“The number one growth priority we have would be to expand our business with existing clients,” UNFI CEO Sandy Douglas told Andrew Wolf, a senior analyst covering food merchandising at CL King, this week at the 2023 ICR Conference for investors.
While he refused to comment specifically about divestitures related to the pending acquisition of Albertsons by Kroger, he noted that “to the extent that there were divestures happening in the market, you can bet a number of [our existing clients] would be all over that… But we more likely would be seen by the side of the acquirer in a situation like that, as opposed to being the acquirer ourselves.”
He explained that while UNFI is open to potential acquisitions if they could help build the distributor’s “capability to run our core strategy,” and provide “excellent financial returns,” the company already has a lot on its plate as it continues to rebuild supply chains damaged during the pandemic and improve fill rates which are still below pre-COVID levels.
“We serve 15,000 different retailing companies and 32,000 rooftops and growing,” and “what we’re focused on … is strengthening and supporting our national accounts and building national account capability,” Douglas said.
Moving beyond ‘survival’
He noted that during the last three years, UNFI and most others have been in a 'survival' mode as supply chains struggle to reset after the jolt delivered by the first waves of the coronavirus outbreak.
“Fill rates are improving and we’re sort of moving in a more normal rhythm,” but “they’re still below pre-pandemic levels and running a retail store with uncertain assortment is hard.”
Douglas said UNFI plans to improve fill rates and reinforce its supply lines by investing in staff training, optimizing its existing salesforce and leveraging automation to deliver the products needed in a dynamic, fast-changing and economically challenging period.
“My focus has really been on … what is the core capability of the sales organization, the merchandising organization, the supply chain, the finance organization, on our technology to be able to capture the opportunity profitably, and to be able to create superior value for our customers, our suppliers and our associates,” Douglas said.
For example, he said, UNFI will “use technology and automation to significantly ramp up the quality and the cost and the speed, not only to create more value for customers, but importantly to generate significantly higher levels or returns on capital for our investors.”
Creating a best in class team
UNFI also is investing in people through training, reorganization and strategic hires.
“We just finished training our sales force on best-in-class training programs to help them work with customers, working to overhaul our merchandising, so we buy better, we negotiate better, we interact with suppliers better and help them connect to the 32,000 customers that we serve every day,” Douglas said.
He also called out an ongoing reorganization, which included elevating a president of fresh, leadership promotions in bakery and dairy and increased support of national accounts.
“The net-net of this is not a more expensive sales force. It is a sales force that costs the same – it’s just moving things around to make sure we’re optimized against where the growth is,” he said.
UNFI zeros in on price, assortment optimization for inflation-impacted consumers
UNFI also is “vigorously” negotiating with suppliers on price to ensure its retail clients can offer shoppers products that are accessible and competitive, Douglas said.
This includes building out its private label offering, which is growing faster than the rest of UNFI’s business, he added.
“We recently attracted a super talent to overhaul and continue to build there, we think, giving our customers outstanding private brands to sell. … And it is an area where we can make some money, too. So, we’re very, very focused on that,” Douglas said.
This strategy includes a dual approach that meets the bifurcated needs of shoppers based on their incomes and how inflation is hitting them.
“On the low end .. the shopper who is trying to stretch every single dollar – it is all about certain kinds of assortment, and it’s all about merchandising times of the month. It’s all about package size and it’s all about private brands,” Douglas said.
“On the higher end value, there is a share opportunity where they can provide ready-to-eat, ready-to-heat and ready-to-cook meals to compete with restaurants,” he added, noting either way UNFI can help them “maximizing their performance in what is a value centric market today.”