What changed in this filing

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Item 1. Business

2020-09-29 compared with 2019-10-01 · 127 added, 139 removed, 157 unchanged (63% of the section changed)

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Since the formation of our predecessor in 1976, we have grown our business both organically and through acquisitions, which have expanded our distribution network, product selection and customer base.

As a leading distributor of natural, organic, specialty, produce, and conventional grocery and non-food products, and provider of support services in the United States and Canada , we believe we are uniquely positioned to provide the broadest array of products and services to customers throughout North America.

Our Background

As a leading distributor of natural, organic, specialty, produce, and conventional grocery and non-food products, and provider of retailer services in the United States and Canada , we believe we are uniquely positioned to provide the broadest array of products and services to customers throughout North America.

We offer more than 275,000 products consisting of national, regional and private label brands grouped into six product categories:

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nutritional supplements and sports nutrition;

bulk and food service products and personal care items.

bulk and food service products;

and personal care items.

Through our October 2018 acquisition of SUPERVALU INC.

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We believe our total product assortment and service offerings are unmatched by our wholesale competitors.

We plan to aggressively pursue new business opportunities to independent retailers who operate diverse formats, regional and national chains, military commissaries, as well as international customers with wide-ranging needs.

Our Values and Impact

We believe that better food comes from a healthy planet.

We are focused on doing our part to protect the environment, conserve natural resources and promote sustainability.

We invest in the efficiency of our transportation fleet and warehouses, generate on-site solar power for operational use, and focus on diverting waste from landfills.

The communities where we live and work are part of who we are as a company.

We believe that part of doing the right thing includes supporting these communities and helping those in need where we can.

The UNFI Foundation makes grants to nonprofits to inspire better food systems and nurture everyday health.

We plan to aggressively pursue new business opportunities to independent retailers who operate diverse formats, regional and national chains, as well as international customers with wide-ranging needs.

During the fourth quarter of fiscal 2020, we determined we no longer met the held for sale criterion for a probable sale to be completed within 12 months for the Cub Foods business and the majority of the remaining Shoppers locations.

We reviewed our reportable segments and determined we were required to report Retail as a separate segment.

Our business is classified into two reportable segments:

Wholesale and Retail;

and also includes a manufacturing division and a branded product line division.

Our Commitment to Social and Environmental Responsibility

We are committed to being good stewards of our planet, our communities and our people, through tangible action.

We continue to focus on reducing our environmental impact, conserving natural resources and promoting sustainability across our value chain and in our operations.

We invest in the efficiency of our transportation fleet and warehouses, generate on-site solar power for operations use, and focus on diverting waste from landfills.

In early 2020, UNFI joined the Climate Collaborative, solidifying commitments to energy efficiency, food waste reduction and sustainable transportation.

We believe that freedom of food choice matters and we play a vital role in delivering safe, quality and nutritious food options to more tables across North America.

We are also working to increase access to better food, particularly for people in low-income and rural communities, or vulnerable situations, through monetary and in-kind donations, and operating retail stores in underserved areas.

Our 501(c)(3) nonprofit, the UNFI Foundation, provides grants to nonprofit organizations working to build better food systems and nurture everyday health.

We also encourage our associates to make a difference by volunteering their time in their communities.

We believe that freedom of food choice matters, and every day we strive to deliver better food options to more tables across North America.

We are a pioneer in the distribution of high-quality natural and organic and specialty food products.

We believe that through the acquisition of Supervalu, we have increased opportunities to deliver better food options to new communities and customers.

The safety and well-being of our associates is a top priority.

Throughout the COVID-19 pandemic, we have quickly and continuously adopted and added safety measures to protect our associates and the communities we serve.

We are focused on fostering a culture of caring and safety;

we are continuously striving toward zero injuries and accidents.

Social and environmental responsibility is integral to our overall business strategy, and we believe these practices deliver significant value to our stakeholders, including our shareholders, associates, customers, suppliers and communities.

In addition, we focus on developing and maintaining practices and procedures to keep our workplaces safe.

Our Strategic Priorities

We are focused on five strategic priorities that we believe will contribute to our future success:

We remain focused on five strategic priorities that we believe will contribute to our future success:

Foster a People-Driven Culture .

Embracing our core mission to transform the world of food and recognizing that our culture of safety and integrity is at the forefront of everything we do.

Financial Accountability .

Delivering on our financial commitments, driving performance to achieve financial targets.

