What changed in this filing

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Item 1. Business

2024-10-01 compared with 2023-09-26 · 75 added, 83 removed, 205 unchanged (44% of the section changed)

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together with its consolidated subsidiaries.

We are a Delaware corporation based in Providence, Rhode Island and Eden Prairie, Minnesota.

We are a Delaware corporation based in Providence, Rhode Island.

We conduct our business through various subsidiaries.

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Our Strategic Priorities

We are continually striving to better serve our stakeholders, including our customers, suppliers, associates and communities, while driving profitable growth and sustainable shareholder value creation.

We have recently introduced our transformation strategy designed to accomplish this.

Our enterprise-wide business transformation strategy, which we believe will position us for customer service and cost structure improvement, consists of four areas:

Network Automation and Optimization:

Enhancing our distribution network to drive efficiency and improve the customer experience, which we expect to increase network capacity and scalability.

Commercial Value Creation:

Generating more profitable revenue growth through simplified pricing and procurement, and enhancing analytical insights for our customers and suppliers, making it easier to do business with UNFI.

Digital Offering Enhancement:

Integrating and enhancing the functionality of the digital platforms we offer and expanding the actionable intelligence we provide through these platforms.

Infrastructure Unification and Modernization:

Addressing legacy integration issues and continuing investments to upgrade and simplify our digital infrastructure, which we expect will streamline operations, provide greater visibility and enhance our scale.

We are also working on near-term initiatives to help improve profitability while we execute our longer-term strategy.

These include actioning administrative structure efficiencies, reprioritizing our selling and administrative spending, optimizing our stock-keeping unit (“SKU”) assortment as well as reviewing commercial contracts in collaboration with our customers and suppliers.

We expect to continue to use available capital to re-invest in our business, and we remain committed to improving our financial leverage and reducing outstanding debt over the long term.

Since the close of our 2018 acquisition of SUPERVALU INC.

(“Supervalu”), we have reduced net debt by $1.4 billion.

We believe we can enhance our profitability and accelerate our growth through our transformation efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.

We believe the key drivers for value creation will be improved efficiency through the automation and optimization of our supply chain, as well as new customer growth associated with the benefits of our significant scale, product and service offerings and nationwide footprint.

We are continually striving to better serve our stakeholders, including our customers, suppliers, associates and communities, and to drive profitable growth and sustainable shareholder value creation.

We have undertaken a new strategy and have established new three-year financial objectives that begin in fiscal 2025 and are designed to make the Company more efficient while improving free cash flow generation and reducing net leverage.

Our strategy is centered on adding value to our customers and suppliers through our expansive assortment of products, services, programs, and insights that help them grow and compete.

Our strategy is highly focused on actively positioning our Company to add value to a resilient portion of the food retail industry that totals over $90 billion of wholesale sales and includes many specialty, natural, multi-cultural and conventional retailers.

This new strategy capitalizes on UNFI’s strengths, including our heritage in natural and organic products, as well as our growing, value-added digital and professional services portfolio.

Simultaneously, we are working to improve free cash flow generation and reduce net leverage by optimizing controllable variables including:

Intensified Network Optimization :

Streamlining our distribution center footprint to create a more efficient supply chain with a lower level of fixed capital invested.

Reduced Capital Intensity :

Prioritizing capital investment needs and reducing the overall level of future spending while continuing to emphasize maintenance and targeted network enablement and technology enhancements.

We also plan to lower overall working capital levels while driving higher customer satisfaction.

Optimized Cost Structure :

Reducing ongoing operating expenses and better aligning corporate resources to reflect our updated strategy and customer and supplier-facing work.

During fiscal 2024, we continued to implement near-term initiatives to help improve profitability and strengthen our foundation while we finalized and began implementing our revised strategy.

We expect to continue to use available capital to re-invest in our business and are committed to improving our free cash flow and financial leverage while reducing outstanding debt.

We believe we can optimize our performance and profitability through our improvement efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.

Our Commitment to Social and Environmental Responsibility

Building a Food System That’s Better for All

As North America’s premier grocery wholesaler, we are using our scale to drive progress across the food industry, focusing on the areas where we can affect the greatest change.

Now in the third year since unveiling our Better for All plan, we continue to evaluate the impacts we have along our value chain, focusing on proactively engaging with the people making and moving the products we distribute.

In fiscal 2023, we published our 12th annual Better for All report, which offers a summary of our social, environmental, and governance impacts during the fiscal year, and the second update to this plan, which prioritizes nine areas of focus:

Associate Safety & Well-being, Climate Action, Community Development, Customer Health & Safety, Diversity, Equity, and Inclusion, Energy Efficiency, Governance, Responsible Procurement, and Waste Reduction.

