Jana’s Call To Overhaul Whole Foods Supply Chain Has Few Takers

One America News Network | 2/7/2017 | Staff
j.moomin (Posted by) Level 3
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(Reuters) – Activist investor Jana Partners’ proposal that Whole Foods Market Inc move grocery distribution in-house to reduce its dependence on its biggest supplier, United Natural Foods Inc , is easier said than done.

The 18-year relationship between the two companies has meant their existing operations are deeply interwoven.

Foods - Retailers - Dominance - Category - Footprint

Whole Foods, unlike many of the retailers that have been chipping away at its dominance in the natural and organic category, has focused on growing its retail footprint and leaned heavily on United Natural to supply frozen and dry goods.

Jana disclosed on Monday that it had raised its stake in the high-end grocer and called for changes in Whole Food’s grocery procurement and distribution strategy, which it called “suboptimal and cost-disadvantaged.”

Analysts - Consultants - Water - Idea

However, analysts and consultants threw cold water on the idea.

“I don’t really give a tremendous amount of credence to (the proposal),” Wolfe Research analyst Scott Mushkin said.

United - Natural - Shares - Jana - Proposal

United Natural’s shares were hammered following Jana’s proposal, closing down 8 percent at $39.47 on Monday, while Whole Foods stock closed up nearly 10 percent at $34.17.

United Natural’s shares have clawed back most of the losses since then, closing at $41.80 on Wednesday, as it became clear that Whole Food benefits from the scale and pricing leverage that United Natural offers, making it unlikely that the grocer would cut its dependence on the distributor.

Analysts - Industry - Sources - Jana - Plan

Analysts and industry sources said Jana’s plan to get Whole Foods to rethink its distribution strategy could set the company up for failure because it lacks cost efficiencies and relationships with distributors that United Natural offers.

“I’m not saying they cant squeeze some money here, but to think that UNFI is somehow fleecing Whole Foods by hundreds of millions of dollars – it really doesn’t make a lot of sense,” Mushkin said, adding there was a...
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