Financially, we are focused on the successful integration of Supervalu into UNFI, realizing cost synergies, optimizing our distribution center network, driving cross-selling of products and services across our businesses, and generating cash to pay down debt.

Building out the store through effectively selling our entire portfolio of products and services, which provide differentiated solutions for our customers.

Deploying Thrive2, our project to drive integrated work streams, which provide better experiences for our customers, associates and suppliers and allow us to realize synergy benefits from simplification.

The implementation of an efficient, standardized operating model powers better experiences for associates, customers and suppliers.

Divesting our retail assets in a thoughtful and economic manner.

We are focused on completing the integration of Supervalu into UNFI, realizing cost synergies, optimizing our distribution center network, driving cross-selling of products and services across our businesses and generating cash to pay down debt.

Execute on our Core Business .

Completing our Thrive2 initiative, our project to drive integrated work streams and standardized operating procedures, which provide better experiences for our customers, associates and suppliers and allow us to realize synergy benefits from simplification, pursuing additional operational efficiencies, and delivering food solutions.

Focus on Growth .

Building out the store through effectively cross-selling our entire portfolio of products and services, which provide differentiated solutions for our customers, and actively pursuing new customers.

Divest Retail .

Divesting our retail assets in a thoughtful and economic manner, a process which we believe may take up to an additional 24 months to be complete.

In recent years, our sales to existing and new customers have increased through:

the acquisition of natural and specialty products distributors and most recently the previously largest publicly traded conventional distributor, Supervalu;

the continued growth of the natural and organic products industry in general;

increased market share as a result of our high quality service and broader product selection, including specialty products;

the expansion of our existing distribution centers;

the construction of new distribution centers;

the introduction of new products and the development of our own line of natural, organic and conventional branded products.

Through these efforts, we believe that we have been able to broaden our geographic penetration, expand our customer base, enhance and diversify our product selections, increase our market share, increase operating efficiencies in existing facilities and open new facilities.

Our strategic plan includes increasing the type of products and services we provide to our customers, including perishable products and conventional produce to “build out the store” and cover center store, as well as perimeter offerings and private brands products, and providing services to additional customers, including marketing and e-commerce solutions.

Our Customers

We maintain long-standing relationships with our customers.

We serve approximately 30,000 unique customer locations, including customers acquired from the Supervalu acquisition, primarily located across the United States and Canada, which we classify into four customer types:

Supermarkets, which include accounts that also carry conventional products, and include chain accounts, supermarket independents, and gourmet and ethnic specialty stores.

We serve approximately 30,000 unique customer locations, primarily located across the United States and Canada, which we classify into five customer types:

Chains , which consists of customer accounts that typically have more than 10 operating stores and exclude stores included within the Supernatural and Other channels defined below ;

Independent retailers , which include smaller size accounts and include single store and multiple store locations, but are not classified within Chains above or Other discussed below ;

Supernatural , which consists of chain accounts that are national in scope and carry primarily natural products, and currently consists solely of Whole Foods Market ;

Independents, which include single store and chain accounts (excluding supernatural, as defined above), which carry primarily natural products and buying clubs of consumer groups joined to buy products.

Other, which includes foodservice, e-commerce and international customers outside of Canada, as well as sales to Amazon.com, Inc.

Retail , which includes our Retail segment, including the Cub Foods business and the majority of the remaining Shoppers locations, excluding five Shoppers locations that are held for sale ;

Other , which includes international customers outside of Canada, foodservice, e-commerce, conventional military business and other sales .

In the fourth quarter of fiscal 2020, we recast our presentation of net sales by customer channel to be on a basis consistent with customer size, with international customers other than Canada and alternative format sales continuing to be classified within Other.

Refer to Part II, Item 7—Results of Operations of this Annual Report on Form 10-K for additional information.

We have been the primary distributor to Whole Foods Market for more than twenty years.

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Whole Foods Market is our only customer that represented more than 10% of total net sales in fiscal 2020 .

Our customers include single and multiple store independent grocery store retailers, regional chains and the military, many of which are long tenured customers.

Our customers include single and multiple store independent grocery store retailers, regional chains, foodservice and the military, many of which are long tenured customers.

