One of the largest food distributors in the U.S. is joining a list of consumer companies hit by a shortage of truck drivers.
Executives at Sysco Corp. said Feb. 5 that the prices they pay for freight arriving at their business increased during the company's fiscal second quarter.
The root of the cause, according to the executives and an industry group, is a shortage of drivers in the U.S. truck transport industry.
With fewer drivers available, loads awaiting transportation backup are forcing companies such as Sysco to splurge on on-demand arrangements, called spot rates, which are frequently more expensive than future contracts, President, CEO and Director Thomas Bené told analysts during the call.
For Sysco, that shortage pressured the company's gross profit during the quarter, he added.
"The fact remains that the rates that are increasing in some of those spot loads are dramatic, and we are struggling to be able to pass all that along," Bené said.
Across the entire business, Sysco's gross profit increased 5% during the second quarter to $2.7 billion, while the company's gross margin fell 38 basis points to 18.73%.
The Houston-based company faced challenges moving food products to its customers, which include restaurants, hotels and other businesses that sell prepared foods, as hurricanes ripped through the U.S. Gulf Coast in mid-2017.
But the broader shortage of truck drivers has affected the company, Bené said, which has few options other than paying higher transportation rates and passing costs on to customers. The company does have its own fleet of trucks for delivering products to its customers, but the company has no plans to reallocate that hauling capacity to incoming shipments, he told analysts.
The shortage of drivers across U.S. supply chains has worsened over the last year, according to an October 2017 report from the American Trucking Associations, or ATA. An estimate from the report indicates that the U.S. ended 2017 short about 50,000 drivers, up from the 2016 deficit of 36,500.
The problem may get worse over the next decade, ATA's report suggests. To replace retiring drivers and meet the demand for freight transportation over that period, logistics companies will need to hire 90,000 drivers on average per year, according to the report.
Other consumer companies hit by higher freight trucking costs in recent quarters include The Hershey Company and Campbell Soup Co., according to transcripts compiled by S&P Capital IQ.
Sysco's gross profit was also hit during the quarter by rising costs for some food items in the U.S., including meat, dairy and produce, according to a statement summarizing the company's second-quarter results.
