U.S. Foodservice announced yesterday that it signed a $4 billion contract to supply food and other products to one of the world's largest hospitality and catering contractors.
The five-year deal with London-based Compass Group PLC in North America will bring in $800 million annually to Columbia-based U.S. Foodservice.
"This makes Compass one of our larger individual clients, so this is a very big deal for us," said Robert Gillison, U.S. Foodservice vice president and treasurer.
U.S. Foodservice has been a supplier to Compass for 12 years. The new deal is nearly double that of the previous contract between the two companies and makes U.S. Foodservice Compass Group's largest supplier in the United States.
Under the new contract, U.S. Foodservice will serve Compass in 15 additional markets, including all of Compass' business west of the Mississippi River.
Compass Group, which has annual revenue of $13 billion and employs more than 360,000, provides food services to schools, railway stations, airports, health care institutions, retail stores and shopping malls.
Its North American group, headquartered in Charlotte, N.C., owns or partially owns Levy Restaurants, Bon Appetit, Au Bon Pain and the Pantina Group, which runs a restaurant at the MCI Center in Washington.
It has partnerships with Sbarro Pizza, Krispy Kreme Doughnuts and Chick-fil-A.
"We'll distribute everything - from the napkins to the desserts - to their restaurants and cafeterias," Gillison said.
U.S. Foodservice and its parent company, Dutch conglomerate Royal Ahold NV, have been looking for ways to bolster U.S. sales as consumers have cut back on grocery shopping and frequenting discount stores.
Excluding last year's $2.2 billion acquisition of Alliant Foodservice, U.S. Foodservice saw a 6.1 percent drop in third-quarter sales.
One analyst who follows Ahold said last month that the poor third-quarter numbers posted by U.S. Foodservice "were a bolt from the blue."
At the time, analysts said Ahold had been hurt by the complicated integration of Alliant into U.S. Foodservice.
U.S. Foodservice lost some customers when it began renegotiating prices on some unprofitable Alliant contracts, and other business was lost as management resources went into combining the two companies.
U.S. Foodservice, which had $12.1 billion in sales last year, markets and distributes more than 50,000 national, private-label and signature-brand items to more than 250,000 food-service customers.
"This gives us the opportunity to expand into areas where we were poorly represented," said Nick Gale, a spokesman for Royal Ahold.