UNF: RESTAURANTS AN OPPORTUNITY FOR NATURAL, ORGANIC FOODS

ORLANDO, Fla. -- Natural and organic products are poised for growth in the food-service channel, Rick Puckett, chief financial officer and treasurer of United Natural Foods, Dayville, Conn., said during a presentation at the RBC Capital Markets Consumer Conference here."From a growth perspective, our focus is definitely on growing within our existing channels: the supermarket channel, the super-natural

ORLANDO, Fla. -- Natural and organic products are poised for growth in the food-service channel, Rick Puckett, chief financial officer and treasurer of United Natural Foods, Dayville, Conn., said during a presentation at the RBC Capital Markets Consumer Conference here.

"From a growth perspective, our focus is definitely on growing within our existing channels: the supermarket channel, the super-natural channel and the independent [natural food store] channel," Puckett said. "But in addition, the food-service channel and international [markets] are two up-and-coming channels for us. We believe that there is high growth potential in both."

Although restaurants have a long history of leading most food-related trends, Puckett said the food-service industry was lagging three to five years behind retailers with regard to the booming popularity of natural and organic products.

Food service currently represents only 2% of UNF's sales, but, driven by growing demand, more restaurants have begun offering natural and organic options. And within the $200 billion U.S. food-service industry, even minor shifts can have significant repercussions, Puckett explained.

"Demand is still very small, [but] we expect that we will start to see increased demand from the food-service channel."

In response to an audience member's question, Puckett later weighed in on natural food merchandising strategies, saying that among their conventional supermarket customers, store-within-a-store sets still tend to perform best. Citing major regional operators such as Publix, Shaw's, Raley's, Stop & Shop and Wegman's, Puckett said, "It's going to be interesting if the national conventional guys adopt the same model. If they do, then I think they will be fairly successful at pushing natural and organic food stores in a very significant way."

As the category's double-digit growth continues, many conventional supermarkets have grappled with where and how natural and organic foods should be merchandised. Suppliers have offered conflicting messages. In general, newer or smaller natural and organic food suppliers tend to prefer store-within-a-store sets, where they feel their products will be more easily noticed, while breakaway brands such as Kashi, Eden and Amy's increasingly wish to compete in regular sets against conventional rivals. Puckett noted that this trend is likely to continue.

"Kashi cereal is an example of a natural or organic product that has done very well in the conventional store," he said. "Will it displace Rice Krispies? Probably not. But it is developing shelf space for itself, and I think you'll begin to see more products like that push for additional shelf space based on demand."