Item 1. Business
ITEM 1. BUSINESS
In this Annual Report on Form 10-K (“Annual Report” or “Report”), unless otherwise specified, references to “United Natural Foods”, “UNFI”, “we”, “us”, “our” or the “Company” mean United Natural Foods, Inc. together with its consolidated subsidiaries. We are a Delaware corporation based in Providence, Rhode Island and Eden Prairie, Minnesota. We conduct our business through various subsidiaries. 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.
Our Background
UNFI is a leading distributor of grocery and non-food products, and support services provider to retailers 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 diversified customer base includes over 30,000 customer locations ranging from some of the largest grocers in the country to smaller independents as well. We offer approximately 260,000 products consisting of national, regional and private label brands grouped into six product categories: grocery and general merchandise; produce; perishables and frozen foods; nutritional supplements and sports nutrition; bulk and foodservice products; and personal care items. We believe we are North America’s premier wholesaler with 56 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers. We believe our total product assortment and service offerings are unmatched by our wholesale competitors. We plan to continue to pursue new business opportunities with independent retailers that operate diverse formats, regional and national chains, as well as international customers with wide-ranging needs. Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division.
Our Strategic Priorities
We are committed to executing our Fuel the Future strategy. Through this strategy, UNFI is building a food ecosystem that is better for all by delivering great food, more choices and fresh thinking for our customers and suppliers. Our Fuel the Future strategy consists of six pillars: Fulfill Power in Scale, Unlock the Customer Experience, Taste the Future, UNFI Pride, Retail Optimized, and Earn Results. We are executing our strategy through four focus areas:
1) Customers: Utilizing our scale, insights and innovative offerings to develop a differentiated value proposition that helps our customers grow and gain share.
2) Suppliers: Strengthening our capabilities, especially those driven by technology, to deliver value creating programs to our suppliers.
3) Associates: Building a culture that inspires pride and enables associates to do their best work.
4) Communities: Supporting our communities and the planet through our wide-ranging and ambitious environment, social and governance (ESG) initiatives.
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 in part through our 2018 acquisition of SUPERVALU INC. (“Supervalu”).
Our Commitment to Social and Environmental Responsibility
We Believe in Better for All
We are committed to being good stewards of our planet, our communities and our people through tangible action. In fiscal 2022, we published our 11 th annual environmental, social and governance report, which we refer to as our Better For All report and the first update to our Better for All plan, which seeks to build a food system that is better for our people, our communities and our world. The report is available on our website at www.betterforall.unfi.com and expands the six impact focus areas to provide a more in-depth look at the direct and indirect impacts at multiple points along the value chain. Our key focus areas include Diversity & Inclusion, Responsible Procurement, Community Development, Governance, Associate Safety & Well-Being, Climate Action, Waste Reduction, Customer Health & Safety, and Energy Efficiency. Our Better for All Report and the contents of our Better For All webpage are not incorporated by reference into or considered to be part of this Annual Report.
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Better for Our World
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 fiscal 2022, we announced a new set of climate targets covering Scope 1, 2 and 3 emissions, which have been validated by the Science Based Targets initiative. To help address value chain emissions, we created the UNFI Climate Action Hub, which provides tools and resources to our suppliers to help innovate and scale climate solutions across the food system.
Better for Our Communities
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 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. The UNFI Foundation, a 501(c)(3) organization, provides grants to nonprofit organizations working to build better food systems and nurture everyday health. In fiscal 2022, the UNFI Foundation announced the UNFI Food Equity Project, which aims to invest in community-led solutions that create more equitable access to fresh, healthy food. We also encourage our associates to make a difference by volunteering in their communities, including through paid volunteer time off.
Better for Our People
The safety and wellbeing of our associates is a top priority. We are focused on fostering a culture of caring and safety; we are continuously striving toward zero injuries and accidents. We are also working to advance diversity, equity and inclusion in our workplace by creating and maintaining a culture of inclusion and empathy through open dialogue, effective associate training, and by honoring holidays and special events that speak to our associates’ identities. In fiscal 2021, we launched a new “Missions” platform to promote awareness of our Better for All goals and engage associates in issues that matter to them and to UNFI as a whole.
