UNFI’s latest realignment divides natural and conventional grocery sales

United Natural Foods Inc. (UNFI) continues to attempt to right the ship as a company, with a move to split its wholesale business into natural/organic and conventional grocery in a way it hasn’t done previously, the company announced on Wednesday.

The move comes after several years of the Providence, Rhode Island-based distributor struggling to find its identity within the industry. In June 2023, UNFI announced a regional restructuring, consolidating four regions into three. It also laid off some 150 employees at that time. Not long after that, the grocer added independent board members specially focused on driving shareholder value.

This most recent move to restructure the wholesale business means new leaders for each division, who will arguably have their own marching orders to drive value and growth in the sectors.

Last year, UNFI seemed to be putting in motion an effort to broaden the scope of its business, announcing that its selling shows for the year would support both the natural and conventional supplier as well as “all grocery retail customer channels” and positioning. A release at the time placed an emphasis on UNFI’s “full spectrum of products and services” targeting customer buying behavior. The distributor has since gone on to place an emphasis on its tech products, including a new retail media network launched in May.

“This realignment is another step in the execution of our plan to add value and improve efficiency and effectiveness for our customers and suppliers,” UNFI CEO Sandy Douglas said in a press release. “By empowering our commercial teams to provide a more customized product and service-centered experience, we intend to help our customers and suppliers differentiate, compete and grow profitability through a more responsive, efficient and effective operating model.”

UNFI Sandy Douglas, left, announces that Louis Martin, center, and Mark Bushway have new roles in the food distributor's latest restructuring.

UNFI expanded its reach in 2018

Until 2018, UNFI distributed only natural and organic foods. In what was considering a surprising move, then-CEO Steve Spinner announced that July that UNFI would acquire Supervalu, a distributor of conventional foods and the owner of several retail grocery banners. The approximately $2.9 billion purchase gave UNFI more distribution centers and a wider geographic reach, as well as additional products and customers. But the financial rewards came slowly.

Sixteen months after the deal closed, the International Brotherhood of Teamsters campaigned for shareholders to reject a double-digit pay raises for UNFI’s executives, including Spinner, because the distributor’s market capitalization had fallen to about $465 million from $2.2 billion before the acquisition. In response, Spinner defended the purchase of Supervalu and UNFI’s executive compensation at the 2019 shareholders meeting and during an investors conference in January 2020.

Of course, the COVID-19 pandemic reached the United States in March of that year. Sales at grocery stores around the country skyrocketed. UNFI updated its 2020 outlook that June, expecting net sales for fiscal 2020 to total $25.3 billion-$25.4 billion, more than 7% higher than previous estimates.

"We are on track for $175 million in cross-selling revenue this year as our customers continue to recognize the benefits of consolidating purchases with UNFI and our industry-leading 250,000-item SKU count," Skinner said then.

In September 2020, the CEO announced that he was retiring, but would remain with UNFI until a replacement was chosen. At the 2021 ICR Conference of investors, he praised the company’s performance during the COVID-19 pandemic and was optimistic about its future.

Douglas, who had been the CEO of Staples, joined UNFI in August 2021.

Restructuring plan reverses ‘synergy’

As part of the new wholesale restructuring, Louis Martin moves from president of wholesale for UNFI to president of conventional grocery products and chief commercial officer. Mark Bushway, UNFI’s chief supply chain officer, retains that title and becomes president of the natural, organic, specialty and fresh foods products.

Each division will have a focused sales team and will be supported by functional experts in merchandising, operations, procurement, and supplier services, the distributor said in a press release.

Areas including supply chain, professional and digital services, and private brands will work across the divisions to support sales leaders in building customized programs to help drive sales and growth.

Despite recently reporting a couple of stronger quarterly financials, UNFI has still been plagued with layoffs and questions about the company’s overall financial viability. In early December, the distributor announced it would close an office in Rhode Island, laying off 121 workers.

This article originally appeared on Supermarket News, a New Hope Network sister website. Previous reporting by Victoria A.F. Camron has been added to this version.