ORTUNE
Natural Specialty Bakery
Newsletter March/ April 2016 Volume 4 - Issue 2
Distributor News Focus on Fresh Acquisition Continues at UNFI Vol. 4 - Issue 2 Inside This Issue Distributor News 2-4 Industry News 4-6 Retailer News 6-10 Shows & Events 11
United Natural Foods Inc. (Nasdaq: UNFI) committed to growth across retail channels and categories as it announced a new acquisition and reported second-quarter financial results. UNFI has purchased Global Organic/Specialty Source of Sarasota, Florida—a distributor of organic fruits, vegetables, juices, milk, eggs, nuts and coffee. Watch for more acquisitions like this one, UNFI President and CEO Steven Spinner said. “We are intently focused on managing our business in a rapidly changing environment. We will make strategic investments to improve our sales growth rate and customer experience through the back half of this fiscal year and into fiscal 2017,” Spinner said in a press release. “We are working to build new distribution opportunities and expand our relationships with current customers. Our announcement today of the acquisition of certain assets of Global Organic further demonstrates our strategic focus on increasing UNFI’s product offering into the perishable perimeter. We believe our infrastructure, supply chain and logistics network are uniquely positioned to add meaningful value to customers in an evolving food retail environment.” Spinner also announced that a restructuring into regional territories and technology investments “to grow a greater share of store” will accompany acquisitions as part of its 2016 strategy.
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And while UNFI has outpaced industry growth averages for the last several years, it does not expect to do the same this year. Spinner said the industry forecast for 2016 is 7 percent to 9 percent growth. UNFI expects 1.5 percent to 3 percent growth for the fiscal year ending July 30 over 2015, according to its revised guidance released Feb. 29. Second-quarter highlights include: lN et sales increased 1.5 percent to $2.05 billion, compared to $2.02 billion for the same period last fiscal year. lA djusted net sales increased 6.5 percent compared to the same period last fiscal year, excluding the year-over-year impact of the previously disclosed termination of a customer distribution contract and, for the second quarter of fiscal 2015, the previously disclosed non-recurring reduction in net sales. lD iluted EPS was 45 cents compared to 55 cents for the same period last fiscal year. lA djusted diluted EPS was 49 cents, excluding $2.0 million of severance and other transition costs related to a previously announced restructuring plan and approximately $1.0 million of acquisition related costs. l Free cash flow generation of $106.2 million, the largest free cash flow quarter in company history.
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Distributor News Recent Lipari Acquisition Helps To Yield Largest Food Show In Company History Lipari Foods, a leading Midwest food distributor based in Warren, Michigan, hosted its 2016 Lipari Food Show on April 20. The Shelby Report’s Geoff Welch attended the event, which was held at the Suburban Collection Showplace in Novi, and discovered the sold-out show marked the largest in the company’s history. Approximately 5,550 customers attended this year’s show, which boasted 602 booths, up 140 from last year, and 765 vendors, according Don Symonds, director of events and trade relations for Lipari Foods. The show featured nearly 16,000 items, all at special prices. “Every year the show seems to be getting bigger,” Symonds told The Shelby Report from the show floor. “With our acquisition this year of the Leo Dick Co., it’s brought on an awful lot of new vendors, it’s bringing in a lot more customers.” Leo A. Dick & Sons Co. is a specialty and gourmet business out of Canton, Ohio. Lipari Foods President and CEO Thom Lipari told The Shelby Report at the show that the Leo Dick Co. acquisition has strengthened Lipari Foods’ specialty, natural and organic food categories. “We are showcasing a lot of those new items at the show this year,” Lipari said. “And we have gotten great response from the customers on it, and we feel it’s going to be a real great addition to our product offering.” Participants and attendees also enjoyed this year’s show theme: “Lipari in Wonderland,” a take off of “Alice in Wonderland.” The theme brought with it bright colors and elaborate displays. “It’s just amazing what happens,” Symonds said. “It turns from a trade show to a trade event. There are so many cameras flashing pictures of what’s going on in the show; it’s just a fun time for everybody. “We’ve got Alice and the Ace of Hearts and so many characters walking around giving photo opportunities for customers,” he added. “A lot of this is preceded by a dinner we put on (April 19) for about 4,000 customers who (traveled) to come to this show. We bring in the vendors and the customers for a dinner. We put in a fun casino where everybody can win prizes. We have a band in there for dancing and drinks and food. You put all of that in one room, and it was just a lot of fun. It was the first time we’ve ever had a live band at one of these events and it seemed to be pretty well-received by all the customers.” In addition, the 2016 Lipari Food Show highlighted the latest industry trends and gave its vendors the opportunity, over the course of one day in a single location, to connect with thousands of customers. “…And we give our customers an opportunity to see thousands of new items and what the trends are in the industry, all in one day,” Lipari said. “The customers win, the vendors win, and that makes everybody at Lipari happy when both those two win. “The biggest thing right now, especially with the Millennials that are coming into the market, is the natural, the organic, the specialty type of foods. We’re moving more into ethnic type of foods. It seems like that age generation is much more attuned to trying different types of products. So we want to make sure we just kind of follow the trends. That’s why we’ve moved into the specialty arena and we think over the next couple of years it’s going to continues on next page... be one of our major categories.”
