Issue #5: UNFI Explores Going Private

Trend of the Week: UNFI Explores Going Private

If you purchase a product at Whole Foods, chances are it either comes from one of two food distributors: United Natural Foods Inc. (UNFI) or KeHe. The same can be said for many major natural foods chains, independent markets, and even natural products at large stores, like Kroger and Stop & Shop. These food distributors play a vital role in getting products from the food manufacturers and suppliers to the consumers at the grocery store. Since these distributors typically service grocery stores more willing to take on new brands, a lot of startups have started using UNFI and KeHe as their first distributors. Additionally, getting accepted by one of these distributors can be key to entering a top supermarket, as it is a stamp of validation.

This week, news got out that UNFI is looking for a buyer to take it private (KeHe is already private). In 2018, UNFI acquired SuperValu, a distributor for mainly independent grocery stores and also owner of some grocery stores too. The goal of this acquisition was to increase their distribution network and then sell off the grocery stores to have a wider network. Due to external forces, the integration never reached peak efficiency, which destroyed the financial performance and the stock price, and being take private became a reality. If UNFI goes private, it could be bad for a lot of brands, as UNFI would need to get ruthless with their finances, and only take on the top performing brands, which would leave many small, emerging brands behind. However, hopefully by going private it would allow them to finalize the operational merger with SuperValu, which would make it more efficient for the brands in the system and the brands would not face the performance issues that caused many retailers to drop UNFI. Like anything in retail, this situation contains good and bad aspects, but will have major implications across the ecosystem.

News of the Week:

Positive:

1. Emerging Brands Expanding In Retail - While the UNFI news may shake up how many emerging brands approach their retail strategy, it has not stopped many from keeping their foot on the gas with regard to expansion. This week was big for many emerging brands announcing retail partnership expansion. Heyday Canning Co, a provider of canned beans, soups, and chillis, launched 6 new soup SKUs available nationwide in Whole Foods. Immi, a better for you ramen, launched their 6 packet ramen nationwide with Sprouts. Both these brands have parlayed spinning an existing product to be more fun and healthy, into launching nation wide with major chains. It will be exciting to follow along as more emerging brands on this path continue to grow.

2. Netflix Launches Immersive Experiences - After last week’s Sony Pictures acquisition of Alamo Draft House (covered in Issue #4), Netflix announced their plans for Netflix House. These 100,000 plus square foot experiences will launch next year in Dallas and Philly (at two of the largest malls in the country: King of Prussia Mall and Galleria Dallas) allowing fans to experience the world of the shows they love. Some shows mentioned to have experiences in these locations were Stranger Things, Bridgerton, and Squid Game, which Netflix has all done pop ups in the past. Straight out of the Disney playbook, there will be merchandise, food, drink, and experiences, just now with a permanent location. It is not clear if you will be able to watch movies and TV shows there, but I would be shocked if that is not the case. It will also be interesting to see how frequently the experiences are updated. With malls struggling and Netflix trying to continue to innovate, this concept is a win win for both parties and a great low-ish capital way for Netflix to get into the theme park game.

Negative:

1. Census Drops May Retail Numbers - This week, the U.S. Census Bureau, announced the estimates for May 2024 performance and it was not as strong as people had hoped. Total sales were up, but that was driven mostly by auto-related businesses and there were expectations it would be stronger. One strange area that was disappointing to see was building materials, garden equipment, and supplies dealers decreasing despite this being a big time of year for them. However, the general sentiment overall was that this month’s numbers were good enough despite the fluctuations due to higher prices. As always, something to monitor and like everything in retail very nuanced.

2. McDonald’s Ends IBM AI Partnership - Starting in 2021, McDonald’s and IBM worked together to build an Automated Order Taker software for drive-throughs, but announced this week the partnership was done. This solution rolled out to over 100 locations, but ultimately struggled with getting people’s order accurate due to issues understanding different types of accents. McDonald’s has been trying to automate the drive through for a while, but has failed to figure out a scalable solution. Previously, they bought the startup Apprente which used AI voice tech to understand drive though orders and Dynamic Yield which personalized the drive through experience. Both were sold to other large companies prior to the partnership with IBM starting. On the positive side, there is clearly an opportunity for a startup to build voice technology to handle drive through orders. Does anyone know any startups building this technology?

Startup Feature: PrimeSite

• Summary: Supports choosing the location using data and construction of new retail and fulfillment locations

• Founder(s): John Rabiner, Michael Sannuti

• Amount raised & investors: N/A

• How this will shape the future of retail: All retail decisions need to be data-driven and by adding data to an area that lacks consolidated data it changes how operators approach new locations

• My take: Location is everything to a retail business and by making sure the proper location is selected up front, it could save a lot of money while also boosting revenue

Job Opportunities:

Gopuff | Louisville, KY - Senior FP&A Analyst

Mezcla | New York, NY - Director of eCommerce

Omsom (featured in Issue #4) | Remote - Creator Crew

Link of the week: How to use social media to augment launching in a retail store (read more here)

Additional Links:

1. Temu gets more repeat customers than other eCommerce platforms (read more here)

2. Carvel launches a rebrand (check it out here)

3. ChefSuite, a shared kitchen facility, launched a new location (read more here)

4. Leap opens fifth store for True Classic (read more here)

5. Breakdown of The Simply Good Foods Company acquiring Only What You Need (read more here)

6. Van Leeuwen collabs with Sabrina Carpenter to launch espresso ice cream (read more here)

7. Sweetgreen launches 230th store, located in Southport, Chicago (read more here)

8. Tom Brady partners with GoPuff (read more here)

9. Magnolia Bakery and Fini Pizza partner to launch Magnolia in the Hamptons for the summer (read more here)

10. Walmart replaces paper price tags with digital price tags (read more here)

11. Resy, the reservation platform and a subsidiary of American Express, has acquired Tock, another reservation platform (read more here)

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