The report is available on our website at www.betterforall.unfi.com and highlights progress toward goals including waste reduction, supplier diversity, food donations, and food safety.

Creating a Better Future for Communities

As North America’s premier grocery wholesaler, we are working to create a better future for our communities by improving access to quality food, empowering our associates to give back and protecting the planet we share.

We look for ways to use our scale to drive progress across the food industry, while focusing on sustainability initiatives that drive efficiency and cost savings and create sustainable value for our stakeholders.

Now in the fourth year since unveiling our Better for All impact strategy, we continue to evaluate the impacts we have along our value chain, focusing on proactively engaging with the people making and moving the products we distribute.

In fiscal 2024, we published our 13th annual Better for All report, which offers a summary of our social, environmental, and governance impacts during the fiscal year.

The report demonstrates our enhanced focus on our six most pressing impact areas:

safety, well-being, waste, climate, sourcing and community.

The report is available on our website at www.betterforall.unfi.com and highlights progress toward our goals, including waste reduction, supplier diversity, food donations and food safety.

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.

Our impact begins with the decisions made by our partners and suppliers, well before products reach our distribution centers.

We are investing in programs and partnerships that will help build a more equitable system and carry our values further upstream.

We are investing in programs and partnerships that are designed to help build a more equitable system and carry our values further upstream.

In fiscal 2023, we launched the UNFI Climate Action Partnership, encouraging suppliers to set credible climate goals.

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We also published a new Deforestation Policy, an updated Animal Welfare Position Statement, and an updated Supplier and Vendor Code of Conduct, clearly outlining expectations of suppliers on responsible procurement topics.

These policies help us to work more efficiently and effectively with suppliers and vendors in pursuing our shared goals.

We remain focused on operating efficiently and sustainably, which includes managing the social and environmental impacts within our direct control.

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Our primary goal is to cultivate a culture that values care and safety for all.

Through continuous efforts we are dedicated to achieving zero injuries and accidents, ensuring a safe and thriving environment for everyone.

In fiscal 2023, we received a score of 100 on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index and a score of 100 on the Disability Equality Index.

In 2023, we launched our seventh associate-led Belonging & Innovation Group, the Asian Coalition for Engagement, to celebrate Asian Pacific Islander heritage, promote career development and foster a safe space for all.

We also completed key initiatives in support of our science-based climate targets, including the completion of LED lighting installations at all distribution centers, the installation of our largest solar array to date in Howell, New Jersey, and achievement of our goal of sourcing 20% of our electricity from renewable sources.

Through continuous efforts we are dedicated to minimizing the risk of injuries and accidents, ensuring a safe and thriving environment for everyone.

In fiscal 2024, for the third year in a row, we received a score of 100 on the Disability Equality Index.

In fiscal 2024, our seven associate-led Belonging & Innovation Groups continued to cultivate a culture of innovation, learning and impact across the Company.

In addition, we began work on a new roof-mounted solar array installation at our Riverside, California distribution center, which will be our largest to date.

UNFI’s solar array initiatives provide a strong return on investment and reduce the energy cost of operating a distribution center, while lowering the Company’s carbon footprint.

We aim to be responsible community members, from how we provide information and services to our customers, to the local organizations our associates support with their volunteer hours.

In fiscal 2023, we significantly grew associate volunteerism and the UNFI Foundation, a 501(c)(3) organization, began a five-year strategic planning process intended to make a more profound impact on the communities we serve.

We also made strides toward our food waste reduction goal and expanded our partnership with Too Good to Go, an innovative food waste reduction app and the largest business-to-consumer marketplace for surplus food.

In fiscal 2024, we significantly grew associate volunteerism, and the UNFI Foundation, a 501(c)(3) organization, began implementation of its five-year plan and awarded over $1.5 million in grants.

We also made significant strides toward our food waste reduction goal and deployed a Reverse Logistics Disposition Reporting system at all UNFI distribution centers to enhance inventory visibility and operational efficiency.

This initiative is expected to reduce food waste, minimize waste disposal costs and decrease shrink in the distribution centers.

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.

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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 2023.

One Wholesale customer, which includes customers under common control, constituted more than 10% of total Net sales in fiscal 2024.

On May 21, 2024, we amended and restated our distribution agreement with our largest customer which, among other things, extended the term of that agreement through May 20, 2032.

Our international Net sales primarily reflect UNFI Canada, Inc.

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This includes sales to eCommerce companies as well as business-to-business sales to non-traditional customers.