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Distributor Announcements Plans to expand
Recent Lipari Acquisition...continued
Lipari Foods continues to grow and expects to have a physical location in the South in the “next year or so,” according to Lipari, whose father started the company. “We’re trying to find something now that would work for us and be able to kind of do what we’ve done out of our Warren, Michigan, facility, and cover all the Midwest—to cover the Southeast through a facility down there.” In addition to its Midwest distribution area, Lipari currently distributes to most of Kentucky and Tennessee and a portion of lower West Virginia. It has limited distribution in Florida. “We’re kind of sticking our toe in the water down there,” Lipari said. “Eventually we hope to have a location down there and be able to cover that whole complete area down in the South.”
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Industry News Judge Rules That Vermont GMO Law Stands The Vermont Retail & Grocers Association is disappointed that that a federal court judge didn’t block the state’s GMO labeling law until a lawsuit is resolved. That’s because retailers, manufacturers and other members of the supply chain will need to prepare for the July 2016 implementation of the law even though there’s still a chance it can be overturned. “It’s costly to the industry,” Jim Harrison, president of the Vermont Retail & Grocers Association, told SN. “Retailers and manufacturers will have to start making provisions, like labeling, record-keeping and creating in-store signage.” The VRGA’s comments come after a federal judge in Vermont Monday denied a request for an injunction to halt continues on next page... implementation of Vermont’s GMO labeling law.
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Industry News Judge Rules That Vermont GMO Law Stands...continued As reported, the regulations require food sold in Vermont stores that contain genetically modified ingredients be labeled as such starting July 2016. Vermont’s attorney general formally approved the rules April 17. The Grocery Manufacturers Association, Snack Food Association, International Dairy Foods Association and National Association of Manufacturers filed a lawsuit challenging the constitutionality of the law, known as Act 120. Vermont filed an appeal to dismiss the industry lawsuit. The judge partially granted and partially denied the state’s move to dismiss the industry lawsuit, meaning the case may now go to trial. Until then, the law stands. In a statement, the GMA said it was pleased the court “found us likely to succeed on several of our claims.” For instance, the judge took issue with the law’s definition of “natural.” But the GMA is disappointed that its request for a preliminary injunction was denied. The GMA said it is reviewing the decision and considering legal options. “Manufacturers are being harmed, and they are being harmed now,” the GMA statement reads, in part. “Act 120 is unconstitutional and imposes burdensome new speech requirements on food manufacturers and retailers. It will also set the nation on a path toward a 50-state patchwork of GMO labeling policies that will be costly and confusing for consumers.” Source
Specialty Food Industry Sales Hit Record High Of $120.5B The specialty food industry continues to be a bright spot in the U.S. economy and is now a $120.5 billion dollar industry, largely fueled by the growth of small businesses, according to the Specialty Food Association. Specialty food sales at retail grew to $94 billion in 2015, a 19.7 percent jump since 2013, driven by product innovations and wider availability of specialty foods through mass-market outlets. Sales through foodservice outlets grew at a faster clip—27 percent to hit $26.5 billion—as U.S. consumers continue to make specialty food a part of away-from-home meal purchases. The supply chain also has embraced the importance of e-commerce as a way to sell directly to consumers. Eighty-five percent of manufacturers sell via their own website and 49 percent use a third-party platform like Amazon. Importers cite online sales as one of their fastest-growing channels. These findings are from a new report from the Specialty Food Association produced in conjunction with research firms Mintel International and Spins/IRI. The report, The State of the Specialty Food Industry 2016, tracks U.S. sales of specialty food through supermarkets, natural food stores and specialty food retailers.
