In 1976, a 22-year-old, ponytailed natural foods lover named Michael Funk started a small distribution company, Mountain Peoples Warehouse, in Northern California. Twenty years later, MPW merged with Connecticut's Cornucopia Natural Foods to form a nationwide natural products distributor, UNFI. Today, UNFI is a multibillion-dollar company and the largest publicly traded U.S. wholesaler of natural and organic products. It manages seven subsidiaries from its Dayville, Conn., headquarters and also owns the NRG retail group, a chain of 12 natural products stores in the eastern U.S.
Funk stepped down as UNFI's president and CEO in September, but still serves as chairman of the board and the company's idea man. As an industry pioneer, he brings a unique perspective to the current and future business of natural foods retailing.
Q: From your viewpoint as a distributor, has the current economic climate changed how natural products retailers are ordering?
A: I think up until the current moment, the sales trends for our independent [stores] have still been surprisingly strong. That's been the really good news for the industry. That being said, consumers are looking for more value. Bulk-food sales are up significantly from the previous year. Most retailers are looking at perimeter sales being down, but the center store, where most of the basic foods are, is still holding strong. High-end supplements and high-end [personal care] sales are down, but that's not surprising. The strong point for our business, particularly in terms of organic foods, is it's a lifestyle. Consumers are going to give up everything else before they give up a healthy diet for their families.
Q: What do you think is the best way for retailers to weather this economic downturn?
A: Even with the current trend of strong sales, it's prudent for people to tighten their belts and prepare for the worst. This last year, fuel prices forced consumers to look at shopping closer to home, so, as retailers, you need to make sure you really do outreach so everyone in your shopping radius knows what products they can buy at your store. Staying on top of the value proposition and constantly merchandising effective promotions obviously is important. Also, trends can change so quickly, so you really need to stay on top of them. Stay out of debt, obviously; the companies that are less leveraged are most likely to survive the downturn. And category management is so important. You need to be constantly taking non-selling products off the shelf and replacing them with hot trends.
Q: What are those hot trends?
A: Bulk items and the functional foods/probiotics/superfruits category (I lump that together—things like flax omega, kombucha and açai) are selling very strongly. Gluten-free is still very strong and appearing in more categories. Baby foods are surprisingly very strong—it's one of those categories where people enter into buying natural and organic before they would buy those for themselves or the rest of their family. Single-serve beverages are doing well. Sweeteners are strong, led by agave, which has been a huge hit. Organic sugars are getting wide introduction and a reasonable price point. Sugar has kind of become OK in our industry after being banned for so long. Environmentally friendly nonfood items—cleaners, paper products—are strong. Companies like Seventh Generation have been really successful. Yogurt and kefir is a mature category but is still one of the fastest-growing, amazingly enough. Overall, I think media attention really drives awareness, creates trends and changes consumers' eating habits.
Natural Foods Merchandiser volume XXIX/number 12/p. 7