United Expands Whole Foods Pact

JON SPRINGER

DAYVILLE, Conn. — United Natural Foods here will begin distributing groceries to Whole Foods Market stores in Southern California, Nevada and Arizona in January, officials of United Natural said last week.

The switch, when combined with other new accounts, is expected to account for around $100 million in annual sales for United Natural, according to company officials. It also comes as a blow to Nature's Best, the Brea, Calif.-based natural/organic supplier that currently serves Whole Foods stores in its Southern Pacific region.

The deal to serve Whole Foods' Western stores is in addition to the seven-year distribution agreement reached between United Natural and Whole Foods last month, according to Michael Funk, chief executive officer of United Natural. The new business will also better utilize United's distribution facilities in the Western states, some of which are at 50% of capacity and are less profitable than counterparts in the Eastern U.S., Funk said.

“The additional business would help our capacity, and in the long term create more margin,” Funk said during a conference call discussing financial results for the fiscal first quarter ended Oct. 28.

Austin, Texas-based Whole Foods is United Natural's largest customer, and its slate of new-store openings next year is expected to drive further sales gains and more than make up for the loss of around $7 million in sales related to Wild Oats' recently announced store closures, Funk said.