Kenny Cheung: Hey John, it’s Kenny. I’ll start. So, on the topic of inflation, you are correct. We are informed by data. We actually have a terrific [ph] tool of data. We partnered directly with suppliers, third-party strategic partners, institutions and the like. And so we have a rich data set of our own as well, given how much volume goes through our supply chain each and every day across various segments and industries. So, we’re all that modeling in right now. Number two, we watch our basket very closely. Now, I’ve talked about this in the past. But if you think about our commodity basket, we have 12 main commodities. And we don’t really over index on anyone in particular. No one come out more than 15%. So, each and every day, we’re managing inflation and deflation, right?
For example, you could have beef, for example, which is growing close to double-digit, but you can have another commodity that’s in a different space. So, Sysco has historically and today managed deflation, inflation day in and day out. And the third point, as I mentioned earlier, Q1 deflation in the US; Q2, slightly positive inflation. On both quarters, we were able to effectively drive positive, consistent and operating leverage to our P&L.
Kevin Hourican: It’s Kevin, I’ll just add. You asked about prices to the consumer in the local business, in particular. It’s a very efficient market, John. So, as our COGS come down, yes, the way it works is we then are able to pass through value to our customers. So, unlike a retail store, we’re publishing prices in a circular and putting signs on a shelf. For us, it’s a dynamic business. The book gets priced weekly, as do our competitors. And as prices come down, it’s an efficient market. And that gets passed through to customers. As Kenny said, though, we didn’t maintain profitability ratios on the way up. We can maintain profitability ratios on the way down. That’s the value of our pricing tool that we are leveraging extensively to make sure that we are where we need to be.
As it relates to just general confidence in the year-to-go inflation figures, we’ve got a lot of data at Sysco. We have global data. We have access to a large amount, as Kenny said, across the 12-plus categories. Some are moving up, some are moving down. The one that’s going to be the biggest tailwind in the year to go is Produce. Produce was substantially deflationary in Q2 because of wild markets the year before due to major flooding in California. Produce is going to return to more normal, like low levels of inflation, 1% to 2% versus down substantially in Q2. So that’s one of the bigger drivers of giving confidence in the year to go. And we said muted inflation, but certainly muted inflation is up from where we were in the first half of the year.
John Ivankoe: Very helpful color. Thank you.
Kevin Hourican: Thanks, John.
Operator: The next question comes from Alex Slagle with Jefferies.
Alex Slagle: Hey, thanks. Good morning. I just want to see if you could provide any color on the broader growth rates and health of the various categories you participate in. There are certain specialty categories that are growing particularly well or certain customer types in the industry if the growth has either carried off or accelerated lately?
Kevin Hourican: Alex, it’s Kevin. I’ll start and then if Kenny has anything to add, he can jump in. Let me first just talk about like where is the business growing, where is success happening, and then I’ll flip back to the customer. But it’s okay, I’m going to actually answer it in reverse. Right now, broadline is winning. And what I mean by that is distributors. So broadline distributors are winning. People ask us all the time, Kevin, how can it be true that you plus the other big two are all saying you’re taking share? Answer is scale matters in this industry. Size and scale matter, our purchasing scale, our delivery scale, our technology scale. And frankly, all three of the big three are growing faster than the market. Our growth for the quarter was plus 3.4 and the overall market was very nominal growth.
So we meaningfully outgrew versus the market and my suspicion will be as well the other big players in the space. So what does that mean? It means the growth is coming from smaller regional distributors and specialty distributors. Point two for the Sysco specific thesis is our specialty business is meaningfully performing. So we’re winning in broadline in total versus the 60-plus percent of the business that’s not done through the Big 3, that’s a very clear point that should be understood. 60% of the business does not happen from the Big 3, where the big players are winning meaningfully in broadline versus that 60%. And then within specialty, Sysco’s specialty is outperforming versus specialty. So that’s kind of the thesis or the story of why we’re outperforming versus the market.
As it relates to the customer side, we’re seeing no discernible moves trade up, trade down, trade left, trade right. The best operators are winning. People who have interesting concepts or interesting culinary trends are winning, but we’re not seeing trade up or trade down. Since the January blip that I mentioned, it was a robust food-away-from-home market in Q2. And then specifically, December was a robust month as consumers were frequenting food-away-from-home establishments.
Alex Slagle: Thank you.
Kevin Hourican: Thank you.
Operator: The next question comes from Jake Bartlett with Truist Securities.
Jake Bartlett: Great. Thank you. Thank you for taking the question. Mine was on the chain business and the growth there has been strong. And maybe if you can just confirm my math on that case growth among the chain business accelerated in the second quarter, maybe kind of what you’re doing to drive that acceleration? And then if you can maybe provide an update on the relative profitability. I know the gap between independents and chains has narrowed, but if you can give us just maybe a better sense as to how much that’s narrowed at this point?
Kevin Hourican: Okay. So I’ll start, and I’ll toss it to Kenny for any additional comment he may have. It’s — our CMU business, it’s half of our business. We’re winning meaningfully in that space. And yes, we did accelerate in Q2 versus Q1, and we have confidence in our ability to continue to be very successful in CMU. When people hear chain, they think national restaurants. I want to be very clear that is just one portion of that business. Travel and hospitality is in that space. Healthcare is in that space, education is in that space. And we’ve had notable and meaningful wins in each of those non-national restaurant sectors. In fact, our focus is in non-national restaurant sectors. The low profit portion of CMU is the national chain restaurant space, mostly in the QSR space.
That’s the lowest profit business. We’re really focused on within national sales, which customer types we create a win-win contract relationship with our customers where we can help them achieve their objectives. We can do it at a cost to serve that meets their objectives. And they’re willing and want to partner with Sysco on things that are profitable and helpful for Sysco. Like, for example, Sysco brand penetration. With local customers, we have more than 50% of our cases on that truck that are Sysco brand. And one of the reasons why the profit profile is lower in national is a lower penetration of Sysco brand. So we’re looking for partners who want to grow together, who want to win together. And our national sales team has been doing a really good job in that regard, and we expect that momentum to continue.
Kenny any additional comments you’d like to make?
Kenny Cheung: Yeah. Thank you. I’ll say a few things here. So if you think about chain business, right, I’ll say ROIC is a lens, how we look at all businesses, including chain. On the CMU side, as Kevin mentioned, we did accelerate. You are correct. The math is correct, but we accelerated profitably. That’s a really important point here. Many of the things that we’re doing across technology, strategic sourcing, all of our initiatives does impact both the local and the CMU side. So it is scaling and I know we say this a lot of time scale and size really matters in the industry. So that’s really important. Sometimes, we’ll say this — we all think the compensation plan ties only local. We have many, many things that scales across both local and CMU driving possibility for both sides of the house.
