We have meaningful share in broadline, and our share is below industry average in specialty. That’s why we are as focused on produce and protein and the ethnic cuisines as we are, we’re moving the needle with existing customers on total team selling. As I’ve mentioned before, what that program is, is each account has a sales consultant generalist, who is the relationship manager, who’s there every week, but they are not going to be an expert in specialty [indiscernible] protein. They’re not going to be an expert in specialty organic produce, as an example. And we’re doing a better job of identifying which customers have the propensity to buy those categories, linking up that specialist with the sales consultant generalist in doing a joint visit and then compensating them in such a way that they win together when those cases are added to a Sysco truck, regardless if that’s a fresh point truck or a Sysco broadline truck.
And we’re moving the needle with existing customers as measured by penetration. We’re pleased with our performance in that regard. But the lifeblood, we call it the oxygen of the business is constantly bringing in new customers. You need that oxygen to breathe. We’re very focused on new. We’re very focused on making that a priority of the sales force. It’s embedded within our updated compensation model as a priority. If they win new business, that’s profitable and sufficiently large to make it worth our while to be going to those customers. There’s a minimum threshold that they get rewarded as a sales force. That works hard. Prospecting is hard work. We need to make it a priority. We need to manage it, and I’m really pleased with the progress that’s been made this last quarter on increasing the portion of our business that’s new business one.
Joshua Long: Great. Thank you for that. And then Kevin, in your prepared comments, you mentioned just the overall improvement in supply chain. It seems like things are perhaps continuing to get back to normal. Your results highlight that. Could you talk about the overall health of the supply chain just broadly as an industry and kind of where some of the pushes and pulls are now that we’re a little bit further removed from some of the disruptions that occurred over the last couple of years?
Kevin Hourican: Thank you for the follow-up. We’re really pleased with our progress of improvement in supply chain. Retention is up overall market, as you just indicated, fewer people are leaving their jobs. There are fewer jobs that are open. So, therefore, just general staffing health in the industry is better. And then specifically at Sysco, we’re fully staffed. It doesn’t mean we don’t have a job opening in a specific site today. But in aggregate across our network, we are fully staffed that bring down, as Kenny said, our hiring costs, our training costs, shrink improves, damages improved, accidents on the road improved. Everything about the ecosystem improves when we have a more tenured population. We’re really pleased with that.
The productivity levers that we have are moving up into the right as a result of that. Oftentimes, I get asked the question, what inning are we in? I think we’re up to inning seven now on supply chain kind of recovering to pre-COVID, which means we still have some gas in the tank. And I want to be clear, when we get to inning nine, the game is not over. What happens in inning nine is then we introduce new technology, we introduced productivity improvement programs, et cetera. We can get beyond, meaning better than 2019 levels of productivity. But I’d say we’re in inning seven, we still have room to improve, and we’re focused on delivering.
Kenny Cheung: Yeah. One point for me is, as I mentioned earlier, we have the labor planning tool, and we’re really matching — being very agile here on the expense side, matching labor with volume and making sure that’s with the backdrop of the Sysco work standards that I talked about earlier in my question in January, the driver academy, our training programs, our engineering labor standards keep getting better and stronger. We improve processes through leveraging, as Kevin said technology. The next wave of productivity improvement is the better have discipline to the standard work that we’re doing. So still room for improvement, but we are pleased with the improvement we made in the supply chain, and that’s factored into the 2024 guidance.
Joshua Long: Thank you.
Operator: The next question comes from Kendall Toscano with Bank of America.
Kendall Toscano: Hi. Thanks for taking my question. So I was wondering if, as you saw a pretty significant rebound in your local customer business in the second quarter, just kind of what the implications are on gross margin performance given that the local customers are a higher-margin customer segment. And then, I guess, as you enter the back half, as my follow-up, how you would expect the local customer growth to look versus the total company?
Kevin Hourican: Yeah. So I can start. So you are correct. The local customer does come with an attachment rate with a higher GP dollars per case, and there was a margin accretion as well with the local customer, and we are seeing that flow through the P&L, and that’s one of the reasons why you’re seeing a nice mix between your leverage on GP as well as the leverage down to EBITDA and net earnings. With that said, though, I think we shouldn’t overlook the CMU success that we’ve had in our business. We are also seeing margin expansion. We are also seeing cost of goods leverage across the portfolio of our CMU business. Again, one may think it’s just restaurant, but it’s not. There’s other specialty growth segments that we’re winning in the marketplace, that’s driving accretion on the margin side.
When we talk about strategic sourcing, it is not just for a local customer. It is the size and scale of Sysco, and that benefit skills across both our local customers and CMU. We are renewing, we are winning businesses at a higher margin clip at the current moment.
Kevin Hourican: Just to plus up the last point that Kenny made, I’ve tried to be very clear about this point over the last several quarters. Our success in national sales, and we are clearly succeeding in national sales, growing new customer wins and the profitability of that business, as Kenny just said. There’s nothing about the growth in national that hinders our ability to grow local. We do not have supply chain capacity constraints, we do not have hiring constraints. What I said on the last call is we want to keep the play running and working in national, and we want to make meaningful progress in local, and we displayed that this past quarter with a 300 basis point improvement and our intention is to continue to make improvement in local.
Kendall Toscano: Great. Thanks guys.
Kevin Hourican: Thanks Kendall.
Kenny Cheung: Thanks Kendall.
Operator: The next question comes from John Ivankoe with JPMorgan.
John Ivankoe: Hi. Thank you. The question is on inflation. And I’m wondering what kind of indicators you were looking at to sustain inflation through the back half of 2024. I mean some PPI food, for example, metrics might suggest a little bit more deflation than what you’re talking about is kind of the first question. And secondly, there’s been at least some chatter — some grocery stores actually sequentially lowering their pricing as their own commodity costs have you been easing. I mean have you seen anywhere in the marketplace in terms of your competitors, maybe on the nationals, but on the local or regionals of different operators that are lowering their price per case to their customers of something that could potentially be influencing the market over time? Thank you.