The following were included among our wholesale customers for fiscal 2020 :

Whole Foods Market, the largest supernatural chain in the United States and Canada;

Cash and Carry Stores, The Fresh Market, Coborn’s, Natural Grocers, Jerry’s Foods, Vitamin Cottage, Festival Foods, All American Quality Foods, Ahold Delhaize banners (Giant-Carlisle, Stop & Shop, Giant-Landover, and Hannaford), Superior Grocers, Vallarta Supermarkets, Wegmans, Raley’s, Redner’s Markets, Neiman's Family Market, Dierberg’s, El Super Supermarkets, Earth Fare, Sprouts Farmers Market, Lucky’s, Kroger, Harris Teeter, Giant Eagle, Market Basket, Shop-Rite, Publix, Raley’s, and Loblaws.

Our total international net sales, including those by UNFI Canada, Inc.

(“UNFI Canada”) and excluding sales transacted in U.S.

dollars and shipped internationally, represented approximately one percent of our net sales in fiscal 2019 , three percent in fiscal 2018 and four percent in fiscal 2017 .

Cash and Carry Stores, The Fresh Market, Coborn’s, Natural Grocers, Jerry’s Foods, Vitamin Cottage, Festival Foods, All American Quality Foods, Ahold Delhaize banners (Giant-Carlisle, Stop & Shop, Giant-Landover, and Hannaford), Lunds & Byerlys, Superior Grocers, Vallarta Supermarkets, Wegmans, Raley’s, Redner’s Markets, Neiman’s Family Market, Dierberg’s, El Super Supermarkets, Sprouts Farmers Market, Kroger, Harris Teeter, Giant Eagle, Market Basket, Schnucks Shop-Rite, Publix, Raley’s and Loblaws.

Our international net sales primarily reflect UNFI Canada, Inc.

(“UNFI Canada”) and exclude sales transacted in U.S.

dollars and shipped internationally, which is a smaller component of our business.

UNFI Canada represented approximately one percent of our net sales in fiscal 2020 .

We believe that our sales outside the United States will expand as we seek to continue to grow our Canadian operations.

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We believe the expanded product and service offerings from these acquisitions has enhanced and will continue to enhance our ability to acquire new customers and present opportunities for cross-selling complementary product lines.

The Supervalu acquisition advanced our “Build Out The Store” strategy and brought incremental capabilities to the Company in these areas.

We now carry an unmatched product assortment that allows us to cross-sell natural products to conventional customers and conventional products to natural customers, all while reducing the number of weekly deliveries that each receives.

Supervalu also brings a robust suite of services that are now available to our natural customer base, services necessary to run their business and provide opportunities to simplify and focus on their operations.

We also believe the Supervalu acquisition will provide additional scale to lower our overall costs.

We believe that as a result of the Supervalu acquisition, we carry an unmatched product assortment that allows us to cross-sell natural products to conventional customers and conventional products to natural customers, all while reducing the number of weekly deliveries that each receives.

Supervalu provided a robust suite of services that are now available to our natural customer base, services necessary to run their business and that provide opportunities to simplify and focus on their operations.

We also believe the Supervalu acquisition provides additional scale to lower our overall costs.

Finally, we are now a coast-to-coast distributor with customers in all fifty states as well as all ten provinces in Canada, making us a desirable partner for consumer product manufacturers.

Our expanded scale and product assortment as a result of the Supervalu acquisition positioned us to continue to serve our customers and communities through the COVID-19 pandemic.

Our recent business acquisitions include:

On October 22, 2018, we acquired Supervalu for an aggregate purchase price of approximately $2.3 billion , which included the assumption of outstanding debt and liabilities.

The acquisition of Supervalu accelerates our build out the store strategy, diversifies the Company’s customer base, enables cross-selling opportunities, expands market reach and scale, enhances technology, capacity and systems, and is expected to deliver significant cost synergies and accelerate potential growth.

Gourmet Guru.

In August 2016, the Company acquired all of the outstanding equity securities of Gourmet Guru Inc.

(“Gourmet Guru”) in a cash transaction for approximately $10.0 million .

Gourmet Guru is a distributor and merchandiser of fresh and organic food focusing on new and emerging brands.

We believe that our acquisition of Gourmet Guru enhances our strength in finding and cultivating emerging fresh and organic brands and further expands our presence in key urban markets.

Gourmet Guru’s operations have been combined with the Company’s existing broadline natural, organic and specialty distribution business in the United States.

On October 22, 2018 (the “Supervalu acquisition date”), we acquired Supervalu for an aggregate purchase price of approximately $2.3 billion , which included the assumption of outstanding debt and liabilities.