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Industry News Specialty Food Industry Sales Hit Record High...continued The 10 top-selling categories in the industry are similar to last year. Cheese and cheese alternatives remain at the top and have grown 14.7 percent over the past two years, but frozen and refrigerated meat, poultry and seafood (+23.1 percent) and chips, pretzels and snacks (+22.3 percent) have inched up to the No. 2 and 3 spots, respectively. Refrigerated entrees and prepared meals joined the top 10 after experiencing a 34.5 percent sales increase in two years. Categories with the biggest sales growth are refrigerated ready-to-drink tea and coffee; eggs; and jerky and other meat snacks. Unit sales of specialty foods grew 13.7 percent overall to 15.6 billion. “American consumers continue to move toward specialty foods and away from mass,” said Ron Tanner, VP of philanthropy, government and industry relations for the Specialty Food Association. “Consumers are looking for foods with fewer and cleaner ingredients, and products that are made by companies with values they care about. All of these define specialty food.” Many in the supply chain believe non-GMO will be a product claim of growing importance to consumers, with 49 percent of manufacturers planning to introduce products that are non-GMO in 2016. Local products also continue to remain an important way retailers differentiate their offerings. Source
Retailer News Fairway Files for Bankruptcy Following months of speculation on its financial status, Fairway Group Holdings Corp., parent company of Fairway Market, this week filed a joint prepackaged Chapter 11 plan of reorganization and voluntary petitions for protection under Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. The New York metro-area grocer said it “intends to use the Chapter 11 process to facilitate a financial restructuring designed to restore Fairway to long-term financial health while continuing to operate in the normal course of business without interruption.” In a statement, Fairway Group Holdings CEO Jack Murphy said: “We believe that implementing this prepackaged plan is the best opportunity for Fairway to restructure its balance sheet on an expedited basis, strengthen its operations, retain jobs and create long-term value, while continuing to provide customers with the best food experience in the greater New York area.” The chain has come to an agreement with its senior secured lenders holding more than 70 percent of the company’s senior secured debt on a reorganization that aims to eliminate about $140 million of senior secured debt and provide financing to restructure the grocer’s balance sheet. Under the prepackaged plan, holders of general unsecured claims, among them suppliers, employees, unions and all other trade creditors, will receive full payment in the ordinary course of business, while the five collective bargaining agreements between Fairway and various unions will be assumed under the plan and remain in effect. All of the company’s existing equity securities, including its shares of common stock, will be cancelled, continues on next page... according to the plan.
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Retailer News Fairway Files for Bankruptcy...continued As part of the plan, Fairway entered into an agreement with certain holders of its senior secured loans, under which they agreed to exchange their loans for common equity and other consideration. All other prepetition creditors will be paid in in the ordinary course of business. In tandem with the filing, the grocer is seeking approval to enter into a $55 million superpriority secured debtor-in-possession (DIP) credit facility, which will be provided by some of the company’s existing senior secured lenders. The proposed financing should help support the reorganization and enable business as usual. The chain has also secured a commitment from its current lenders to convert the amounts extended under the DIP loan to an exit loan, and filed a number of customary first-day motions to support continuing operations. Fairway operates 15 stores in New York, New Jersey and Connecticut. Source
Next 365 by Whole Foods Market Opening in Oregon With the opening of its premier store still nearly a month away, 365 by Whole Foods Market, the broader-appeal incarnation of Austin, Texas-based Whole Foods Market, plans to open its second location, in Lake Oswego, Ore., on July 14. Scheduled to launch in Los Angeles on May 25, 365 by Whole Foods Market stores are designed to complement the Whole Foods Market brand by bringing fresh, healthy foods to a broader audience with a streamlined, quality-meets-value shopping experience. A third location will open in Bellevue, Wash., later this fall and up to 10 additional 365 by Whole Foods Market stores are expected to open in 2017.