In fiscal 2021, we launched Marketplace by UNFI, a business-to-business digital eCommerce solution for emerging brands looking to expand distribution with UNFI customers.

Marketplace by UNFI is our 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.

In June 2023, we realigned our regional structure by consolidating from four operating regions to three.

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

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

geographic regions:

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The differential between the procured cost, including vendor funds and inbound freight, as compared to the net sales price of these products, primarily generates our gross margin.

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 have enhanced and will continue to support our ability to acquire new customers and present opportunities for cross-selling complementary product lines.

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.

We may consider strategic acquisitions to enhance our capabilities and geographic footprint, when we determine that to be the most efficient use of capital.

Our Retail segment includes 76 Cub Foods and Shoppers retail grocery stores.

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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 Retail operations are principally supplied by six of our Wholesale distribution centers.

Our Product Offerings

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Our Service Offerings

Our Professional Services

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 shelf and planogram management, retail store support, pricing strategy, electronic payments processing, advertising, couponing, store design, equipment sourcing, point-of-sale hardware and software, network and data hosting solutions, consumer convenience services, eCommerce, automation tools, sustainability services and administrative back-office solutions.

We offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable business solutions.

Our services are designed to help customers address business challenges, better serve their customers and compete in the marketplace.

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

We provide shelf and planogram management, retail store support, pricing strategy, electronic payments processing, advertising, couponing, store layout and design, equipment sourcing and procurement, point-of-sale hardware and software, network and data hosting solutions, consumer convenience services, eCommerce, automation tools, sustainability services and administrative back-office solutions.

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

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.

Retail marketing programs offer web and digital marketing services, including websites, mobile applications and eCommerce capabilities;

circular programs for our customers and vendors;

and allow our suppliers to purchase advertising space on our trailers.

Retail marketing programs offer web and digital marketing services, including websites, mobile applications and eCommerce capabilities, and circular programs for our customers and vendors.

Supplier marketing programs include information sharing programs designed to provide heightened transparency to suppliers through demand planning, forecasting and procurement insights.

We have also created a retail media network, the UNFI Media Network (“UMN”), that enables retailers to reach their consumers digitally while connecting to our large network of suppliers, who in turn, can utilize the platform for personalized and targeted digital marketing.

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 collective long-term success.

We continually seek customer and supplier feedback to ascertain their needs and allow us to better service them.

In addition to these services, we provide data, insights and resources that help our customers compete and succeed in their respective markets.

We also offer our customers:

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• 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;

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Organic Certification

Our “Certified Organic Distributor” certification covers 26 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 two Canadian distribution centers in British Columbia and Ontario each hold an organic distributor certification from QAI.

We have 33 distribution centers in the United States that are “National Organic Program certified as Organic Handlers by QAI”.

Our California locations are certified as Organic Handlers by QAI, and we are registered as Organic Handlers with the State of California Department of Public Health Food and Drug Branch and the California Department of Food and Agriculture.

In addition, our Canadian distribution center in British Columbia holds an Organic Distributor certification from QAI.

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.

All 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.

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We continue to make 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.

We continually evaluate and upgrade our systems and distribution center infrastructure to enhance security, efficiency, cost-effectiveness and responsiveness to customer needs.

We believe these systems include best in class functionality in warehouse management systems, inventory control, labor management, scan-based fulfillment applications, mechanized pick-to-light systems and order management systems.

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We continue to leverage 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.

In addition, route efficiency software assists us in developing the most efficient routes for our outbound trucks.

In addition, we use cloud solutions to assist us in developing the most efficient routes, tracking vehicle maintenance and monitoring driver safety and the movement of trucks in real-time.

As part of our “one company” approach, we continue an effort to standardize to best in industry software solutions for inventory procurement, order management, transportation operations and warehouse management systems throughout our network.

Our investment in technology is intended to improve our supply chain effectiveness for our suppliers, associates and customers enabling our collective success.

Our Wholesale and Retail businesses operate in a highly competitive and rapidly evolving industry, which is characterized by low profit margins, new business models and the entry of new, well-funded competitors that intensify competition.

Our Wholesale and Retail businesses operate in a highly competitive and rapidly evolving industry, which is characterized by low profit margins, new business models and the entry of new, non-traditional competitors that intensify competition.

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, wholesale membership clubs, and eCommerce and other internet-based businesses.

The primary competitive factors in the Wholesale business include price, service level, product quality, variety, availability and other value-added services.

We also increasingly compete with retailers that maintain or develop self-distribution systems, as well as companies that offer services in digital advertising, fulfillment and delivery services, health and wellness and financial services.