Social and environmental responsibility remains integral to our overall business strategy, and we believe these practices deliver significant value to our stakeholders, including our stockholders, associates, customers, suppliers and communities.
Our Customers
We maintain long-standing relationships with many of our customers. We serve over 30,000 unique customer locations, primarily located across the United States and Canada, which we classify into five customer types: Chains; Independent retailers; Supernatural; Retail; and Other. Refer to Note 3—Revenue Recognition in Part II, Item 8 of this Annual Report for additional information.
We have been the primary distributor to Whole Foods Market for more than 20 years. We continue to serve as the primary distributor to Whole Foods Market in all of its regions in the United States pursuant to an amended distribution agreement with a term through September 27, 2027. Whole Foods Market is our only customer that represented more than 10% of total Net sales in fiscal 2022.
Our international Net sales primarily reflect UNFI Canada, Inc. (“UNFI Canada”), which represented approximately 1% of our Net sales in fiscal 2022. International business excludes sales transacted in U.S. dollars and shipped internationally, which is an even smaller component of our business.
We also continue to invest in technology and systems with the intent of improving the efficiency of our operations, enhancing the customer experience and growing our services platform, including our eCommerce and innovation businesses. This includes sales to eCommerce companies as well as business-to-business sales to non-traditional customers. In fiscal 2021, we launched Community Marketplace by UNFI, a business-to-business digital eCommerce solution for emerging brands looking to expand distribution with UNFI customers. Through this virtual marketplace, suppliers gain immediate access to UNFI’s digital infrastructure to promote and sell their products to UNFI’s broad customer base while UNFI customers gain access to an even broader assortment of unique and local items with flexible order sizes and the convenience of ordering from multiple sources online in one place.
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Wholesale
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 a separate regional president 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, eCommerce, foodservice and multi-cultural. 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 our complete lines of products, which allows 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.
Operations
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 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. Deployment of continuous improvement methodologies within our supply chain is focused on delivering labor and cost efficiencies while also improving our ability to more effectively service our customers.
To maintain our market position and improve our operating efficiencies, we seek to continually:
• expand our marketing and customer service programs across regions;
• expand our national purchasing opportunities;
• offer a broader product and value add service selection than our competitors;
• offer operational excellence with high service levels and a higher percentage of on-time deliveries and fill rates than our competitors;
• centralize and streamline general and administrative functions to reduce expenses;
• consolidate systems applications among physical locations and regions; and
• invest in our people, facilities, equipment and technology.
Procurement
We maintain contracts with suppliers to procure their products. Our procurement process includes assessments of demand planning, pricing, seasonality and other factors. Inventory costs are determined when products are procured, and include vendor funds received and inbound freight, among other items. The gross margins we earn on sales to our customers are typically based on a percentage mark-up, or fee, on top of vendor listed base cost, which vary by customer, product type, vendor size, volume throughput, transportation methods and distances, among other factors. Net sales to customers are determined at the time of sale based on the then prevailing vendor listed base cost, and include discounts we offer to our customers. The differential between the procured cost, including vendor funds and inbound freight, as compared to the net sales price of these products, generates our gross margin.
Acquisitions
A key component of our historical growth has been to acquire distribution companies differentiated by product offerings, service offerings and market area. We believe the expanded product and service offerings from these acquisitions has enhanced and will continue to support our ability to acquire new customers and present opportunities for cross-selling complementary product lines. The Company expects to selectively and strategically engage in acquisitions to enhance our capabilities and geographic footprint. Since our strategic $2.3 billion acquisition of conventional distributor, Supervalu, the Company has prioritized the integration of Supervalu and debt reduction and has not undertaken any additional material acquisitions. As our financial leverage has decreased following the Supervalu acquisition and to the extent it remains near our target levels, we may consider strategic acquisitions.
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Retail
Our Retail segment includes 73 Cub Foods and Shoppers retail grocery stores. 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 local brands, as well as our own private label products. 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 operations are principally supplied by five of our Wholesale distribution centers.
