Kevin Hourican: Hey, good morning, John. Thank you for the questions. I’ll take them in order. On the local business, drop size, I think just as evidenced by the data that we’ve shared has been a bit softer than what we had expected on a cases per operator perspective. Now there is work we can do about that. We have the ability to target our sales reps to win back lost cases or introduced new categories through a customer that has not purchased them before, like produce and protein, and we call that team-based selling, and we’re getting better and better at doing that type of work. Profitability per customer, we’re actually pleased with those metrics and where we are. We’ve done a nice job managing the inflation path through our Sysco brand win that Neil talked about is notable and significant and that meaningfully helps on profit per customer and we’ve done quality work with transportation routing over the last 45 days to make sure we’re being as efficient as possible on our routes, especially for smaller customers and that has provided us with benefit as well.
All of those variables that I just described have been built into the full year forecast that we submitted today. Those are my comments on local. For Sysco Your Way, we couldn’t be more pleased with the performance of Sysco Your Way. Each individual neighborhood that we add to the program continues to perform like the initial markets did. That’s one of my worries as we scale this thing as we add it to more neighborhoods. There’s a halt or effect when you have a pilot program where the performance is outstanding. But when you go to scale, it cannot replicate. We’re definitively proving that we can replicate that performance. It is material and significant. And how fast can we go? We’re going as fast as prudent, John. There is work that has to be done at the operating site to prepare that site to support a very lead late in the evening, ordering cut-off twice per day delivery, a dedicated consistent driver, dedicated consistent sales reps.
So there is customer remapping that has to occur. And we’re going at the fastest pace that’s prudent because what we can’t do is compromise the service experience because what’s making this program work the step change level of service that we’re providing to those customers and it’s not an incremental operating cost for Sysco because these are such dense neighborhoods that are in reasonable close proximity to our warehouses. So €“ and it’s expanded internationally. We’re now live in Toronto. We’re live in Dublin. We’re live in London, and soon, we will be launching in Stockholm. So it just shows you the breadth of this program is not just domestic U.S. It’s working everywhere. We have launched it, and we couldn’t be more pleased. We’re also very pleased with Sysco Perks.
Remember, Sysco Perks is not about restaurant dense neighborhoods, is Sysco Perks is a VIP program. It’s an invitation-only program for our best of customers, and we provide them Sysco Your Way like benefits, but they’re unique to that one specific customer. So that’s the first customer who’s not inside a Sysco Your Way neighborhood and we’re seeing significant lift in profitability and top line growth with customers that are invited into that program and we have meaningfully expanded the rollout of Sysco Your Way €“ excuse me, Sysco Perks over the last quarter. The last of your three questions was in contract bid. I’m really pleased with our team, both in sales and supply chain in this segment. We’ve got a great sales leadership team. They’ve done excellent work with customer retention, customer prospecting.
We are winning outsized business. We stopped reporting the number, but the last time I quoted it, we were at net $2 billion worth of incremental business, and we’ve continued to win net new business in the health care, education and national restaurant space. You asked me a specific question, you see outsized growth coming from that sector. We plan for growth across all of our sectors. And one of the reasons we converted to a 6-day delivery model is so that we have the ability to support that growth without having to make building expansions or building investments. We real feel increased our throughput capacity by 15% across Sysco by converting to a full six day delivery model. So really pleased with our success rate and contract bid. I expect for that success to continue in the forward-facing years.
I am going to talk to Neil. He wants to add one more point. Sorry, John, I step down you I’m going to toss it to Neil for one more point.
Neil Russell: Hey John, I just want to put a proof point out there to wrap up what Kevin was talking about. I’ll bring you back to the slide presentation in Page 9. In looking at our U.S. Broadline business sequentially, second quarter versus prior first quarter, our delivery pieces per hour for our driver universe 500 basis point improvement and then in the warehouse, in the selector position, a 600 basis point improvement in what we’re seeing there. So all these initiatives wrap together are really driving good momentum across both top line and bottom line and how we’re managing it. I think it’s a really good proof point. A lot of the initiatives Kevin was just walking you through.
John Heinbockel: Thank you.
Kevin Hourican: Thanks, John.
