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UNFI comes up big with extension of Whole Foods agreement

Distributor will partner with the retailer until May 2032

Bill Wilson, Senior editor at Supermarket News

May 22, 2024

2 Min Read
UNFI_headquarters_sign_interior_1.png
The prior contract with Whole Foods was set to expire in September 2027 and the new terms keeps the partnership intact until May 2032.UNFI

United Natural Foods, Inc. (UNFI) has extended its wholesale partnership with Whole Foods Market, the distributor announced on Tuesday.

The two agreed on an eight-year extension as UNFI will serve as the retailer’s primary distributor. 

On Wednesday morning, UNFI shares were up almost a dollar a share.

The prior contract with Whole Foods was set to expire in September 2027 and the new terms keeps the partnership intact until May 2032.

“UNFI plays an important role in our supply chain as we continue to grow and serve more customers,” said David Garraway, vice president of Supply Chain for Whole Foods Market. 

The move is a major score for UNFI, which has been struggling as of late. Amazon swept in and purchased Whole Foods during the previous contract with UNFI, raising doubt in the marketplace that Whole Foods would renew with the distributor. 

In April, UNFI announced it had launched the refinancing of its senior secured term loan facility following a downgrade of the company’s debt by ratings agency Moody’s, which noted a possible issue with its Whole Foods deal.

The amended term loan credit facility, expected to close this month, would total $500 million. The amendment is expected to extend the maturity date, modify the interest rate margins applicable to the term loan, and make other modifications to the terms. UNFI said it expects to use the proceeds of the amended term loan, together with borrowings under its asset-based revolving credit facility, to repay the existing term loan.

Related:UNFI drivers vote to join Florida Teamsters

Moody’s Ratings in late March downgraded UNFI to B3 from B2, citing the company’s “weak credit metrics and negative free cash flow.” The outlook for UNFI’s debt remained “stable.”

Moody’s also cited UNFI’s high concentration of sales with its largest customer, Whole Foods Market, and noted that Whole Foods’ parent company, Amazon, has a “deepening relationship” with SpartanNash, a UNFI competitor. (Amazon has a warrant agreement that could result in Amazon owning 12%-15% of SpartanNash stock by 2027 if certain criteria are met.)

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United Natural Foods extended its contract with Whole Foods to 2032. The distributor has been struggling as of late, so do you think this news will pull it out of the slump? Let us know in the comments below, or email the SN staff at [email protected]

 

About the Author

Bill Wilson

Senior editor at Supermarket News

Bill Wilson is the senior editor at Supermarket News, covering all things grocery and retail. He has been a journalist in the B2B industry for 25 years. He has received two Robert F. Boger awards for his work as a journalist in the infrastructure industry and has over 25 editorial awards total in his career. He graduated cum laude from Southern Illinois University at Carbondale with a major in broadcast communications.

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