Natural Foods Merchandiser

Blooming Prairie Buy Bolsters UNFI

An all-cash deal will bring Blooming Prairie Cooperative under the United Natural Foods Inc. umbrella, bolstering the giant natural foods distributor's position in the Midwest.

The Iowa City, Iowa, co-op's 2,200 members still must bless the deal, but UNFI Chairman and CEO Michael Funk said he expects the acquisition to close by early October.

Negotiations have been under way for more than a year, though Funk and Blooming Prairie's board of directors presented the proposed pairing in an Aug. 5 mailing and at the co-op's Aug. 10 annual meeting.

Terms of the purchase were not disclosed. Blooming Prairie did about $130 million in sales in the year that ended June 30.

"We've been servicing our midwestern customers from Pennsylvania and Denver, so the transportation expenses are obviously high and our ability to serve those customers as a primary supplier obviously has been hindered by being so far away," Funk said. "Blooming Prairie is a solid business with a good management team in place. It is the perfect fit, both strategically and culturally."

Blooming Prairie has warehouses in Iowa City and in Mounds View, Minn., where a 100,000-square-foot facility opened in July.

Funk said members of the 28-year-old co-op reacted to the proposal "as expected. There was some shock from the membership, because it was something they were not expecting." But the deal represents an opportunity for "member retailers to cash out some of their equity in the wholesale business and invest it into growing their retail stores," he said.

The acquisition also calls for a portion of the sales proceeds to be set aside in a foundation that supports co-op development and sustainable agriculture. "That's part of what we have been about since our founding," Blooming Prairie Marketing Director Susan Futrell said.

Though Futrell said Blooming Prairie is "in good shape, growing and financially stable," Funk said the co-op, at a 10th the size of its two largest competitors, would always have been at a competitive disadvantage. "UNFI can service the retailers and customer base there more effectively and more efficiently," he said.

Rudi's Organic Bakery CEO Mark A. Retzloff, whose company is a customer of both UNFI and Blooming Prairie, lamented the ongoing distributor consolidation. "We're getting down to a couple of huge distributors, and you can't stop that from happening," Retzloff said. "But if you're going to sell, you want to make sure the new owners understand your business. [UNFI] has the best understanding."

Natural Foods Merchandiser volume XXIII/number 9/p. 1, 10

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