The acquisition of Supervalu accelerated our “build out the store” strategy, diversified our customer base, enabled cross-selling opportunities, expanded market reach and scale, enhanced technology, capacity and systems, and is expected to continue to deliver significant cost synergies and accelerate potential growth.

Haddon House.

In May 2016, the Company acquired Haddon House Food Products Inc.

In May 2016, we acquired Haddon House Food Products Inc.

(“Haddon”) and certain affiliated entities and real estate for total cash consideration of approximately $217.5 million .

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Our acquisition of Haddon has expanded our gourmet and ethnic product and service offering which continues to play an important role in our ongoing strategy to build out these product categories.

Haddon’s operations have been combined with the Company’s existing broadline natural, organic and specialty distribution business in the United States.

Nor-Cal Produce.

In March 2016, the Company acquired Nor-Cal Produce, Inc.

(“Nor-Cal”) and an affiliated entity as well as certain real estate, in a cash transaction for approximately $67.8 million .

Nor-Cal is a distributor of conventional and organic produce and other fresh products primarily to independent retailers in Northern California, with primary operations located in West Sacramento, California.

Our acquisition of Nor-Cal has aided in our efforts to expand our fresh offering, particularly with conventional produce.

Nor-Cal’s operations have been combined with the existing Albert’s Organics, Inc.

(“Albert’s”) business.

Albert’s Organics .

In March 2016, the Company acquired certain assets of Global Organic/Specialty Source, Inc.

Haddon’s operations have been combined with our existing business in the United States.

Nor-Cal Produce and Global Organics.

In March 2016, we acquired (i) Nor-Cal Produce, Inc.

(“Nor-Cal”) and an affiliated entity as well as certain real estate, in a cash transaction for approximately $67.8 million, and, (ii) certain assets of Global Organic/Specialty Source, Inc.

and related affiliates (collectively “Global Organic”) through our wholly owned subsidiary Albert’s Organics, Inc.

(“Albert’s”), in a cash transaction for approximately $20.6 million.

Global Organic is a distributor of organic fruits, vegetables, juices, milk, eggs, nuts, and coffee located in Sarasota, Florida serving customer locations across the southeastern United States.

Global Organic’s operations have been fully integrated into the existing Albert’s business in the Southeastern United States.

In July 2014, we completed the acquisition of all of the outstanding capital stock of Tony’s Fine Foods (“Tony’s”), through our wholly-owned subsidiary UNFI West, Inc.

(“UNFI West”).

With the completion of the transaction, Tony’s became a wholly-owned subsidiary and continues to operate as Tony’s Fine Foods.

Tony’s is headquartered in West Sacramento, California and is a leading distributor of perishable food products, including a wide array of specialty protein, cheese, deli, food service and bakery goods to retail and specialty grocers, food service customers and other distribution companies principally located throughout the Western United States, as well as Alaska and Hawaii.

During fiscal 2015, we began shipping customers both center of the store products and an enhanced selection of fresh, perishable products typically located in the perimeter of the store.

Our customers utilized both UNFI’s broadline and Tony’s perishable offerings, including grocery, refrigerated, protein, specialty cheese and prepared foods.

Our customers seek a full spectrum of offerings and we believe that there is significant value in UNFI’s position as a leading provider of logistics, distribution and category management for both center of the store and perimeter products.

Our Operating Structure

Our continuing operations are organized as follows:

our Wholesale reportable segment includes:

our broadline natural, organic and specialty distribution business in the United States, including our Select Nutrition business which distributes vitamins, minerals and supplements;

our Supervalu conventional business, which distributes conventional grocery and other products, and includes a private brands business with the Essential Everyday®, Wild Harvest®, and Culinary Circle® brands, and provides logistics and professional service solutions to retailers across the United States and internationally;

Tony’s, which distributes a wide array of specialty protein, cheese, deli, foodservice and bakery goods, principally throughout the Western United States;

Albert’s, which distributes organically grown produce and non-produce perishable items within the United States, and includes the operations of Nor-Cal, a distributor of organic and conventional produce and non-produce perishable items principally in Northern California;

UNFI Canada, which is our natural, organic and specialty distribution business in Canada.

our manufacturing and branded products businesses include the following operating segments that do not meet the quantitative disclosure thresholds of a reportable segment:

our Blue Marble Brands branded product lines;

Woodstock Farms Manufacturing.

