Natural and organic grocery retailers have tripled their share of the $1 trillion US grocery market over the last two decades, while differentiated regional and independent chains have doubled their position, showing the potential to beat national competitors, according to grocery supplier United Natural Foods, Inc.
The growth in the segment represents consumers focused on high-quality, healthy assortments and differentiated experiences, said UNFI CEO Sandy Douglas during the company’s Q3 earnings call on June 9.
Best known as the top supplier for Whole Foods Market, UNFI is in a turnaround phase but positioned to capture future growth in the health and wellness markets, Douglas said.
“Throughout the quarter, we remain focused on helping our customers and suppliers execute their strategies in a dynamic operating environment,” Douglas said. “Our underlying top-line performance reflects the continued strength and resilience of our customers, building on a long track record of consistent growth across our industry.”
Stock market rollercoaster
The grocery distributor’s stock dropped on Tuesday after UNFI missed earnings expectations, but regained much of the loss Wednesday during a larger rally across the sector.
UNFI reported earnings of 77 cents per share on revenue of $7.72 billion for the quarter, failing to hit Wall Street consensus estimates of 81 cents per share on revenue of $7.88 billion, according to Earnings Whispers.
It adjusted fiscal 2026 earnings estimates of $2.40 to $2.60 per share on revenue of $31.1 billion to $31.3 billion. UNFI previously set the guidance at $2.30 to $2.70 per share on revenue of $31 billion to $31.4 billion.
Despite the stock value decline, UNFI was bolstered by an increase in its adjusted EBITDA, up 16.6% to $183 million and a reduction in its net debt, which reached $1.63 billion for the quarter, its lowest level since fiscal 2018, the company said.
“Our adjusted EBITDA margin was approximately 2.4% of net sales, up around 40 basis points year-over-year,” said Giorgio Tarditi, president and CFO. “The strong growth in profitability along with lower net interest from reduced debt levels and lower depreciation expense resulted in adjusted EPS of 77 cents, a meaningful increase compared to last year’s 44 cents.”
Differentiation play from UNFI
Retailers pursuing differentiation in their inventory to distinguish themselves in a crowded marketplace are UNFI’s core strategy, according to Douglas, who said those grocers make up UNFI’s $90 billion target market.
“Our focus is on strengthening the capabilities that are supporting differentiation and growth in our industry,” he said.
UNFI is focusing on strengthening seven key areas to help support its differentiation: customer stewardship, merchandising and supplier support, professional and digital services, private brands, technology, next-generation supply chain and productivity.
Digital marketplace rollout
UNFI’s new digital marketplace, Endless Aisle, launched in late 2025 to provide retailers a better look at “innovative emerging brands,” according to Douglas. It also helps suppliers expand their reach with less friction, he said.
The company said in a blog post in March that the platform enables suppliers to list their products, giving retailers the opportunity to find products that align with their growth strategies.
“While it’s still early, we’re hearing positive feedback from partners who value the ability to test new products with greater flexibility, and we expect to continue to develop and test new solutions like this to help further support our stakeholders,” Douglas said.
AI-powered supply chain management
UNFI also is focused on building AI-powered supply chain management capabilities across its vast distribution network, Douglas explained.
“For example, we expanded our AI-powered supply chain and procurement planning platform to all DCs (distribution centers) in our network and are focused on completing the supplier-facing portion of this deployment,” Douglas said. ”This platform is already helping to steadily improve fill rates and inventory management while also enhancing free cash flow conversion.”
The company’s AI-powered fleet management platform, Samsara, is also creating efficiencies for the company, optimizing routes and improving delivery execution, Douglas said.
“Year-to-date, through the end of the third quarter, our on-time deliveries increased by over 4% compared to the prior year period, while average miles per delivery have declined by nearly 5%,” he said. “Additionally, we’ve expanded our cloud-based warehouse management system to five additional distribution centers, further strengthening reliability and consistency across our network.”
