USA – United Natural Foods, or UNFI, has announced it would acquire Supervalu for US$2.9 billion to reduce the grocery distributor’s dependence on Whole Foods, which accounts for about a third of UNFI’s business.
The company also said it has a contract with the distributor set to expire in 2025.
UNFI’s relationship with Whole Foods has been uncertain ever since Amazon bought the grocery chain.
Amazon’s acquisition of Whole Foods has spurred its first big deal among the grocery distributors.
With United Natural Foods’ US$2.9 billion acquisition of Supervalu, UNFI lessens its reliance on Whole Foods, a relationship that has been shrouded in uncertainty ever since Amazon acquired the natural grocer.
Whole Foods accounts for roughly 33% of UNFI’s business and has a contract with the distributor that is set to expire in 2025.
According to the company, it still remains unclear whether Amazon will renew that contract or attempt distribution on its own.
Loss of that contract could “materially and adversely” impact UNFI’s business, UNFI has warned in regulatory filings.
With its SuperValu purchase, UNFI has access to 3,323 wholesale stores that service its retail distribution business.
The deal “greatly expands UNFI’s customer base,” the company said in a press release.
UNFI is also buying SuperValu’s retail business, which operates under banners such as Cub Foods and Shoppers and plans to divest that business in a “thoughtful and economic manner,” SuperValu said.
UNFI is unlikely to be the last food distributor to consolidate.
U.S. grocers are under pressure from European competitors Aldi and Lidl, which are attacking them on price, and Amazon and Walmart, which are squeezing them from the high and low end.
As more grocers combine, or simply go away, food distributors will likewise need to join forces for scale.
Industry sources have pointed to C&S, KeHE Distributors and SpartanNash as potential candidates for further mergers and acquisitions.