Analysts had previously said such a deal was being negotiated as UNFI, the primary supplier to Whole Foods Market and other natural and organic retailers, has been seeking to expand its distribution into more traditional supermarket chains.
UNFI will assume distribution to all of Safeway's banners in the U.S. for non-proprietary natural, organic and specialty products, effective this October. The incremental annual volume from the contract will increase United's annual revenues by approximately 4% in fiscal 2012, the company said.
"We are looking forward to our new partnership with UNFI to provide the variety of specialty, natural, organic and regionally relevant products that will meet our customers' needs," said Kelly Griffith, Safeway's president of merchandising, in a prepared statement.
UNFI said it will incur approximately $1.5 million to $2.5 million in total start-up expenses during the fourth quarter of fiscal 2011 and the first quarter of fiscal 2012 to transition this business.