In recent years, our sales to existing and new customers have increased through:

the continued growth of the natural and organic products industry in general;

increased market share as a result of our high quality service and a broader product selection, including specialty products;

the acquisition of, or merger with, natural and specialty products distributors and most recently the largest publicly traded conventional distributor, Supervalu;

the expansion of our existing distribution centers;

the construction of new distribution centers;

the introduction of new products and the development of our own line of natural, organic and conventional branded products.

Our strategic plan includes increasing the type of products we distribute to our customers, including perishable products and conventional produce to “build out the store” and cover center of the store, as well as perimeter offerings.

Subsequent to August 3, 2019 , we reorganized our sales organization into four regions led by four region presidents.

The regions consist of Atlantic, South, Central and Pacific.

The region president in each region is responsible for product and service strategy, execution, and financial results.

We organize and operate our Wholesale reportable segment through four U.S.

geographic regions:

Atlantic, South, Central and Pacific;

each of which is led by separate region presidents responsible for product and service strategy, execution, and financial results;

and Canada Wholesale which is operated separately from the U.S.

Wholesale business.

Product and service categories include, grocery, fresh, wellness, private brands, e-commerce, food service and multi-cultural.

This new structure combines our legacy natural sales organization and distribution center network with our legacy conventional sales organization and distribution network offering our customers a consolidated supply solution.

Territory managers in these regions now sell across our complete lines of products.

This change brings us to our customers more frequently with all of our service offerings and we anticipate identifying and taking advantage of sales opportunities that result from our customers having a single point of contact for all of our products and services.

Certain of our distribution centers are shared across business components.

Tony’s operates out of four distribution centers located in California and Washington.

In addition to the four Tony’s facilities, the Company distributes Tony’s perishable products from certain of our other broadline distribution centers, including our Aurora, Colorado facility.

Albert’s operates out of eight distribution centers located throughout the United States.

Four of the eight distribution centers are co-located with other wholesale operations.

UNFI Canada distributes natural, organic and specialty products to our Canada customers.

As of our 2019 fiscal year end, UNFI Canada operated four distribution centers.

Through Select Nutrition, we distribute more than 12,000 health and beauty aids, vitamins, minerals and supplements from distribution centers in Pennsylvania and California.

As a result of the Supervalu acquisition we’ve added 11 brands with over 4,000 stock-keeping units (“SKUs”) sold exclusively and reported as sales through our Wholesale segment.

These brands span the value, national brand equivalent, organic and premium quality tiers.

Manufacturing and Natural Branded Products Businesses

Our Blue Marble Brands portfolio is a collection of 17 organic, non-GMO, clean and specialty food brands representing more than 700 unique retail and food service products sourced from over 30 countries around the globe.

Blue Marble Brands defines clean ingredients to be minimally processed foods, using only essential ingredients that contain no artificial colors or flavors.

Our Blue Marble Brands products are sold through our Wholesale segment, third-party distributors and directly to retailers.

Our Field Day® brand is primarily sold to customers in our independent channel and is meant to serve as a private label brand for retailers to allow them to compete with supermarket and supernatural chains which often have their own private label store brands.

Our subsidiary doing business as Woodstock Farms Manufacturing specializes in importing, roasting, packaging and the distribution of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections for our customers and in the Company’s branded products.

Woodstock Farms Manufacturing sells items manufactured in bulk and through private label packaging arrangements with large health food, supermarket and convenience store chains and independent retailers.

We operate an organic (United States Department of Agriculture (“USDA”) and Quality Assurance International (“QAI”)) and kosher (Circle K) certified packaging, roasting, and processing facility in New Jersey that is SQF (Safety Quality Food) level 2 certified.

This operating structure includes regional sales organizations and distribution center networks, which offer a combination of conventional and natural products to our customers as a consolidated supply solution.

Territory managers in these regions sell across our complete lines of products, which brings us to our customers more frequently with all of our service offerings allowing us to anticipate and identify sales opportunities that result from our customers having a single point of contact for all of our products and services.

We have established a national network of strategically located distribution centers utilizing a multi-tiered logistics system.

The network includes facilities that carry slow turn or fast turn groceries, perishables, general merchandise and home, health and beauty care products.

For financial reporting purposes, sales from our distribution centers to our own Retail stores are eliminated from of our Wholesale segment within Eliminations.