Our Product Offerings
Our extensive selection of products includes natural, organic, specialty, produce, and conventional grocery, and non-food products. We offer nationally recognized 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. We offer six main product categories: grocery and general merchandise; produce; perishables and frozen foods; nutritional supplements and sports nutrition; bulk and foodservice products; and personal care items.
Our owned brands portfolio is a collection of brands that offer high quality solutions for private label to our customers. ESSENTIAL EVERYDAY® is our leading national brand equivalent private label solution with 2,500+ items for departments throughout the store. It is complemented by SHOPPERS VALUE®, which offers the budget conscious consumer quality alternatives to national brands. Our WILD HARVEST® brand offers a full range of products made with simple, wholesome ingredients across multiple categories, including pet foods. Our Field Day® brand is primarily sold to natural store / co-op retailers as a private label solution. Our category-specific brands, EQUALINE®, CULINARY CIRCLE®, ARCTIC SHORES SEAFOOD COMPANY®, STONE RIDGE CREAMERY® and SUPER CHILL®, also provide national brand equivalent products at a competitive price.
Our Blue Marble Brands portfolio is a collection of national brands that offer USDA organic, non-GMO Project Verified, and specialty food and non-food items. The WOODSTOCK® brand has been pioneering organic/non-GMO products for over 35 years and continues to launch innovative products. TUMARO’S is our better for you wrap brand. MT.VIKOS®, KOYO®, ASIAN GOURMET®, MEDITERRANEAN ORGANIC®, and NATURAL SEA® are all niche specialty brands ranging from imported Greek feta cheese to organic Ramen.
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. 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.
Our Service Offerings
We offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable solutions. 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, pricing strategy, shelf and planogram management, advertising, couponing, eCommerce, consumer convenience services, store design, equipment sourcing, electronic payments processing, network and data hosting solutions, point-of-sale hardware and software, automation tools, sustainability services and administrative back-office solutions. The sales and operating results for these services are included within Wholesale.
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Our Marketing Services
We offer a variety of marketing services designed to increase sales for our customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding our markets. Trade and consumer marketing programs are supplier-sponsored programs that cater to a broad range of retail formats. All of our programs and services 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. Our goal is to provide support to ensure long-term success. Set forth below are the services offered by each of these programs:
Retail Marketing Programs
• We offer circular programs to our customers and vendors, and also provide retailers with a physical flyer and shelf tags corresponding to each month’s promotions. We also offer a web-based tool, which retailers can use to produce highly customized circulars and other marketing materials for their stores called the Customized Marketing Program.
• Web and digital marketing services including websites, mobile applications and eCommerce capabilities.
• Trailer wrap program allows our suppliers to purchase advertising space on the sides of our hundreds of trailers traveling throughout the United States and Canada, increasing exposure to end consumers.
We continually seek customer and supplier feedback to ascertain their needs and allow us to better service them. We also provide our customers with:
• trends reports in the natural and organic industry:
• product data information such as best seller lists, store usage reports and catalogs;
• assistance with store layout designs, new store design and equipment procurement;
• planogramming, shelf and category management support;
• in-store signage and promotional materials, and assistance with product display planning and set up;
• shelf tags for products; and
• a robust retailer portal with product information, search and ordering capabilities, reports and publications.
Trade Marketing Programs
• New item introduction programs showcase a supplier’s new items to retailers through trials and discounts.
• myUNFI Customer allows our suppliers to advertise directly to retailers using the portal that many retailers use to order product and/or gather product information.
• Monthly specials catalogs that highlight promotions and new product introductions.
• Customized email marketing campaigns to share supplier product information or promotion directly to our Wholesale customers’ inbox.
• Specialized catalogs for holiday and seasonal products.
Supplier Marketing Programs
• Efficient Supplier Agreement is a customized supplier relationship program designed to address key needs of a select group of suppliers.
• ClearVue®, an information sharing program offered to a select group of suppliers designed to improve the transparency of information and drive efficiency within the supply chain. With the availability of in-depth data and tailored reporting tools, participants are able to reduce inventory balances while improving service levels.
• Supply Chain by ClearVue®, an information sharing program designed to provide heightened transparency to suppliers through demand planning, forecasting and procurement insights. 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 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.
