Natural Foods Merchandiser
Distribution update: the Tree of Life-Kehe consolidation

Distribution update: the Tree of Life-Kehe consolidation

Natural products distributors, facing challenges from a turbulent economy and rapidly changing technology, are finding new, streamlined ways to get products on store shelves and forge stronger ties with retailers. At the same time, distributors’ customers, facing challenges of their own, are looking for the best price, reliably stocked inventories, on-time deliveries and attentive service.

Natural Foods Merchandiser explores how the products get to their destinations and who gets them there in this four-part look at the natural products distribution sector.

Analyzing the Tree of Life-Kehe Foods consolidation

Romeoville, Ill.-based Kehe Distributorsacquisition of St. Augustine, Fla.-based distributor Tree of Life for $190 million early this year left some observers scratching their heads over why employee-owned Kehe, which distributes to 15,000 retail outlets in the U.S., Mexico and the Caribbean, would buy the larger Tree of Life, which never seemed able to gain a big foothold during the industry’s growth years after some earlier missteps.

Analysts say Tree of Life had been a drag on its previous owner, the Dutch conglomerate Royal Wessanen, which also seemed to ignore the distributor as it tried to divest itself of its North American assets.

Few details have emerged, and Kehe and Tree of Life executives declined to comment about the deal for this story.

Consultant Jay Jacobowitz, president and founder of Brattleboro, Vt.-based Retail Insights, says Tree of Life lost market share in the 1990s after switching its focus from natural foods to supermarkets before trying to make a comeback to naturals more recently. Kehe, which is “most at home in supermarket and gourmet,” is the “dark horse,” he says.

How well the pairing will succeed depends on how much investment Kehe can put into distribution centers and truck capacity and routes for the naturals business, Jacobowitz says. “One big question is, where are they going to put their resources? [Next spring], we’ll know whether they’ve made a serious effort.”

Meanwhile, Tree of Life management, sales staff and services remain in place, which is “a good thing,” according to Jacobowitz.

Summer Auerbach, vice president of operations at Rainbow Blossom Natural Food Markets in Louisville, Ky., says the chain of five stores works with Tree of Life and “nothing has changed. It’s still Tree of Life. It’s a division of Kehe. We have the same sales reps, the same relationship.” Auerbach applauds the deal with Kehe because “it has opened us up to be able to work with another distributor.”

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