Operator: Your next question comes from Lauren Silberman of Credit Suisse. Please go ahead.
Lauren Silberman: Thank you, very much. I wanted to ask a quick follow-up on the EPS and then ask a question. But I understand there’s a few moving pieces in the second quarter. Looking at the second half of the year, I guess what’s driving the reduction in the guide relative to what you expected in the beginning of the year? I just want to have a better understanding of that. And then, Kevin, I know you mentioned engaging in specific actions to accelerate local case growth in the second half of the year. I guess, one, what are those actions? And the genesis of the question is, just given the softness that you’ve talked about in the environment, do you expect the category to get more promotional or competitive in the back half of the year as everyone tries to sort of grow market share? Thank you.
Neil Russell: Hey, Lauren, it’s Neil. I’ll start and then I’ll pass to Kevin. Let me talk about the EPS and the guidance first. There are a few factors that came into play for our adjustment. As I mentioned, we totally and completely rebuilt the forecast based on a few different things. First of all, the market environment that Kevin referenced in his prepared comments and having a clean, good view to where we think the market is right now and headed for the next couple of quarters. On the cost side of the equation, as we talked about the impact of the labor dispute, putting that into the numbers looking at the pension expense, now that we’ve remeasured the plan at the midpoint of the year, knowing that that will continue forward as I mentioned, that about $15 million of expense that you saw down below the line, carrying forward again in Q3 and again in Q4.
And even though improvement, we still have some of those productivity costs that we are carrying and our best view on that. So taking all those factors into consideration, the market environment, some of these expenses, that is what went into the updated guidance and therefore, our confidence that we feel very good about that new number. And then Kevin, over to you.
Kevin Hourican: Sure. Lauren, thank you for the question. I do want to be very clear that we are growing volume and we posted a performance result in the most recent quarter. Our total volume growth was plus 5.2. Local volume growth was plus 3.2. What the facts are, we are growing faster than the market. The reality is that the overall market was expected to be mid-single digits and then we would have been in the high single digits with our growth on top of that. It’s now the total market is low single digits. We’re growing in mid-single digits. So it’s meaningful growth. It’s just not the growth that we had budgeted essentially this time, a year ago, leveraging third-party data. So again, growing, and this is a very large business, $350 billion business.
We have 17% market share. We are meaningfully confident in our ability to grow versus the market to take share and to deliver compounded growth on an annual basis on the top line and bottom line. We’ll talk more about that in August as Neil said. What are the types of actions that we can take? And then you asked a very specific question, are we worried about deep discounting? I am not worried about deep discounting. That is not the recipe for success in this industry. Leading with price is not sticky, leading with price is able to be copied by others. We’re going to lead with service differentiation through Sysco Your Way, through Perks, through our Italian platform expansion and we are going to be very clear on allocating our sales reps time to spend more time with new customer prospecting, but that does not imply that price is the lever.
It’s calling upon a customer that you’ve not served before. It’s bringing in a specialty produce expert to penetrate produce in a category that hasn’t purchased it before. It’s introducing one of our Buckhead Meats premium protein specialist to a customer who’s not buying premium protein, but yet we offer the best product in the industry, et cetera. So it’s about in the second half of the year, leveraging our growth initiatives, they’re working and we can accelerate those initiatives of Perks, Sysco Your Way, Italian and allocation of time and our sales reps can spend more of their time with prospecting new and penetrating further with existing and we’re getting better and better at that. I’ve net spoken a lot about digital tools today, but we’ve enhanced our website to make it more clear to customers who have not purchased a product from us before.
We’re providing them even better suggestions on you might also consider the following that technology gets easier to use and better over time. We are now able to push promotional e-mails to our customer, articulating to them products that would be compelling to them and providing them a short-term discount in order to make it interesting to them to give that product to try, but those are levers that are new-ish to Sysco, leveraging e-mail, leveraging techs, leveraging our digital tools and the capability of targeting our sales reps to the right customer prospects with a preapproved deal that’s compelling to the customer, but underwritten by Sysco Finance as compelling and profitable for us. .
Operator: Your next question comes from Alex Slagle of Jefferies. Please go ahead.
