Businessmodel of United Natural Foods

Customer Segments

United Natural Foods operates principally as a distributor of organic foods. The Company serves a range of customers within the food service and grocery sector. It divides its customers into four customer categories:

• Independent natural products retailers, including buying clubs, food cooperatives, and specialist food retailers;
• Conventional supermarkets, comprising mass market retail chains and mainstream supermarkets;
• Supernatural chains, solely comprising Whole Foods Market Inc; and
• Other, comprising foodservice customers and international customers outside North America. In addition to serving Whole Foods Market, to which it is the primary supplier, United Natural Foods also includes leading grocery chains Kroger, Vitamin Cottage, Wegmans, Sprouts Farmers Market, Giant-Carlisle, Shop-Rite, Publix and Fred Meyer.

United Natural Foods also serves general consumers directly through its chain of retail stores, which operate across the US under the name Earth Origins.

United Natural Foods’s principal market is its native US, which accounts for the majority of the Company’s business. The Company also serves customers in Canada, and has some operations outside North America, notably through brokers in Asia and the Caribbean.

Value Propositions

United Natural Foods provides value to its customers in the following ways:

• Its broad product portfolio, with the Company offering more than 80,000 products across multiple product categories, following food trends and expanding its selection of products by 1,000 every month;
• Its efficient and well-placed distribution network, with the Company operating broad distribution infrastructure across the US and Canada and a fleet more around 1,000 delivery vehicles;
• Its category management program, with the Company analysing the operations of its customers, providing customers with appropriate products that aim to maximise sales based consumer demographics and lifestyle;
• Its flexible pricing structure, with the Company allowing customers to create their own pricing program, with control over delivery frequency, account management, and merchandising support; and
• Its commitment to sustainability, with the Company committed to providing foods in a sustainable way and identifying reliable producers. ### Channels

United Natural Foods operates a website at www.unfi.com, through which the Company provides information on its products, services, and activities. While the Company does not operate an online sales channel, it provides an online customer portal through which customers can manage certain account details.

United Natural Foods serves customers through its own in-house sales team, which are organised by region. The Company utilises its own distribution network, which is organised into three regions – Eastern Region, Western Region and Canadian Region – which operate a combined 31g distribution centres, representing approximately 7.7 million square feet of warehouse space, making the Company the largest North American-based distributor in the natural, organic and specialty products industry.

United Natural Foods also serves consumers directly through its network of 13 natural products retail stores, under the Earth Origins brand, including ten in Florida, two in Maryland, and one in Massachusetts. The Company also operates its own manufacturing and distribution channels through its Woodstock Farms Manufacturing unit, which imports, roasts, packages and distributes nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections.

Customer Relationships

United Natural Foods operates an online customer portal, through which customers can manage certain account details without interacting directly with members of the Company’s sales team.

United Natural Foods deals directly with customers through its direct sales teams. The Company consults closely with its customers, discussing all detail of any distribution agreement, including delivery frequency, product selections, and merchandising support, as well as negotiating a flexible pricing structure. Sales and distribution agreements are typically agreed for multi-year periods.

United Natural Foods provides some customer support resources through its website, as well as web support for its online portal. Existing and potential customers can contact the Company’s support staff directly by email or through an online contact form, or can interact with the Company through its social media accounts with Facebook, Twitter, LinkedIn, and YouTube.

Key Activities

United Natural Foods operates as a wholesaler and distributor of natural, organic and specialty foods, as well as certain non-food products, across the US and Canada.

The Company divides its products into six categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and food service products, and personal care items. United Natural Foods operates through three separate divisions: Wholesale, which includes its organic and specialty distribution business in the US, its organic and specialty business in Canada, and its Albert’s Organics and Select Nutrition units; Retail, which comprises its natural products retail stores across the US; and Manufacturing, which comprises the Company’s Woodstock Farms Manufacturing unit.

Key Partners

United Natural Foods collaborates with a range of companies and organisations across its multiple operating divisions. These partnerships include:

• Supplier and Vendor Partners, comprising suppliers of products, natural produce, and services, as well as vendors to which certain functions can be outsourced;
• Strategic and Alliance Partners, comprising a range of companies and organisations with which the Company shares resources and collaborates on joint projects; and
• Community and Social Partners, comprising non-profits and charitable organisations, with which the Company collaborates on community and philanthropic projects. United Natural Foods has launched a number of partnerships in recent years. This includes a tie-up with Retail Solutions to transform retailer data into insights and alerts, and a deal with Fresh Healthy Vending under which it offers franchisees additional discounts on food purchases.

Key Resources

United Natural Foods’s key resources are its product portfolio and stock, its manufacturing facilities, its distribution and logistics infrastructure, its chain of retail stores, its IT infrastructure, its partnerships – in particular its suppliers, and its personnel.

United Natural Foods owns and leases a number of properties across the US and Canada. This includes 31 distribution centres spanning a combined area of approximately 7.7 million square feet, 13 natural products retail stores, and manufacturing facilities operated under its Woodstock Farms Manufacturing unit.

Cost Structure

United Natural Foods incurs costs in relation to the acquisition of supplies and produce, the operation of its distribution network – including its fleet of vehicles, the operation of its retail chain, the operation of its manufacturing facilities, the maintenance of its IT infrastructure, the implementation of marketing and advertising campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 United Natural Foods accrued total operating costs in the amount of $1.02 billion, including the payment of salaries and benefits to the Company’s workforce of 8,700 full and part-time employees. In 2015, the Company accrued property and equipment costs totalling $572.45 million.

Revenue Streams

United Natural Foods generates revenue primarily through the distribution of organic foods to supermarkets, specialty stores, and foodservice businesses. Its product sales are organised into six categories:

• Grocery and general merchandise;
• Produce;
• Perishables and frozen foods;
• Nutritional supplements and sports nutrition;
• Bulk and foodservice products; and
• Personal care items. The Company also generates revenue through the operation of its own natural foods retail chain, as well as through the provision of marketing services designed to increase sales for customers and suppliers.

In 2015 United Natural Foods generated total net sales of $8.18 billion, up on the $6.79 billion in sales recorded by the Company in 2014. The vast majority of the Company’s sales are attributed to its wholesale distribution business, which accounted for $8.10 billion in sales for the year.