Local partners The Lake Oswego store will host two new Friends of 365 partners that both originate from Portland, Ore.: Next Level Burger, a plant-based take on the classic American burger joint, and Canteen, a fresh and healthy café and juice bar. Both “friends” will establish shops within the new market and will feature specially curated menus that will further enhance the store experience. Next Level Burger will serve plant-based burgers, fries, shakes, hot dogs and organic salads alongside craft soda, local beer and kombucha. Canteen will feature design elements from its flagship store in Portland and will serve an innovative menu of organic juices and smoothies as well as a few continues on next page... other select items.
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Retailer News Next 365 by Whole Foods Market Opening...continued “Oregon is known throughout the country for an extremely creative and diverse food scene, and we wanted to find partners that would be reflective of those qualities,” said Jeff Turnas, president of 365 by Whole Foods Market.” We’ve made it a point to keep an open mind during the selection process, considering anything and everything. This time it was the team in the Pacific Northwest that helped us discover friends for this new store. “They were huge fans of Next Level Burger and Canteen and suggested they would be a great fit. We’re really excited to welcome both and anticipate this 365 by Whole Foods Market location will become a Portland-area destination for healthy, fast casual eating as well as convenient grocery shopping.” The Lake Oswego store will also offer shoppers the convenience of online ordering and delivery with Instacart, through its longstanding relationship with Whole Foods Market. Fun, easy, affordable Stores feature thoughtfully selected partners and products that adhere to Whole Foods Market’s industry-leading quality standards in an environment that’s fun and easy for shoppers. The Friends of 365 program is an opportunity for innovative businesses and entrepreneurs that align with the mission and quality standards of Whole Foods Market to transform the traditional grocery shopping experience and expand their reach by establishing independent retail spaces inside of 365 by Whole Foods Market stores. 365 by Whole Foods Market aims to provide simple, affordable and convenient everyday shopping without sacrificing the quality standards and dedication to food transparency that Whole Foods Market pioneered. The banner features a product selection curated for convenience, including the 365 Everyday Value brand. Source
Kroger Names Roundy’s, Mariano’s Presidents The Kroger Co. is promoting Michael Marx, currently VP of people operations for Kroger, to president of Roundy’s Supermarkets, Wisconsin, effective April 1. Kroger also promoted Roundy’s VP of Operations Don Rosanova to president of Mariano’s, effective immediately. Both report to Roundy’s CEO Bob Mariano. “Michael’s knowledge of store operations and merchandising, combined with his expertise in human resources and organizational effectiveness, will serve him well in this role. He builds strong teams of leaders and associates who work together to deliver business results,” Mariano said. “Michael’s leadership skills and business knowledge make him an excellent addition to our Roundy’s team in Wisconsin.” Marx joined Kroger in 1975 as a stocker at the former Highland Village store in Houston, Texas. After completing the management development program, he served in numerous leadership positions through the years, including store and district management and produce, floral and natural foods merchandiser. continues on next page...