• Various marketing vehicles are offered that support the needs of our diverse customer base, while providing suppliers a cost-effective means to market and promote their products.
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Organic Certification
Our “Certified Organic Distributor” certification covers 25 of our distribution centers in the United States. Although not designated as a “Certified Organic Distributor” by QAI, two of our California locations are certified as Organic by the State of California Department of Public Health Food and Drug Branch, and another California location is currently registered with the California Department of Food and Agriculture Organic Program as an organic handler. In addition, our four Canadian distribution centers in British Columbia and Ontario each hold an organic distributor certification from either QAI or ProCert Canada.
We maintain a comprehensive quality assurance program. All of the products we sell that are represented as “organic” are required to be certified as such by an independent third-party agency. We maintain current certification affidavits on most organic commodities and produce in order to verify the authenticity of the product. Most potential suppliers of organic products are required to provide such third-party certifications to us before they are approved as suppliers.
Our Suppliers
We purchase our products from nearly 12,000 suppliers. The majority of our suppliers are based in the United States and Canada, but we also source products from suppliers throughout Europe, Asia, North America, South America, Australia and New Zealand. We believe suppliers seek to distribute their products through us because we provide access to a large customer base across the United States and Canada, distribute the majority of the suppliers’ products and offer a wide variety of marketing programs to our customers to help sell our suppliers’ products. Substantially all product categories that we distribute are available from a number of suppliers and, therefore, we are not dependent on any single supply source for any product category. In addition, although we have exclusive distribution arrangements and support programs with several suppliers, none of our suppliers accounted for more than 5% of our total purchases in fiscal 2022.
We have positioned ourselves as one of the largest purchasers of organically grown bulk products in the natural and organic products industry by centralizing our purchase of nuts, seeds, grains, flours and dried foods. As a result, we are able to negotiate purchases from suppliers on the basis of volume and other considerations that may include discounted pricing or prompt payment discounts. Furthermore, some of our purchase arrangements include the right of return to the supplier with respect to products that we do not sell in a specified period of time. Each region is responsible for placing its own orders and can select the products that it believes will most appeal to its customers, although each region is able to participate in our company-wide purchasing programs.
Our Distribution Systems
We select the sites for our distribution centers to provide direct access to the markets we serve and configure them to minimize total operating costs. 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 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. Products are delivered to our distribution centers primarily by our fleet of leased and owned trucks, contract carriers and the suppliers themselves. When financially advantageous, we pick up products from suppliers or satellite staging facilities and return them to our distribution centers using our own trucks. Additionally, the scale of our distribution network provides us with the flexibility to shift volume amongst distribution centers in the case of volume spikes, unique customer needs, temporary inbound fill rate challenges and weather-related events as well as the capacity to support future sales growth.
The majority of our trucks are leased and are maintained by third-party national leasing companies, which in some cases maintain facilities on our premises for the maintenance and service of these vehicles. We also have facilities where we operate our own maintenance shops.
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 freight-forwarders through ocean-going containers.
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Our Focus on Technology
We have made significant investments in distribution, financial, information and warehouse management systems. We continually evaluate and upgrade our systems to enhance efficiency, cost-effectiveness and responsiveness to customer needs. These systems include functionality in radio frequency inventory control, pick-to-voice systems, pick-to-light systems, computer-assisted order processing and slot locator/retrieval assignment systems. At most of our receiving docks, warehouse associates attach computer-generated, preprinted locator tags to inbound products. These tags contain the expiration date, locations, quantity, lot number and other information about the products in bar code format. Customer returns are processed by scanning the UPC bar codes. We also employ a management information system that enables us to lower inbound transportation costs by making optimum use of our own fleet of trucks and/or by consolidating deliveries to achieve full truckloads. Orders from multiple suppliers and multiple distribution centers are consolidated into single truckloads for efficient use of available capacity. In addition, route efficiency software assists us in developing the most efficient routes for our outbound trucks. As part of our “one company” approach, we have implemented a national planning and procurement system and are in the process of converting to a national warehouse management platform across the organization. We continue to focus on the automation of certain of our distribution centers that are at different development stages. These steps and others are intended to promote operational efficiencies and reduce operating expenses as a percentage of net sales.
