Sysco Corporation

Digital transformation and innovation · Technology implementation and upgrades

Our failure to implement timely and/or successfully new technologies, including artificial intelligence, may adversely affect our competitiveness and, consequently, our results of operations. As we pursue our strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, we are also expanding and improving our information technologies.

Human capital and workforce · Talent acquisition and retention

A shortage of qualified labor could adversely affect our business, decrease our ability to effectively serve our customers, and achieve our strategic objectives. We periodically experience shortages of qualified labor in certain geographies, particularly in the area of warehouse workers and drivers.

Supply chain and procurement · Raw material availability and cost volatility

The cost of fuel affects the prices we pay for products, as well as the costs we incur to deliver products to our customers. We require significant quantities of fuel for our delivery vehicles and are exposed to the risk associated with fluctuations in the market price for fuel.

Supply chain and procurement · Supplier operation and dependance

We obtain substantially all of our foodservice and related products from third-party suppliers. Suppliers may not be able to provide the foodservice products and supplies that we need due to conditions outside of their control. We are also subject to delays caused by interruptions in production and increases in product costs based on conditions outside of our control.

Natural and catastrophic events · Pandemic and public health crises

Public health crises, pandemics and epidemics could adversely affect our business, financial condition and results of operations, and disrupt the operations of our business partners, suppliers and customers. Among other matters, these actions could require or strongly urge various venues where foodservice products are served, including restaurants, schools, hotels and cruise liners, to reduce or discontinue operations.

Economic and market conditions · Economic recession and downturns

A prolonged economic downturn or recession in the U.S. or global economies, and the impact on gross domestic product growth, corporate earnings, consumer confidence, employment rates, income levels and/or personal wealth, could have a material adverse effect on our results of operations and financial condition.

Geopolitical and trade · Political instability and government changes

Our international operations subject us to certain risks, including economic and political instability and potential unfavorable changes in laws and regulations in international markets in which we operate. Local or regional geopolitical events have negatively impacted our operations in the past.

Geopolitical and trade · International conflicts and tensions

Military conflicts, such as the invasion of Ukraine by Russia and conflicts in the Middle East, or other geopolitical events, can negatively impact global demand. Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in cyberattacks, supply disruptions, lower consumer demand and changes to foreign exchange rates.

Geopolitical and trade · Trade policies tariffs and sanctions

Recent U.S. tariffs imposed or threatened to be imposed on other countries, could have retaliatory actions taken by such countries and general political uncertainty surrounding trade relations and policies. In addition, we procure products from suppliers outside of the U.S., and we are subject to the risks associated with tariffs and other factors relating to foreign trade.

Natural and catastrophic events · Climate change and environmental impact

The effects of climate change may create financial and operational risks to our business, both directly and indirectly. Increased compliance costs and expenses due to the impacts of climate change on our business, as well as additional legal or regulatory requirements regarding climate change or designed to reduce or mitigate the effects of carbon dioxide and other GHG emissions on the environment, may cause disruptions in, or an increase in the costs associated with, the running of our business.

Social and demographic · Public perception and reputation

Maintaining a good reputation and public confidence in the safety of the products we distribute is critical to our business. Anything that damages our reputation or public confidence in our products, whether or not justified, could tarnish our reputation and diminish the value of our brand, which could adversely affect our results of operations.

Economic and market conditions · Inflation and deflation pressures

The foodservice distribution industry is characterized by relatively high inventory turnover with relatively low profit margins. Volatile food costs have a direct impact on our industry. In periods of significant product cost inflation, if we are unable to pass on all or a portion of such product cost increases to our customers in a timely manner, our results of operations would be adversely affected.

Market position and competition · Competitive pressure and market share loss

The foodservice distribution industry is fragmented and highly competitive, with local, regional and multi-regional distributors and specialty competitors. Increased competition from non-traditional sources (such as club stores and commercial wholesale outlets with lower cost structures), online direct food wholesalers, cash and carry operations, and competitors that are utilizing technology, including artificial intelligence and machine learning technologies, have served to further increase pressure on the industry's profit margins.

Customer and revenue · Customer concentration and key customer dependence

The loss of one or more of our major customers could adversely affect our business, financial condition, and results of operations. Some of our customer agreements are terminable upon written notice by either us or the customer, which provides some customers with the opportunity to renegotiate their contracts with us on less favorable terms.

Customer and revenue · Changing customer preferences and behavior

Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, the impact of advancements in pharmaceutical therapies or a shift in preferences toward restaurants that are not our customers) could reduce demand for our products.

Strategic execution · Geographic expansion and market entry

An element of our strategy includes further expansion of operations into new markets and the establishment of new procurement organizations. Our ability to successfully operate in these new markets may be adversely affected by political, economic and social conditions beyond our control, public health crises, epidemics and pandemics, local laws and customs, and legal and regulatory constraints.

Reputation and brand · Social media and digital reputation

The increased use of social media may increase the likelihood and magnitude of negative publicity across media channels, regardless of its accuracy or the reputability of its source, including as a result of fictitious media content (such as content produced by generative artificial intelligence or bad actors).

Legal and litigation · Product liability and warranty claims

If our products are alleged to have caused injury, illness, or death, or to have failed to comply with governmental regulations, we may need to recall or withdraw our products and may experience product liability claims. Any product recall or withdrawal could materially adversely affect our results of operations and financial condition.

Industry regulation · Regulatory compliance and changes

We are subject to various federal, state, provincial, regional and local laws, rules and regulations in the countries in which we operate. If we fail to comply with applicable laws and regulations or encounter disagreements with respect to our contracts subject to governmental regulations, we may be subject to investigations, criminal sanctions or civil remedies, including fines, injunctions, prohibitions on exporting, or seizures or debarments from contracting with such government.

Industry regulation · Safety and environmental regulations

Our operations are subject to various federal, state, provincial, regional and local laws, rules and regulations in the various countries in which we operate relating to the protection of the environment. We could incur substantial costs, including fines or penalties and third-party claims for property damage or personal injury, as a result of any violations of environmental or workplace safety laws and regulations.