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Retailer News Kroger Names Roundy’s, Mariano’s Presidents...continued He was promoted to director of regional operations for the Southwest division in 2006, and to VP of operations in 2007. Marx was named VP of transition at Kroger’s general office in Cincinnati in 2011 and took on his current role earlier this year. Rosanova has served in his current role with Roundy’s since May 2006. He previously served as group VP, supply chain, from 2002-06. Before joining Roundy’s, Rosanova was VP of operations of Edward Don & Co., a provider of foodservice supplies and equipment, from 1999-2002. He also served as group VP of operations at Dominick’s Finer Foods from 1996-98 and held various management positions within Dominick’s from 1971-96 in the greater Chicagoland area. “Don has been my partner in building the Mariano’s brand and I could not have built this without his leadership,” said Mariano. “His passion for excellence has made him a well-respected leader within the Roundy’s and retail grocery community. Don has been an integral part of the success of the Mariano’s stores since its inception and we look forward to him continuing that journey as we grow the Mariano’s business.” Kroger acquired Roundy’s last year. Source
Sprouts To Open A Dozen New Stores In 3Q Sprouts Farmers Market plans to open 12 new locations in 2016’s third quarter. The new stores slated to open in July, August and September are located at:
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2325 Sand Creek Road, Brentwood, California 175 N. Fairview Avenue, Goleta, California 8985 Venice Boulevard, Los Angeles, California 2060 E. Baseline Road, Mesa, Arizona 143 Wendelwood Drive, Murfreesboro, Tennessee 2015 E. Highway 54, Peachtree City, Georgia 1580 Pinole Valley Road, Pinole, California 16415 Paseo Del Sur, San Diego, California 1028 E. Brokaw Road, San Jose, California 2800 Cochran Street, Simi Valley, California 909 W. 6th Avenue, Stillwater, Oklahoma 1105 Garth Brooks Boulevard, Yukon, Oklahoma
Each of these stores will bring an estimated 100 jobs to the communities in which they are opening. Grand opening dates and other details will be shared at a later date, according to the Phoenix, Arizona-based grocer. Sprouts says it offers a healthy grocery store experience featuring fresh produce, bulk foods, dairy, meat and seafood, bakery, deli, vitamins, body care and more. Shoppers can find a selection of fresh fruits and vegetables and barrels of wholesome grains, nuts and sweets. The bright, open stores showcase fresh-baked goods, eclectic beer and wine and thousands of natural, organic and gluten-free groceries, according to Sprouts. Sprouts’ onsite butchers help customers with special cuts of meat or seafood or handmade burgers and sausages. Sprouts currently operates 220 stores in 13 states from coast to coast. It will open 36 stores in 2016, 24 of which have already been announced. Source
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Retailer News Weis Markets’ Nutri-Facts Aims to Simplify Healthy Shopping Mid-Atlantic supermarket chain Weis Markets Inc. has launched a new shelf tag program, Nutri-Facts, that uses brightly-colored icons on pricing tags to help shoppers easily identify foods that meet their unique health and lifestyle needs. “Weis Markets is committed to helping our customers live well. We can accomplish this goal by providing tools and resources on healthy eating and simplifying the process of finding nutritious foods in our stores,” said Beth Stark, manager of lifestyle initiatives for Weis Markets. “Our Nutri-Facts program is designed to provide a snapshot of food products so that at a glance, a customer can determine if its nutrition or lifestyle profile fits their individual needs and the needs of their family.”
Follows FDA, USDA guidelines Using U.S. Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA) guidelines, Weis dietitians developed 13 Nutri-Facts icons that include popular dietary and health identifiers that are in demand by customers, including organic, gluten free, whole grain, carb conscious, heart healthy, vegan, no added sugar, low sodium and vegan. Customers will have to look no further than the product pricing tag on the shelf to see what health and lifestyle attributes are associated the products. The Weis dietitian team also recently launched its Fresh for You and Superfoods programs. Fresh for You foods are hand-selected by the dietitian team based on nutritional profiles and will be flagged with a sign that provides helpful information on ways to incorporate the food into recipes and meal ideas. The Superfoods program highlights nutrient-rich foods that naturally contain significant amounts of vitamins, minerals and antioxidants. Customers will see signs for colorful superfoods signs throughout the store that offer tips for use. Since 2003, Weis Markets has employed dietitians to assist shoppers. The current team consists of four registered dietitians, two of which are based in Weis stores, that are readily available to answer customers’ food, nutrition and wellness questions. Founded in 1912, Sunbury, Pa.-based Weis Markets Inc. operates 163 stores in Pennsylvania, Maryland, New Jersey, New York and West Virginia.
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Shows & Events
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