Sometimes the best opportunities don’t come from firms in glamorous, fast-growing industries, but from well-run companies that have carved out a niche for themselves in lower-profile, but no less profitable, sectors. An example of this is food distribution, which involves making sure that food from producers, both ingredients and prepared meals, reaches wholesale customers such as restaurants, and large institutional consumers such as supermarkets and hospitals. In this industry, Sysco (NYSE: SYY) stands out from all the rest.

Since food distribution is a low-margin business, the key to success is keeping costs to an absolute minimum. Sysco’s status as the largest food-distribution company in the US, supplying nearly one in every five restaurants or commercial kitchens in the country, means that it can use economies of scale to do its work extremely efficiently. As a result, even though its operating margins are only around 3%-4%, it makes a 20% return on capital employed. The fact that the food-distribution industry rewards scale also serves as a barrier against any potential competition, helping to protect both market share and margins.

Should you invest in Sysco?