Competition
Our Wholesale and Retail businesses operate in a highly competitive industry, which is characterized by low profit margins. Our food distribution business competes with many traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems for the business of independent grocery retailers. We also increasingly compete with deep discount retailers, limited assortment stores and wholesale membership clubs. The primary competitive factors in the Wholesale business include price, service level, product quality, variety, availability and other value-added services. 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 we do.
Independent retailers and smaller Chain customers represent a significant portion of our business and face intense competition from supercenters, deep discounters, mass merchandisers and rapidly growing alternative retail channels, such as dollar stores, discount supermarket chains, Internet-based retailers and meal-delivery services.
Our retail banners compete with traditional grocery stores, supercenters, deep discounters, mass merchandisers, limited assortment stores and eCommerce providers. The principal competitive factors in grocery retail include the location and image of the store; the price, quality, and variety of the fresh offering; and the quality, convenience, and consistency of service. Competitive strategies vary based on many factors, such as the competitor’s format, strengths, weaknesses, pricing, and sales focus. Our retail stores have continued to respond to growing competition from online and non-traditional retailers by adding options and services such as online ordering, curbside pick-up and home delivery.
Government Regulation
Our operations and many of the products that we distribute in the United States are subject to regulation by state and local health departments, the USDA and the United States Food and Drug Administration (the “FDA”), which generally impose standards for product quality and sanitation and are responsible for the administration of bioterrorism legislation. In the United States, our facilities generally are inspected at least once annually by state or federal authorities. For certain product lines, we are also subject to the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable Agricultural Commodities Act, the Packers and Stockyard Act and regulations promulgated by the USDA to interpret and implement these statutory provisions. The USDA imposes standards for product safety, quality and sanitation through the federal meat and poultry inspection program.
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. In addition, interstate motor carrier operations are subject to safety requirements prescribed by the United States Department of Transportation and other relevant federal and state agencies. Such matters as weight and dimension of equipment are also subject to federal and state regulations.
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Our facilities are subject to regulations issued pursuant to the U.S. Occupational Safety and Health Act by the U.S. Department of Labor and similar regulations by state agencies. These regulations require us to comply with certain health and safety standards to protect our employees from recognized hazards. We are also subject to the National Labor Relations Act, which provides employees the right to organize and bargain collectively with their employer and to engage in other protected concerted activity.
Our facilities in the United States and in Canada are subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater. Further, many of our distribution facilities have ammonia-based refrigeration systems and tanks for the storage of diesel fuel, hydrogen fuel and other petroleum products which are subject to laws regulating such systems and storage tanks. Moreover, in some of our facilities we, or third parties with whom we contract, perform vehicle maintenance. Our policy is to comply with all applicable federal, state, provincial and local provisions relating to the protection of the environment or the discharge of materials.
Our international business operations are subject to various laws and regulations regarding the import and export of products and preventing corruption and bribery (including the US Foreign Corrupt Practices Act). We have implemented and continue to develop import/export and anti-corruption compliance programs and processes to comply with applicable laws and regulations governing our international business activities.
Human Capital Management
Our employees are critical to supporting our values and achieving our strategic vision. Through our UNFI Pride strategic pillar, we are striving to be an employer of choice. We are focused on associate engagement, empowerment and safety to foster innovation and bring best-in-class solutions to our customers and suppliers in an ever-changing retail landscape, including new ways of work scheduling and productivity investments. In fiscal 2021, we created Compensation Committee oversight for human capital management matters with a focus on associate wellbeing across a variety of measures.
As of July 30, 2022, we had approximately 30,300 full and part-time employees within continuing operations, 10,900 of whom (approximately 36%) are covered by 48 collective bargaining agreements, including agreements under renegotiation. 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.
