During the quarter, the Fund initiated a position in leading foodservice provider, Performance Food Group Company (PFGC, Financial), which came public in October. PFG is the third largest player in the $240 billion U.S. foodservice distribution industry, supplying key ingredients and supplies to restaurants and fast casual chains. PFG’s larger competitors, namely Sysco and US Foods, have a centralized infrastructure that is set up to service larger and lower margin fast food chains and institutional accounts such as schools, prisons and hospitals. PFG, on the other hand, has pursued a more focused growth strategy targeting higher margin independent and local restaurants with an enhanced offering of proprietary brands. This strategy has enabled PFG to gain share and grow revenue faster than peers. The food-away-from-home industry that PFG distributes to is large and growing. At $600 billion, the segment has been growing at a 4% to 5% annual growth rate over the past two decades, as casual dining has expanded significantly. We believe PFG has a large market and margin opportunity and possesses competitive advantages, particularly a decentralized sales approach that helps foster better local relationships with customers. Finally, we believe PFG has built the right team to gain share in a growing market. The company is led by industry veteran and keen operator George Holm who, as CEO, has helped oversee strong and consistent growth for over a decade. (Matt Weiss)
From Ron Baron (Trades, Portfolio)'s Growth Fund fourth quarter shareholder letter.