We offer Wholesale customers a wide variety of food and non-food products, and our own extensive lines of private label products.

We also offer a broad array of professional services.

As a logistics provider, efficiency is an important customer service measure.

We optimize our facilities to implement leading warehouse technology, ranging from radio-frequency devices guiding selectors to mechanized facilities with completely automated order selection for dry groceries that help us deliver aisle-ready pallets to Wholesale customers.

Our Wholesale segment also focuses on improving our supply chain to achieve labor and cost efficiencies.

To maintain our market position and improve our operating efficiencies, we seek to continually:

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consolidate systems applications among physical locations and regions;

increase our investment in people, facilities, equipment and technology;

integrate administrative and accounting functions;

invest in our people, facilities, equipment and technology;

reduce the geographic overlap between regions.

Our continued growth has allowed us to expand our existing facilities and open new facilities in an effort to achieve increasing operating efficiencies.

In fiscal 2019, we acquired retail operations that are classified as discontinued operations in our Consolidated Financial Statements included in this Annual Report.

As of August 3, 2019 , our discontinued operations include 96 retail grocery stores acquired in the Supervalu acquisition.

Our intent is to thoughtfully and economically divest these stores.

For financial reporting purposes, sales from our distribution centers to our Shopper’s retail banner are eliminated within the Wholesale segment, as we do not expect to dispose of the business with a supply agreement.

Wholesale segment sales to our Cub Foods retail banner are not eliminated within the Wholesale segment or total net sales, as we expect and are marketing the business for sale with a supply agreement.

In addition, Wholesale segment sales to our Hornbacher’s retail banner disposed during fiscal 2019 were not eliminated through the closing date, and now continue to be recognized as sales to a third-party.

We disposed of our Earth Origins Market (“Earth Origins”) retail business during fiscal 2018, which was not classified in discontinued operations.

Our Retail stores provide an extensive grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy.

We offer national and regional brands as well as our own private label products.

Depending on the banner, a typical Retail store carries approximately 17,000 to 21,000 core stock-keeping units (“SKUs”) and ranges in size from approximately 50,000 to 70,000 square feet.

We believe our Retail banners have strong local and regional brand recognition in the markets in which they operate.

Our Retail continuing operations are supplied by our distribution centers, which also supply our Wholesale customers.

Our Retail segment includes 71 Cub Foods and Shoppers retail grocery stores acquired in the Supervalu acquisition.

Prior to the fourth quarter of fiscal 2020 and since the Supervalu acquisition, we had presented these stores within discontinued operations.

As a result, our Consolidated Financial Statements and financial information presented within this Annual Report on Form 10-K reflect the Retail segment operations of Cub Foods and certain Shoppers stores within continuing operations, with prior periods having been revised to conform with the current period presentation.

Throughout this Annual Report on Form 10-K references to Retail exclude previously disposed Shoppers stores, five Shoppers stores that are held for sale, and the Hornbacher’s, Shop ‘n Save and Shop ‘n Save East retail banners, all of which we acquired as a result of the Supervalu acquisition and previously disposed.

The results of these businesses continue to be presented as discontinued operations.

Our Products and Services

Our Product Offering

Our extensive selection of products includes natural, organic and specialty foods and non-food products and includes nationally advertised brand name and private-label products, including grocery (both perishable and nonperishable), general merchandise, home, health and beauty care, and pharmacy, which are sold through our Wholesale segment to wholesale customers and through Supervalu-operated retail stores to shoppers.

We offer natural, organic and specialty foods and non-food products, consisting of national, regional and private label brands grouped into six product categories:

Our extensive selection of products includes natural, organic, specialty, produce, and conventional grocery, and non-food products.

We offer nationally advertised brand name and private-label products, including grocery (both perishable and nonperishable), general merchandise, home, health and beauty care, and pharmacy, which are sold through our Wholesale segment to wholesale customers and our Retail stores to shoppers.

We offer six main product categories:

grocery and general merchandise;

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and personal care items.

Our branded product lines address certain needs of our customers, including providing a lower-cost label known as Field Day®.