Developing Talent
Attracting and retaining talent is one of our top priorities. Our goal is to differentiate ourselves in the market by offering unprecedented flexibility to associates in the way, when and how they work. To reduce turnover, we have an emphasized focus on and commitment to our associates, their experiences as well as their continued engagement. We are committed to the continued support and development of our associates and provide access to robust leadership development programming, role-based training and other career development opportunities at every stage of an associate’s tenure with us. Designed to enhance the leadership capabilities of our people, the Emerge program for front-line leaders and the Evolve program for our mid-level managers invite participants from all departments to come together to learn and practice their management skills and identify opportunities to lead more effectively. The Elevate program for Director-level and above associates, as well as the Operations Leadership Academy for leaders in our distribution centers, work to solidify our talent pipeline and promote the success of the organization’s future leaders. Key groups, such as Sales and Risk & Safety, develop role-based training to drive greater productivity and safety. We also offer associates additional learning and career development opportunities that extend from skills-based training deployed electronically through our BetterU learning system, to mentorship programs and career development discussions and beyond.
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Compensation and Benefits
Our compensation and benefits programs are designed to promote a culture of wellbeing and recognize our associates for their outstanding achievements and dedication to serving our customers and keeping them safe during even the most challenging of times. We are committed to offering market competitive pay programs that reward high levels of performance and behaviors that challenge convention and drive company success. Our short-term incentive programs are tied to the Company’s financial goals and are intended to align our eligible associates’ rewards with our financial success. Long-term incentives, including restricted stock units and performance stock unit awards, are designed to attract and retain innovative leaders and align their financial interests with that of our shareholders and other stakeholders. As part of our commitment to recognize our associates’ “whole self” – health, finances and overall wellbeing – we offer a comprehensive health and welfare benefit program to eligible associates providing a variety of medical, dental and vision options plus additional voluntary benefits like long-term disability and optional life insurance. Additionally, we provide to eligible associates a leading edge, no-cost wellness program, paid time off programs including paid parental leave, an employee assistance program, 401(k) plan, a back-up childcare program, and a recently enhanced education assistance program.
Diversity and Inclusion
We pledge to promote equity, celebrate diversity, dismantle systemic racism and support justice and inclusion for all. Our Board of Directors is diverse in gender and ethnic background, as well as having a broad range of experience, with four out of 11 directors identifying as female, two members identifying as African American, one member identifying as Asian American and one member identifying as LGBTQ+. We recognize that innovation thrives when there is unity and respect for diverse backgrounds and perspectives. Additionally, we aim to foster a culture of belonging, equity and empathy through open dialogues, educational opportunities and by honoring the experiences and special events that speak to our associates’ many identities.
We built a diversity and inclusion team, and our diversity and inclusion strategy is built on a foundation of research, best practices and leadership commitment. Our Vice President of Diversity and Inclusion oversees our diversity and inclusion efforts and our diversity council takes an active role in advocating for and celebrating diversity and inclusion, as well as overseeing belonging and innovation groups. We provide helpful diversity and inclusion information on our associate platforms including diversity and inclusion training. Additionally, our UCount campaign encourages associates to self-identify and our Real Talk program offers a series of conversations on various dimensions of diversity.
Creating a Safe Environment
Safety is at the forefront of everything we do. We continue to focus on the safety of our associates, customers and communities with enhanced sanitation and increased safety measures. We also have invested in several initiatives, including the development and implementation of a new safety brand and pledge, Every Moment Matters, that is designed to foster a caring culture, the implementation of interactive and proven training programs, which were rolled out across our network, and enhanced safety auditing. In fiscal 2022, we created a new role and hired a new Senior Vice President, Occupational and Food Safety.
Seasonality
Overall product sales are fairly balanced throughout the year, although demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events. Our working capital needs are generally greater during the months of and leading up to high sales periods, such as the buildup in inventory leading to the calendar year-end holidays. Our inventory, Accounts payable and Accounts receivable levels may be impacted by macroeconomic impacts and changes in food-at-home purchasing rates. These effects can result in normal operating fluctuations in working capital balances, which in turn can result in changes to Cash flow from operations that are not necessarily indicative of long-term operating trends.
Available Information
Our internet address is http://www.unfi.com. The contents of our website are not incorporated by reference into or considered to be part of this Annual Report, and our internet address is included in this document as an inactive textual reference only. We make our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) available free of charge through our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the Securities and Exchange Commission.
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