Starting with a small Texas company called Zero Foods, that he founded in the wake of World War II, Baugh devoted his life to excellence in foodservice distribution, ultimately launching some 25 years later a company that would grow into enviably the largest by far foodservice distributorship in America: Sysco. In the latest ID Top 50 survey, Sysco again captured first place among broadliners with $24.7 billion in sales last year, up 9.8 percent from 2001.
In a recent retrospective interview with ID Management Report, the soft-spoken foodservice distribution visionary said that being the biggest company wasn't his goal but rather being the best managed and most useful distributorship was the paln. However, he admits, "Being well managed and most useful merits being known as a leader."
Baugh says he understood that his mission could not be undertaken alone and he sought additional enthusiasts of his dream. "It is so much better to have the benefit of the ingenuity, the creativity of other people who join with you and to be able to concentrate on a great number of things better than one could do by himself," he recalls. (For an early history of Sysco, the 1980 ID GDO, see the June 1980 edition of ID.)
Speaking fondly of his origins in the industry, Baugh somewhat sentimentally points out that he has had a love affair with foods. His devotion to perfection in the industry has earned him many awards, the latest being the first-ever Lifetime Achievement Award presented by the International Foodservice Distributors Association during a special ceremony at its February Partners Executive Forum. In 1980, he was the first inductee in the ID Hall of Fame.
By the mid-1960s, Baugh began witnessing what he refers to as "the changing nature" of the foodservice distribution industry and realized that the time was ripe for a company that could efficiently service the food needs of restaurateurs around the country. By then, he adds, food processors had become skilled enough to provide a vast array of food products that were consistently produced with an outstanding level of quality.
Baugh's vision of foodservice distribution went beyond just selling groceries to operators and from the outset he began instilling in Sysco personnel to perform outstanding services for their customers and respond to their needs and expectations as well as help them build their business.
His explanations of these "outstanding services" became Gospel for Sysco.
"The first one has to be absolute consistency in the quality of merchandise. I could never compete with anyone whose objective was to put an array of products together and always be able to sell the lowest-priced thing to hit the marketplace," he states, adding that customers are soon disappointed when consistent quality is absent.
"Another is dependability of the delivery being made on time as expected, which doesn't necessarily mean when the customer would like to have it. It means when you and the customer agreed on when it would be delivered. So the quality of delivery service is excellent," he continues, while expanding the thought again: "Another aspect of service that is exceptionally needful is that you deliver everything that the customer ordered on a timely basis." In order to prevent operator embarrassment and ensure that the restaurateur has the necessary ingredients, Baugh says that Sysco would fly a lot of product in just so that the distributor would not be out of a product. Finally, a good attitude is also beneficial.
While today many sales and marketing consultants are touting the tactical gains of distribution teamwork and value of the inside sales rep, Baugh etched this in stone at Sysco more than three decades ago. "At Sysco, there are only three people that are important to the customer: our marketing associates, the delivery people and the third person is the telephone voice. And those telephone voices are more than just voices. They're remarkably intelligent customers services (yes, he did say services with an 's') people, who really know how to interpret what every customer is saying, either if it is said subliminally or otherwise. The man or woman on that telephone is a very important person to our customers as well as to us," he explains.
Reflecting on the foodservice industry's growth, Baugh offers a compelling observation about Rosy the Riveter's role in its evolution. He believes that the entry of the United States into World War II and the influx of women into the labor force was the dawn of dining out, as we know it today.
"I doubt that we would have prevailed had not the wonderful women come out of their homes in 1942 and during the succeeding years to literally build ships and weld tanks, work in munitions factories and do everything else they did to support the war effort," Baugh says. "When Pearl Harbor occurred, it is said, the foodservice industry was about 5 percent of the total food business and that 92 percent of all women were homemakers. When those women came out of their homes to come to the defense of the country, they found that they had some remarkable skills and they wanted to use them and develop their own careers."
Though no one grasped the social and economic importance of what had happened then and would not for some years, Baugh is convinced that the expansion of women in the workforce was the "beginning of a great societal change" in this country. Working husbands and wives dined out because of necessity and for entertainment. The latest cataclysm that will spawn another societal change, the ramifications of which we still don't know, Baugh somberly predicts, occurred on September 11, 2001.
Driving the consumers' desire for enjoyable dining-out experiences are, on the one hand, high-skilled chefs and, on the other, marketing associates, as they are called at Sysco, or DSRs, as they are referred to on the pages of ID. Baugh points out that chefs' skills continue to attract "more and more people to enjoy something that was prepared properly and well, presented in an attractive manner. All of these things were coupled together to fashion this business as it is today."
DSRs, he notes, are expected to be as knowledgeable about the business as are their customers, to the point that they can substitute for them when the restaurateurs are out of town for a couple of weeks. "This business is to see everything from the perspective of the customer. And the perspective of the customer just has to be to please their clients in outstanding ways and therefore to distinguish themselves to their clients to continue building and building an attractive, profitable business," he says. The DSR, he adds, cannot not merely be "a supplier but must be an initiator of many things that would help the restaurateur attain that distinction that they need."
Baugh has taught his marketing associates that it makes no sense for them not to know everything about their customers' businesses. On the one hand, restaurateurs had to become more proficient in their profession and utilize their sense of artistry to be successful, while simultaneously, he points out, alluding to the sales reps' consultative role, DSRs had to learn to understand the operators' problems, objectives and needs in order to help him or her increase profitability, commensurate with the increases in growth.
Baugh offer the following comparative example: "If I go into a shoe store I expect that person waiting on me to know everything about shoes, feet and what would make me feel more comfortable, enjoy life more, not just sell me a pair of shoes."
Turning to economic trends in the industry, such as consolidation, Baugh feels that it is not detrimental to the foodservice distribution but can actually help a family-operated regional company transfer the business and accomplishments to a larger entity. While asserting that there is indeed a place for regionals in the industry, Baugh notes that succession is factor worthy of consideration. "Unfortunately, people get old. I was unable to avoid that," he quips.
"Had I reached 55 years of age still owning a family-operated business, I would have to take into account who's going to run the business when I get ill or die? When I become ill or die, how's the business going to sold at its real value. These are very real problems that are increasingly insistent as people get old," Baugh points out.
Even though a family-owned business many have skilled next-generation managers, Baugh says, the current owner may want to avoid the anxieties of amassing expansion capital that could burden his or her inheritors. "It's good to avoid those things," he adds.
Baugh, who's company is known for its private-label products, believes that national brands can "by all means" coexist with distributor-owned brands. However, there are differences, he notes. National food manufacturers do a uniquely good job of providing the best products, in the best packaging and responding to the "needs, delights and expectations" of the customers.
"Unless, those who prepare private-label products can do so with equal fervor and success, then just by the nature of competition, the major brands that are well established and, therefore, have a franchise in the hearts and minds of consumers, will continue to do well," he cautions. Many private-label producers will be forced to compete on price, he continues, but the better ones will do so on the basis of consistent "quality and utility of the products," making sure that when the customer opens the package the product is what the customer was expecting.