Our private-label products include:

the premium brands CULINARY CIRCLE® and STOCKMAN AND DAKOTA®, which offer unique, premium quality products in highly competitive areas;

WILD HARVEST®, which is free from over 150 undesirable ingredients;

core brands ESSENTIAL EVERYDAY®, EQUALINE®, SPRINGFIELD®, and category-specific brands ARCTIC SHORES SEAFOOD COMPANY®, BABY BASICS®, STONE RIDGE CREAMERY® and SUPER CHILL®, which provide shoppers quality national brand equivalent products at a competitive price;

and the value brand SHOPPER’S VALUE®, which offers budget conscious consumer quality alternatives to national brands at substantial savings.

the premium brand CULINARY CIRCLE®, which offers premium quality products in highly competitive categories;

WILD HARVEST® and Field Day®, which include organic, non-GMO and items free from over 140 undesirable ingredients;

core brands ESSENTIAL EVERYDAY®, EQUALINE®, SPRINGFIELD®, and category-specific brands ARCTIC SHORES SEAFOOD COMPANY®, BABY BASICS®, STONE RIDGE CREAMERY® and SUPER CHILL®, which provide national brand equivalent products at a competitive price;

and the value brand SHOPPERS VALUE®, which offers the budget conscious consumer quality alternatives to national brands at substantial savings.

Manufacturing and Natural Branded Products Businesses

Our Blue Marble Brands portfolio is a collection of 16 organic, non-GMO, clean and specialty food brands representing more than 700 unique retail and food service products sourced from 29 countries around the globe.

Blue Marble Brands defines clean ingredients to be minimally processed foods, using only essential ingredients that contain no artificial colors or flavors.

Our Blue Marble Brands products are sold through our Wholesale segment, third-party distributors and directly to retailers.

Our subsidiary doing business as Woodstock Farms Manufacturing specializes in importing, roasting, packaging and distributing nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections for our customers and in the Company’s branded products.

Our Professional Services Offerings

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These services include pass-through programs in which vendors provide services directly to our Wholesale customers, as well as services and solutions we develop and provide directly.

Our services include retail store support, advertising, couponing, e-commerce, network and data hosting solutions, training and certifications classes, and administrative back-office solutions.

Our services include retail store support, advertising, couponing, e-commerce, network and data hosting solutions, and administrative back-office solutions.

The sales and operating results for these services are included within Wholesale.

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These programs are designed to educate consumers, profile suppliers and increase sales for retailers, many of which do not have the resources necessary to conduct such marketing programs independently.

Set forth below are the services offered by each to these programs:

Set forth below are the services offered by each of these programs:

Consumer Marketing Programs

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Truck advertising programs allow our suppliers to purchase advertising space on the sides of our hundreds of trailers traveling throughout the United States and Canada, increasing brand exposure to consumers.

Web and digital marketing services including websites, mobile apps, and e-Commerce capabilities.

Web and digital marketing services including websites, mobile applications, and e-commerce capabilities.

Trade Marketing Programs

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This program offers weekly and monthly reporting, enabling suppliers to identify areas of sales growth while pinpointing specific opportunities for achieving greater profits.

Supplier-In-Site (SIS), an information-sharing website that helps our suppliers better understand the independents channel in order to generate mutually beneficial incremental sales in an efficient manner.

Supplier-In-Site (SIS), an information-sharing website that helps our suppliers better understand our Wholesale customers in order to generate mutually beneficial incremental sales in an efficient manner.

Growth incentive programs, supplier-focused high-level sales and marketing support for selected brands, which foster our partnership by building incremental, mutually profitable sales for suppliers and us.

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Organic Certification

Our “Certified Organic Distributor” certification covers all of our broadline distribution centers in the United States, except for facilities acquired in connection with the acquisitions of Tony’s, Haddon, and Nor-Cal.

Our “Certified Organic Distributor” certification covers all of our natural distribution centers in the United States, except for facilities acquired in connection with the acquisitions of Tony’s, Haddon, and Nor-Cal.

Although not designated as a “Certified Organic Distributor” by QAI, the three Tony’s California locations are certified as Organic by the State of California Department of Public Health Food and Drug Branch, and Nor-Cal is currently registered with the California Department of Food and Agriculture Organic Program as an organic handler.

In addition, our Canadian distribution centers in British Columbia and Ontario both hold one of the following organic distributor certifications:

In addition, our three Canadian distribution centers in British Columbia and Ontario each hold one of the following organic distributor certifications:

QAI, EcoCert Canada or ProCert Canada.

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We typically finance these working capital needs with funds provided by operating activities and available credit through our revolving credit facility.

