Distribution is second nature for United Natural Foods, Inc. (UNFI). The company is one of the top wholesale distributors of natural, organic, and specialty foods in the US and Canada. It owns more than 25 distribution centers that supply 60,000-plus items to 23,000 customers, including independently owned retailers, supernatural chain Whole Foods (its #1 customer), and traditional supermarkets. The company offers groceries, supplements, produce, frozen foods, and ethnic and kosher food products. UNFI also operates about a dozen natural-products retail stores under the name NRG (mostly in Florida) and it produces roasted nuts, dried fruits, and other snack items through subsidiary Woodstock Farms.
UNFI's wholesale division (97% of sales) is augmented by specialty products units, such as subsidiary Albert's Organics, which supplies more than 5,000 customers with fruits, vegetables, and other perishable items. The division includes distribution of vitamins through Select Nutrition, and ethnic food items and related products through its UNFI Specialty business. The company has built up its own food brands through subsidiary Blue Marble Brands. The unit offers more than 900 products marketed under 25-brand names directly to retailers as well as third party distributors.
UNFI's retail arm, Earth Origins, operates 13 natural products stores in Florida, Maryland, and Massachusetts. The company also has a retail store in Vancouver, British Columbia.
Through its acquisition of SunOpta Distribution Group the company's wholly-owned subsidiary, UNFI Canada, became the largest distributor of natural, organic, and specialty foods, including kosher fare, in Canada. UNFI has five distribution centers in Canada. UNFI Canada contributes about 5% of UNFI's sales.
UNFI's fiscal 2012 (ends July) sales increased more than 15% vs. the prior year, while net income grew by about 19% over the same period. The double-digit sales increase resulted from growth of the company's core wholesale business, which added grocery-giant Safeway and Giant Eagle as customers over the course of the year. Riding a wave of increased demand for healthier (presumably natural and organic) food and acquisitions, UNFI has seen its sales nearly double over the past five years.
In a move to focus on the edible side of the natural and organic products aisle, UNFI in 2011 sold the non-foods and general merchandise lines of its UNFI Specialty business to L&R Distributors. The deal included UNFI's portfolio of cosmetics, seasonal goods, health and beauty products, and household goods, picked up as part of its $85 million acquisition of Millbrook Distribution Services in 2007. In a follow-on deal, UNFI's Canadian subsidiary in late 2011 bought the food distribution assets of B.K. Sethi Distribution, which specializes in Asian, Indian, Hispanic, and Caribbean food distribution.
The company has succeeded at taking market share away from its competition, thanks to demand for its slate of premium services coupled with expanded distribution capacity and targeted acquisitions. In mid-2010 UNFI acquired the food distribution assets of Ontario-based rival SunOpta, the largest supplier of organic, kosher, and specialty foods in Canada -- a promisingly dynamic market. The deal, worth some C$68 million (nearly $67 million), gave UNFI a prominent position north of the US-Canada border.
The bulk of the company's business comes from independently owned retail stores (35% of sales) and from supernatural chains that specialize in natural food products (36%). Its largest customer is Whole Foods Market, which accounts for more than a third of sales. Other customers include conventional supermarkets Kroger, Publix and Wegman's.
Nonetheless, competition is fierce; UNFI goes head-to-head with Kehe Food, which acquired another rival, Tree of Life, from Dutch food giant Wessanen in 2010. The company also contends with traditional grocery wholesalers such as C & S Wholesale and Nash-Finch that distribute a growing number of organic food items.
FMR, LLC owns nearly 12% of UNFI's shares. – less