The merger of WFMI/OATS has created a customer of UNFI which accounts for roughly 40% of UNFI sales. Does anyone have any thoughts on this? I believe that UNFI has two viable options at this point. The most logical would be to pursue a merger with WFMI. If this is not possible, UNFI should put itself on the auction block to the highest bidder in the conventional wholesale food sector. If UNFI does neither of these things by the time the current contract with WFMI runs out, they will be in big time trouble. Mackey has squeezed UNFI margins while continuing to expand WFMI's self distribution. When he is done running UNFI through the Juiceman Juicer, he will throw what is left in his organic compost pile and go to Super-Valu, C&S, or one of the other giants in food distribution. Wake up and smell the tofu UNFI!!!!
Doesn't UNFI have a 7 yr contract? Plenty of time to add customers or diversify. Besides, why would WFMI want to choke their lifeline? Sure they are going to be looking for a good deal, but the last thing they'll want to do is make them unprofitable or worse drive them out of business. Why did they give UNFI a 7 yr deal in the first place?
WFMI is at the opposite end of the spectrum from Walmart - both in customers and pricing.
WFMI does not need UNFI. They can dump them at any time. UNFI is now totally dependent upon them for any growth in top line. That top line will produce no bottom line. Best thing for UNFI is to be taken out by a mainline distributor like a C&S. That would probably work well for WFMI also.
The stock is very undervalued now. A 7 yr. contract with Whole Foods with huge growth in organics and now Kroger, Safeway, Publix and a host of other companies are all in on the private label organics. Guess who will deliver the products?
I agree. When the next contract comes up, no doubt WFMI will try to drive a "better" deal, but how much more buying power is WFMI, well, buying with it's acquistion of OATS? On a sales basis, OATS is alot smaller than WFMI. Perhaps from UNFI's perspective, it would be better to have the two remain independent, but as many has posted before, these two are not the only players in the market and the overall market is growing. I expect UNFI to continue to grow as the market increases.
That said, the two trust officers who manage some trusts I'm familiar with sold each trust's UNFI holdings recently, prior to the latest FTC news, due to their concerns about the impact of a merged WFMI/OATS.