Creating North America’s Premier Food Wholesaler

 

In June 2018, United Natural Foods (UNFI) and Supervalu decided to uproot North America’s wholesale distribution by combining their efforts to create a premier wholesale distributor. UNFI is the largest distributor of natural organic products in the United States and Canada, while Supervalu is the largest publicly traded wholesaler in the U.S.

Their joint enterprise indicates a rapidly changing infrastructure landscape in which consolidation among stakeholders in the supply chain is fast-becoming the new norm. And this has become a prime example of how manufacturers, suppliers, distributors, and retailers are pushing for change in Canada and the United States.

Based on this recent industry development, here are the most significant benefits of creating a premier food wholesaler in North America.

Adding Value to Customers and Stakeholders

Transforming into North America’s top wholesale food distributor is beneficial for all parties involved in the supply chain, including consumers and shareholders.

First off, it allows distributors to create a diversified consumer base. As they merge to form a common front, it automatically expands the consumer base to open up new opportunities to different stakeholders and increase distribution across all fronts. Delivering an extensive and comprehensive product offer to UNFI’s existing natural and organic products has allowed Supervalu to create a genuinely “better for you” offer.

As high-value products like organic meat and products become available to a broader audience, it enables cross-selling opportunities for different stakeholders on a much larger scale. A much more significant market across the United States and Canada gives wholesalers a much broader geographical location to work with and increase their market reach. The much more extensive scale has not only enabled growth but has improved their efficiency and effectiveness across the board.

The increase in capacity relies heavily on leveraging scalable systems. Focusing attention on streamlining larger operations has enabled different stakeholders to optimize their processes. Combined with the increased use of technology to achieve this goal has equipped all involved parties to meet customer expectations and reduce future expenses at the same time.

And in the case of UNFI and Supervalu, it also delivers significant synergy, which by the third year can create a run rate cost opportunity of more than $175 million.

Advanced Build-Out-The-Store Growth Strategy

With UNFI and Supervalu heading the enterprise, many smaller brands have joined the food super-wholesaler. Both giants contributed in equal measure in securing brands which create the supply chain. UNFI brought Blue Marble Brands, Woodstock Farms, Tumaro’s, Rising Moon, and Field Day to the fold, while Supervalu contributed with Essential Everyday, Culinary Circle, Market Centre, and Wild Harvest, among others.

Handing each brand a seat at the table has enabled them to have a united market presence, and create an advanced build-out-the-store growth model. The strategy is relatively simple and relies on increasing the product range to bring in attractive products to the store, and build a comprehensive and diversified product portfolio.

With each brand specializing in a specific food group, everyone is specializing in premier products. It expands the offer to the consumer, who is treated to a variety of quality, natural, organic, free-range, and specialty food items.

Complementary Contribution

Combining the two wholesalers into one has also merged their capabilities. It works because both UNFI and Supervalu share certain features. However, their most significant advantage is in the different and unique abilities, which essentially compliment one another.

UNFI’s revenue contribution is divided among Independent Natural Retailers (26%), Supermarkets (30%), Supernatural Retailers (33%), and other revenue (11%) such as e-commerce retailers and foodservice customers.

Supervalu’s revenue contribution is divided among Independent Regional Supermarkets (61%), Unified Groceries (29%), SVU FL (5%; regional chains, multi-stores, and single stores), and other (5%) which includes military and corporate revenue.

The combined revenue of UNFI and Supervalu is therefore divided among Independent Regional Supermarkets (48%), Unified Groceries (17%), Supernatural Retailers (14%), Independent Natural Retailers (11%), other revenue (8%), and revenue from SVU FL (3%).

It diversifies the consumer base for both wholesale retailers, as well as their revenue streams. In doing so, both UNFI and Supervalu can adapt to the fast growth of retailers and supply their demand for products.

A Compelling Opportunity

The opportunity for the premier food wholesaler will be to unlock the potential value across the business using synergy. Synergetic cooperation between the two organizations will improve the business process and inside operations, but also create a unified presence when dealing with outside services.

A combined effort has a more significant effect than individually either UNFI or Supervalu would have ever been able to achieve, and will benefit multiple aspects of the premier food wholesaler:

  • Revenue – a diversified revenue stream from cross-selling, offering high-growth products in stores and expanding the private label offering (net sales expected to reach over $21 billion);
  • Capital expenditure – increasing optimization of the supply chain and more effective capacities in distribution centers minimizes costs and expenditure (strong cash flow can reduce leverage and improve the credit profile);
  • Systems and technology – combining IT systems and cyberinfrastructure of both companies will enhance automation and use of technology to streamline the business process;
  • Operations – joint operations, increased capacity and a united strategy all increase efficiency inside the business model and stood to benefit everyone across the supply chain;
  • SG&A (selling, general & administrative expenses) – increased capacity minimizes expenses especially by optimizing lease contracts and reducing fleet-related costs;
  • Expanding Gross Margin – aligning strategies and methods of inbound logistics and adopting a professional service unit to monitor the process will help with larger capacity.

Ready to Learn More About the Food and Beverage Industry?

Stay up to date with the latest news and innovations in the food and beverage industry, and use what you learn to grow your business. It’s the best thing you can do for your brand, and all you have to do is realize the opportunity right in front of you to use its potential. Contact me or connect on twitter if you want to share with me your industry experience.

For more information about Cascadia Managing Brands go to www.cascadiamanagingbrands.com

 

 

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