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Rykoff-Sexton Match Pays Off : But L.A. Firm's Smaller Acquisitions Less Successful

December 23, 1985|NANCY RIVERA | Times Staff Writer

One February morning in 1983, Roger Coleman was reading through his three-newspaper quota when a thought hit him that would drastically change S. E. Rykoff & Co., the regional food-service company that Coleman had headed since 1967.

Coleman read that Beatrice Cos. wanted to divest itself of 50 businesses, and he wondered if Beatrice was selling its John Sexton & Co. institutional food service division. The Chicago-based company would be a big bite for Los Angeles-based Rykoff, which had a history of much smaller acquisitions, but the operations would mesh nicely, he thought.

The answer was "no"--Beatrice wasn't interested in selling Sexton. But with the somewhat reluctant approval of Rykoff's board of directors, Coleman went after what he saw as a "once-in-a-lifetime opportunity."

Persuaded Beatrice to Sell

Beatrice eventually was persuaded to unload the operation, and in December, 1983, S. E. Rykoff & Co. bought John Sexton & Co. for $84 million.

To reflect the equal importance of the S. E. Rykoff and John Sexton divisions, the company changed its name to Rykoff-Sexton in September, 1984.

"So now we had a truly national company with the Sexton name very well known in the East, Northeast, Midwest and South," Coleman said. "The Rykoff name was very well known in the West."

With that one move, Rykoff became a major national player in the fragmented food service business populated by small, often family-operated companies. And in the fast-changing industry, analysts said, it is the large companies that will survive because they offer buyers one-stop shopping and have the financial muscle to make the large capital investments needed to stay competitive.

The company has made several acquisitions since then--none so big and not yet as well integrated--and hasn't discounted the possibility of future acquisitions.

The recent fiscal year shows some of the rough edges of those acquisitions: Income increased only marginally during the first six months of the year. Nonetheless, analysts give the company high marks for improved performance and its potential for growth.

To the general public, Rykoff-Sexton is a low-profile company, perhaps best known in the West for the green-on-green trucks of the S. E. Rykoff division that proclaim: "Enjoy Life, Eat Out More Often." But anyone who has eaten away from home has probably tasted Rykoff-Sexton products or wadded up a cocktail napkin that was custom-printed at the company's downtown Los Angeles facilities.

"The Rykoff labels and the Sexton labels are as well known to restaurants and chefs and to people in the hospitality industry as Heinz and Campbell's Soup are to the consuming public," Coleman said. Rykoff-Sexton products aren't sold in retail stores; the only way the public can buy the products is through the company's mail-order catalogue--a sideline that the company projects will grow to $10 million in annual sales over the next few years.

More Than 30,000 Products

Rykoff-Sexton distributes more than 30,000 products under its own labels as well as those of other firms, both foreign and domestic.

Those items range from food products (except fresh meat, dairy products, produce, baked goods and liquor) to such non-food, higher-margin products as paper and plastic goods, dishes, low-temperature dishwashers, cleaning compounds and even paper chefs' hats. Rykoff-Sexton also provides restaurant design and engineering services. The company defines its market as any place where food is prepared and eaten outside the home, primarily restaurants but also hospitals and nursing homes, schools, hotels, airlines and cruise ships.

Rykoff-Sexton is the second-largest publicly held institutional food service company after Houston-based Sysco Corp. and is fourth in the industry when the larger institutional divisions of other companies--Chicago-based CFS Continental, a division of Staley Continental, and PYA-Monarch, a part of Chicago-based Sara Lee--are taken into account, Coleman said.

"We're in a wonderful industry," Coleman said. "The demographics of society are working in our favor" as the growing number of working women opt to eat out more and as the 20- to 40-year-old age group--which was raised on fast food--turns to finer dining.

"We just feel that the growth of eating out will continue," he said. "They're now having business breakfasts, dinners and lunches."

Food industry analyst Paul Weiss of San Francisco-based Sutro & Co. said: "As a company, I think very highly of them, in part because I think very highly of the industry as a whole." Rykoff-Sexton focuses more strongly on restaurants than do its competitors, which is a strength, he said.

The restaurant industry has been going through considerable turmoil as new eating trends are born and then quickly die, Weiss said.

"But Rykoff benefits as long as people are still eating out," he said. "They're serving a segment that's bound to have all kinds of exciting growth."

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