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Well, from coffee to cattle to cocoa, it feels like the price of everything is getting higher right now, and that's a real problem for large food manufacturers, including for Kevin Hurricane. He is the CEO of Cisco. He is a food distribution company that services restaurants, educational facilities, and hospitals around the world. So, Kevin, you have a really unique view into some of these supply constraints that are
impacting different parts of the commodity world. And I'm curious about how you at Cisco are handling a market and different parts of that market, from cattle.
All the way to coffee.
What does that mean for Cisco?
Yady, good morning.
It's a pleasure to be with you on the show and with your audience today to understand inflation and where we are at the spot moment.
I think it's helple to just take a quick step back over the past a couple of years, as you decid, we're what's called the food away from home business, so everything outside of the grocery store, restaurants, hostibles, education facilities, sports.
Venues in the life coming out of COVID, demand.
Was far outpacing supply. We saw significantly increased inflation. In fact, it peaked at about eighteen percent a couple of years ago, again with demand far out pacing the ability of producers to supply a product. We follow that with deflation actually where the costs were coming down, and we've settled at about two percent. So at the spot moment today, inflation cogs increase inbound to CISCO is at about two percent, which is in a reasonably normal status.
And that's across all categories.
But that doesn't mean that our individual categories like chicken as an example, where we're seeing elevated inflation because of again the lack of supply versus demand. So we're seeing a bit of a normal environment at the current moment.
The challenge that consumers are facing is the following.
If you look about cumulatively over the past two to three years, menu prices where we go to a restaurant are up about thirty to forty percent versus twenty nineteen. So I think that's the pain that we're all feeling when we go to a restaurant. We SISCO are taking actions with our supplier community and within our own book of business to.
Help bring those prices.
Down, so we can help restaurants lower menu prices will still hit the profitability targets that those individual business owners are hoping to achieve.
Right, it seems like consumers who are looking forward to a spate of deflation are looking at a December even alone where cocoa coffee up almost forty percent more than ten percent, respectively. And if there is something you could do to bring those prices lower, what exactly is it at the end of the day, or do you simply just see consumers shifting their preferences to goods that are cheaper.
Sure, that's a great question, I appreciated, and we view ourselves as a part of the solution, not the problem, and have a four part plan if you will, to help decrease the pain that that consumers feeling when they go out. The first and foremost is to work with our supplier community to bring down costs.
We are the largest purchaser of food and the food away from home segment, so leaning in hard with our suppliers to help them be more efficient.
Be that how we buy, the frequency that we buy, creating competitive environments to have suppliers of like product compete for our business so we can get to a lower netline and price and again pass that value and savings on to our end customers so they can lower menu price.
Step two is Cisco brand.
We offer a private label product under the Cisco banner, and that product is very high quality and it enables our customers.
To save money. We say, save them time, save them money.
It may surprise you that fifty percent five zero fifty percent of what we sell to a mom and pop independent restaurant is a Cisco branded product and we can lean in harder there. We call them swap and save opportunities. They can clear on our ordering website. Make it clear with you our set one thousand person plus salesforce to share that value with our customers, to educate them if they swap.
They can say. Thing number three is to take time out of the kitchen.
Help them with the opportunity to take labor costs out.
So we have prepared foods in the light that we can lean in by cutting.
The meat in advance of it arriving in the kitchen, cutting the vegetables in advance of it reviving in the kitchen, and those prepared foods are a good opportunity for our customers to.
Take labor costs because those are the two things that have increased the most for a restaurant.
Their food costs are up, their labor costs are up. We can help with providing both of those opportunities. The last, but not least, is lower cost alternatives. If the one protein category is spiking, we can help that customer understand make the following changes through your menu. You can shift your consumer purchasing to a lower cost of food. Helps the end consumer save money, helps that restaurant lower their food costs.
Interesting perspective there, especially when it comes to switching out proteins to maybe save on cost a little bit. We're talking about input costs, of course, the actual cost of chicken, cattle, et cetera. But I want to talk about tariffs and the potential there. You think about food packaging, for example, you think about produce coming from Mexico and other places. A lot of unknowns right now. Of course, Donald Trump
isn't even in office yet. How do you possibly plan ahead for some of the potentials that are being talked about right now?
Though this is a very important topic and appreciate the question, I think the main point of what you said is accurate, which is it's not actually certain what will happen. It is uncertain what specifically will occur. But if I take again a giant step back and start with them at some facts, the vast majority of food that is consumed within the United States is purchased within the United States. And we're a global company. We do business in over
ninety countries around the world. In each country that we operate in, the majority of the food is actually purchased within that country. So the impact our space, the industrer and is less than select other spaces.
But you mentioned one, which is produce.
Of course, during the winter months, a lot of produce that's consumed in the United States comes from Mexico.
Yes, we're paying.
Attention to what incoming President Trump has said about tariffs from China to specifically most recently Canada and Mexico, and we're taking prepared measures and actions to put ourselves in a position to succeed in helping our customers if those tariffs.
Come to realization.
There's some fundits saying that it's a bit negotiating strategy. We don't know is the honest truth. So here are the things that we need to deliver for our end customers. Thing one assurances and continuity of supply. Regardless of what happens with tariffs. We need to ensure that we Cisco can ship on time and in full to our end customers so that they can keep their doors open and satisfy their end consumers.
So that's thing number one, assurance of supply.
Because we've purchased more food than anyone in our space, we can provide our customers with that confidence that we.
Will have what they need when they needed. Thing two is affordable at a cost.
And if a select individual country sees a spike in tariffs, let's just say we're China.
Can we source that product from somewhere else.
We're working aggressively with our global supplier community in exactly that regard, and we will pivot. We will take actions, the charge and comment on the specifics at this time when none of us know exactly what those terras will be.
Kevin, we thank you so much for joining us today. Of course, a balanced view here on what's going on in the world of food and restaurants, that is Kevin Harkin of Cisco