In fiscal 2020, we experienced significant changes in our inventory, accounts payable and accounts receivable as a result of the customer behavior responses to the spread of COVID-19 and economic impacts in the second half of fiscal 2020.

Our working capital levels have since stabilized to meet the higher levels of demand, and we expect our working capital to fluctuate with any macroeconomic impacts and changes in food-at-home purchasing levels.

Our Suppliers

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The sites for our distribution centers are chosen to provide direct access to our regional markets.

This proximity allows us to reduce our transportation costs relative to those of our competitors that seek to service these customers from locations that are often several hundred miles away.

This proximity allows us to reduce our transportation costs relative to those of our competitors that seek to service these customers from locations that are often much further away.

We believe that we incur lower inbound freight expense than our regional competitors because our scale allows us to buy full and partial truckloads of products.

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We ship certain orders for supplements or for items that are destined for areas outside of regular delivery routes through independent carriers.

Deliveries to areas outside the continental United States and Canada are typically shipped by ocean-going containers on a weekly basis.

Deliveries to areas outside the continental United States and Canada are typically shipped by freight-forwarders through ocean-going containers.

Our Focus on Technology

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As part of our “one company” approach, we are in the process of converting to a single national warehouse management and procurement system to integrate our existing facilities, including acquired Supervalu facilities, onto one nationalized platform across the organization.

We continue to be focused on the automation of our new or expanded distribution centers that are at different stages of construction and implementation.

We continue to focus on the automation of our new or expanded distribution centers that are at different stages of construction and implementation.

These steps and others are intended to promote operational efficiencies and improve operating expenses as a percentage of net sales.

The food distribution industry is highly competitive.

The food distribution industry and the retail food industry are highly competitive.

Our largest competition comes from direct distribution, whereby a customer reaches a product volume level that justifies distribution directly from the manufacturer in order to obtain a lower price.

We compete on the basis of price, quality, assortment, schedule and reliability of deliveries and services, value-added services, service fees and distribution facility locations.

We also compete in the United States and Canada with numerous national, regional, and local distributors of grocery and non-grocery consumable products.

We compete in the United States and Canada with numerous national, regional, and local distributors of grocery and non-grocery consumable products.

We also face indirect competition through our customers and direct competition in our retail stores from alternative methods of food distribution, such as internet-based retailers, non-traditional retailers, discount supermarket chains, supercenters, membership warehouse clubs, dollar stores and meal-delivery services.

The strategic acquisition of Supervalu provided us with greater scale, a broader product assortment, and a suite of professional services that enhance our ability to compete.

Our customers also compete with online retailers and distributors that seek to sell products directly to customers.

Recent and ongoing consolidation within the grocery industry has resulted in, and is expected to continue to result in, increased competition, including from some competitors that have greater financial, marketing and other resources than us.

In recent years consolidation within the grocery industry has resulted in, and is expected to continue to result in, increased competition, including from some competitors that have greater financial, marketing and other resources than us.

Government Regulation

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The USDA imposes standards for product safety, quality and sanitation through the federal meat and poultry inspection program.

The FDA Food Safety Modernization Act (“FSMA”), expanded food safety requirements and FDA food safety authorities and, among other things, requires that the FDA impose comprehensive, prevention-based controls across the food supply chain, further regulates food products imported into the United States, and provides the FDA with mandatory recall authority.

The FSMA requires the FDA to undertake numerous rulemakings and to issue numerous guidance documents, as well as reports, plans, standards, notices, and other tasks.

The FDA Food Safety Modernization Act in the United States and the Safe Foods for Canadians Act in Canada have expanded food safety requirements across the food supply chain and, among other things, impose additional regulations focused on prevention of food contamination, more frequent inspection of high-risk facilities, increased record-keeping, and improved tracing of food.

Products that do not meet regulatory standards and/or comply with these regulations may be considered to be adulterated and/or misbranded and subject to recall.

The Surface Transportation Board and the Federal Highway Administration regulate our trucking operations.

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We have in the past been the focus of union-organizing efforts, and we believe it is likely that we will be the focus of similar efforts in the future.

In December 2018, the National Labor Relations Board certified the election results of our driver and warehouse employees in Vernon, California to be represented by the Teamsters union.

We are in the process of negotiating collective bargaining agreements with these employees.

Generally, we do not experience any material seasonality.

However, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, personnel changes, demand for our products, supply shortages and general economic conditions.

However, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, demand for our products, supply shortages and general economic conditions.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business