Stressed supply chain turns into silver lining for UNFI

Dive Brief:

UNFI is benefiting from supply chain disruptions affecting grocers, as more customers are turning to the company for supplies, executives said during an earnings call Tuesday.
President Chris Testa said UNFI's purchasing scale and portfolio has helped turn others' logistics challenges into sales. Customers who previously bought only natural foods from UNFI, for example, turned to purchase conventional foods as well due to supply chain constraints.
"The supply chain is stressed right now and it's been stressed for 17 months. And that level — that environment — has been an opportunity for UNFI," said Testa.

Dive Insight:

Taking advantage of the opportunity has been difficult for UNFI. "It's been a roller coaster," Testa said.

UNFI itself faced "supply challenges" that led service levels from inbound suppliers to drop, according to Testa. The underlying factors affecting raw material purchasing and freight costs deteriorated in Q4, and the company had to contend with a temporary shutdown at one of its facilities.

"The retailer community is growing fatigued with the limited assortments and increasing out-of-stocks across several key categories," said Testa.

Nonetheless, UNFI’s new CEO, Sandy Douglas said he sees opportunities to grow the business and endorses the company’s strategic plan that was put in place over the summer aimed at generating $30 billion in sales and $900 million in adjusted earnings by 2024.

Some of those plans are already taking shape.

"My early take is that there are significant opportunities to improve the way we serve existing and new customers and the opportunity to partner with suppliers to bring customers the highest quality differentiated products and services that they want and need," Douglas said.

UNFI restructured its sourcing in the past quarter to emphasize relationships with its own suppliers. "Deeper relationships with growers are expected to improve our supply consistency to days out of the supply chain and ultimately improve product quality across the network and help drive sales," Testa said.