be difficult to grow if they’re not growing — that’s why I’ve seen some real flatness or declines in our national account business. And our focus is just — I mean we like those type of business and we like all business and we like those customers. But for us, our focus has had to be really, really heavily on independent. And I will also say that, we’ve also had Core-Mark growing at mid-teens in their nontobacco business and that’s been a nice contributor for us for growth.

Brian Harbour: Yes, it makes sense. Okay. And could you remind us where just kind of your owned brand penetration is and how that’s kind of driven some of the margin performance that you’ve seen recently?

George Holm: No. That’s one of the best things we have gone for us right now. We just finished a month where it was 51.9% of our independent business. And it’s just not a number that, quite frankly, I expected us to get to. So it’s been really good. And almost — I mean, really close to all of our branded business goes to independent restaurateurs. So we’re really focused on that. It’s doing well. Customers seem to receive it well.

Operator: We’ll take our next question from Jeffrey Bernstein with Barclays.

Jeffrey Bernstein: George, you mentioned in your prepared remarks, the more stable landscape to start calendar ’23. I think, you alluded to it being beyond just a favorable January compare bounce. You’ve also noted that the industry is not doing really well right now. So I was trying to just contextualize because it seems like most of the chains we talked to are talking about surprising resilience in the business and the consumer and whatnot. So I’m just trying to bifurcate between the more stable landscape relative to the industry not really doing well right now? And then I have 1 follow-up.

George Holm: Yes. What we get from third parties show that the industry is in a very, very slow. I mean talking like, not single digit, single point growth. I get the same conflicting things, Jeff. We have chains that are doing really well and are excited in — and don’t know there’s a downturn going on and we have some that are really struggling. And I think it’s that mixed . One of the reasons that I guess, that we use the word stable, is that we’re been in this period of time where we’ve had a single-digit loss business and that’s something that we always had as a goal and could never quite get to. So that’s accounts that we sold last year and don’t sell this year. So they went out of business or we lost the business or something happened. And that’s a stability that we haven’t had in our company to that degree before; that’s where that word comes from, I guess.

Jeffrey Bernstein: Understood. And then just on the commodity inflation or less of it, it sounds like you’re expecting continued easing. Just wondering where you think that goes, whether we’ll be talking about low or mid-single-digit inflation over the next quarter or 2. And thoughts on whether or not, that could turn to the deflation. I know most have not conceded that, that was really, very likely but just wondering how you change, how you manage your business differently, if that inflation ease more quickly and actually turn to deflation?

Page 6 of 12