PROVIDENCE – It has been a tough couple of years for United Natural Foods Inc.
Since making a
notable leadership change and launching a
three-year strategy in 2024 to replace another effort launched in 2022, the food distribution company has seen losses, layoffs and operational challenges.
The latest gut punch came on June 5 when a cyber incident disrupted operations, temporarily affecting UNFI customer orders, including Whole Foods Market Inc.
The company said it
took some of its systems offline after discovering “unauthorized activity” on June 5, which temporarily affected its ability to fulfill and distribute orders.
On June 10, UNFI said it was "working steadily" to gradually restore services. The comment was included with the company's third-quarter earnings statement, in which it reported a loss of $7 million for the quarter that ended May 3.
That has meant leaner supplies of certain items this week.
Besides the disruption in sales and distribution, United Natural Foods experienced a 25% drop in market share, totaling more than $500 million, following the cyber incident.
On June 6, the market cap for UNFI, which ranks as one of the leading wholesale food distributors in North America and
supplies Whole Foods and other grocers, was $1.85 billion. Now, it sits around $1.3 billion.
John Mullen, president of Parsons Capital Management Inc. in Providence, couldn't speak to the specifics of UNFI's situation, but he noted that this kind of market response is par for the course when it comes to cyberattacks.
"When you look at the history of these kinds of corporate cyberattacks, there's always major stock being sold off right out of the gate," Mullen said. "Investors will sell first, assume the worst in terms of business impact, and ask questions later."
Kristen Jimenez, UNFI spokesperson, said that as of Thursday, the Rhode Island-based company is "
gradually bringing our ordering and receiving capabilities back online, with the goal of further increasing our capacity over the coming days."
Jimenez added, "The investigation is ongoing with the support of leading forensics experts. Our customers, suppliers and associates are our highest priority. We continue to work closely with them to minimize disruptions as much as possible."
UNFI reported the cyber incident to the FBI and does not expect any payroll delays as a result of the incident, according to Bloomberg. The company said it aims to be fully operational by June 15, the outlet reported.
Mullen added that in many cases of corporate cyberattacks, the affected company does eventually financially recover, with such declines typically only taking place in the immediate aftermath.
Meanwhile, during an earnings call on June 10, UNFI CEO Sandy Douglas announced the end of its distribution deal with Key Food in the Northeast, leading to the closure of its Pennsylvania distribution center in North Whitehall Township and more than 700 layoffs.
"Recently, UNFI and Key Food mutually agreed to transition Key Food’s conventional grocery products business in the Northeast to another wholesaler. We believe this transition will be a better fit for Key Food and allows UNFI to exit an unprofitable relationship," Jimenez said. "We will be ending operations at our Allentown distribution center in July 2025 and will transition these customers and suppliers to nearby distribution centers in our network."
The recent cyber incident and the layoffs in Pennsylvania culminate in what has been a tough couple of years for UNFI.
In 2018, UNFI acquired SuperValu, a major grocery wholesaler, for $3.3 billion. The merger left UNFI with a significant rise in debt and operational challenges.
UNFI then sued Goldman Sachs over its role in facilitating the SuperValu acquisition, saying the deal’s structure was not in UNFI’s best interest, potentially exposing it to the competing interests of hedge funds. The lawsuit also claimed that the bank improperly profited from the deal.
Last year, UNFI announced plans to shut down its Lincoln office and lay off 121 employees in two phases, beginning in January 2025 and wrapping up on June 20. The company will be relocating operations to a new headquarters in downtown Providence.
Earlier this year, UNFI announced it was
shaking up its commercial wholesale organization with the creation of two new divisions – conventional grocery products and natural, organic, specialty and fresh products.
The realignment is part of the company’s three-year plan launched in October 2024 that replaced the “Fuel the Future” strategy set in June 2022. The company said the new multiyear plan aims to add value and improve efficiency and effectiveness for its customers and suppliers.
Matthew McNulty is a PBN staff writer. He can be reached at McNulty@PBN.com or on X at @MattMcNultyNYC.