The primary competitive factors in the Wholesale business include price, service level, product quality, variety, availability, location of distribution centers 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 brick and mortar, eCommerce, and omni-channel retailers operating discount, department, retail and wholesale grocers, drug, dollar, variety and specialty stores, supermarkets, hypermarkets and supercenter-type stores, and social commerce platforms, as well as companies that offer services in digital advertising, fulfillment and delivery services, health and wellness and financial services.

Our retail banners compete with traditional grocery stores, supercenters, deep discounters, mass merchandisers, limited assortment stores and eCommerce providers.

Independent retailers and smaller Chain customers represent a significant portion of our business and face intense competition from national grocery chains, supercenters, deep discounters, mass merchandisers, limited assortment stores and eCommerce providers, many of whom offer expansive services beyond grocery.

Our retail banners compete with traditional and specialty 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;

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These regulations require us to comply with certain health and safety standards to protect our employees from recognized hazards.

and the Fair Labor Standards Act, which establishes minimum wages and overtime standards, among other requirements.

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, and the Fair Labor Standards Act, which establishes minimum wages and overtime standards, among other requirements.

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.

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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).

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 U.S.

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.

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The Compensation Committee of our Board of Directors has oversight of human capital management matters with a focus on associate wellbeing across a variety of measures.

As of July 29, 2023, we had approximately 29,455 full and part-time employees within continuing operations, 10,667 of whom (approximately 36%) are covered by 49 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.

As of August 3, 2024, we had approximately 28,333 full and part-time employees, 10,704 of whom (approximately 38%) are covered by 48 collective bargaining agreements, including existing agreements under negotiation.

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

Our goal is to differentiate ourselves in the market by offering 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.

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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.

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 and a recently enhanced education assistance program.

Diversity, Equity and Inclusion

We pledge to promote equity, celebrate diversity 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, one member identifying as LGBTQ+ and two members identifying as veterans.

In order to recruit, inspire and retain the most talented team at all levels that maximizes speed, agility, innovation, execution and performance from the Boardroom to our distribution centers, we pledge to promote equity, celebrate diversity and support inclusion for all.

We recognize that innovation thrives when there is unity and respect for diverse backgrounds and perspectives.

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Our Vice President of Diversity, Inclusion, Equity and Wellbeing oversees our DEI efforts, inclusive procurement initiatives and wellbeing programs.

Our diversity council and seven associate-led Belonging & Innovation Groups actively strive to create a workplace where all associates feel welcome and are motivated to reach their full potential.

We developed a multi-pronged approach to educate and engage associates that includes open discussions on various dimensions of diversity, a podcast, DEI trainings on our associate platforms, targeted volunteerism, and campaigns encouraging respect and empathy.

Our diversity and wellbeing council and seven associate-led Belonging & Innovation Groups actively strive to create a workplace where all associates feel welcome and are motivated to reach their full potential.

We developed a multi-pronged approach to educate and engage associates that includes open discussions on various dimensions of diversity, a podcast, DEI and mental health awareness trainings on our associate platforms, targeted volunteerism, and campaigns encouraging respect and empathy.

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 increased safety measures.

We continue to focus on the safety of our associates, customers, communities and consumers with increased safety measures.

We continue to be committed to continuous learning and improvement, and we believe in the power of learning from past experiences to enhance our safety system and performance, including through root cause incident analysis.

We also continue to invest in our safety brand and pledge, Every Moment Matters, which 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.

This past year, we focused on creating an audit ready everyday culture;

improving our audit scores, sanitation practices, and overall customer satisfaction.

During fiscal 2023, we added additional data analytic tools to continuously monitor and report on fleet safety performance metrics.

We integrated new safety performance dashboards that allow management to monitor fleet safety metrics at the corporate, regional, and individual site level.

These tools allow us to better identify and respond to unsafe driving behaviors and recognize drivers who demonstrate safe driving habits.

We also continue to invest in our safety brand and pledge, Every Moment Matters, which is designed to foster a culture of caring and doing the right thing.

This past year, we focused on reducing lost time injuries (“LTI”), improving our root cause analysis process, implementing a comprehensive safety management software solution, completing internal and external audits and closing findings identified therein, creating more comprehensive reporting on key performance indicators and continuing to build upon our safety culture.

In fiscal 2024, we were able to reduce our LTI rate by nearly 50%.

We also began installation of a new video telematics solution to optimize fleet operations and improve driver safety, while continuing to reduce our preventable accident rates.

Additionally, we increased our focus on how we deliver value to our customers and consumers, strengthening our food safety programs with the creation of our vision for a world class food safety management system.

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.

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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