NEW YORK (The Deal) -- United Natural Foods (UNFI) Chief Financial Officer Mark Shamber says the Providence, R.I.-based distributor of natural and organic foods is seeking acquisitions to build out its fresh food distribution business -- an area in which the industry is likely to see rapid growth over the next several years.
Consumers are not only demanding products with fewer artificial ingredients, they are also shopping for fresher foods, Shamber said at recent consumer conference in New York.
Acquisitions would help to expand United Natural's existing fresh food distribution businesses -- Tony's Fine Foods and Albert's Organics. The company bought Tony's, which delivers products such as cheese, deli meats and bakery items, just over 12 months ago for about $195 million.
Tony's gave United Natural a footprint for meat and cheese distribution in the Western United States, including Hawaii and Alaska. Albert's, the company's first fresh food business, delivers organic produce and has distribution centers in North Carolina, Florida, New Jersey, New Hampshire, Minnesota, Colorado and California.
Shamber said that it would be difficult for the company to build those businesses in other areas organically or from scratch, noting that it is easier to acquire companies with trucks and distribution centers already in place, along with an existing clientele.
Shamber declined to comment on whether such companies as Dufur, Ore.-based Azure Farms, Atlanta-based Royal Food Service, or Ephrata, Pa.-based Four Seasons Produce could possibly be targets. But he did say that companies with the attributes of Four Seasons, which operates a fleet of 120 tractor-trailers and would likely generate a minimum of several hundred million dollars in revenue based on the size of its fleet, would be attractive candidates.
Royal Food distributes in Georgia, while Four Season operates in Pennsylvania, and Azure Farms delivers in the Northwest from its base in Oregon.
United Natural's appetite reflects the active deal environment and outsized valuations for companies in the natural and organic food space. Hormel Foods (HRL) agreed to buy prepared meats brand Applegate Farms for $775 million, the two companies said on May 27. The Austin, Minn.-based parent of brands such as Spam, Muscle Milk and Skippy is acquiring the company from private equity firm Swander Pace Capital and its founder, Stephen McDonnell.
Only weeks before that, Omaha, Neb.-based ConAgra Foods (CAG) bought Blake's All Natural Foods, a maker of natural and organic frozen meals, in a deal announced on May 12. Other recent deals include Deerfield, Ill.-based Mondelez International's (MDLZ) acquisition of Enjoy Life Natural Brands, based in Schiller Park, Ill., for several times its roughly $40 million in revenue, according to an industry source. And Hershey (HSY), based in Hershey, Pa., acquired gourmet meat snacks company Krave Pure Foods for $315 million, which was about 9 times its $35 million in revenue, according to an industry executive.
As the food giants gobble up the myriad start-ups in natural and organic, it only makes sense that consolidation will roll through the distribution side.
This article was originally published at 12:16 p.m. EST, June 25, 2015, on The Deal.