United Natural Foods, Inc. (UNFI) is the largest distributor of organic, natural and specialty food and health & beauty products in U.S. and Canada. In recent years, the 40-year old company has made several acquisitions to increase its product offerings in the “perishable perimeter” of supermarkets, such as specialty cheeses; grass-fed, antibiotic free, and hormone-free meats; deli products; bakery goods; and prepared foods. Due to these acquisitions, fresh food has recently become UNFI’s fastest growing division.
Certified organic products account for 18% of the 85,000 products offered through UNFI, while 30% of products are non-GMO verified. The company has supported the Non-GMO Project for over ten years and is a member of Just Label It (dedicated to bringing about federal GMO labeling). UNFI also offers Fair Trade Certified products.
Through its 33 distribution centers in the U.S. and Canada, UNFI distributes 12% of the overall market for organic and natural products in both countries. While organic foods are gaining market share, organic farmland still accounts for only 1% of farmland. To this end, UNFI’s foundation focuses on organic farming and initiatives to increase production such as the Future Organic Farmer Grant Fund (working to convert agricultural land to organic) and the Pesticide Action Network (protecting organic farmers from pesticide drift).
Sustainability efforts in other areas include LEED certification of distribution centers and solar arrays, which generated about 5% of total electricity used by the company in 2015. As a distributor, fleet efficiency is key and over the last five years UNFI has increased fuel economy by 12.5% and increased rail shipments, which can be up to four times more fuel efficient than trucks. UNFI also has an employee stock ownership plan (ESOP), which currently owns over 6% of Company stock.
UNFI is a high value company with a strong track record of growing top line revenue. After a period of rapid growth in 2015 the company stumbled, in part due to the fact that one-third of its revenue comes from one customer – Whole Foods Market (WFMI) – which felt the squeeze from conventional retailers offering lower priced natural and organic products. But Clean Yield stuck with UNFI stock, which has rebounded nicely this year.
Organic foods hit an all-time high of $43.3 billion in sales in 2015, and UNFI is well positioned to take advantage of the organic and natural food growth trend. But UNFI needs to manage both margin pressures and increased competition. So far, their plan includes strategic investments to improve and expand customer relationships, new distribution opportunities, and lowering costs through improved distribution efficiencies. Clean Yield likes the long term prospects of this company.
Market cap: $2.4 billion
Dividend yield: N/A
52-week low to high: $29.75 – $55.69
Risk level: Average