Sean Griffin was on the verge of retiring from United Natural Foods Inc., but then it bought Supervalu Inc. Now he’ll become chief executive of the Eden Prairie-based firm as a unit of the combined firms.
United Natural Foods (UNFI) announced the appointment last week when it disclosed its latest financial results. He succeeds Mark Gross, who has led Supervalu for the past two years and is expected to leave at the completion of the $2.9 billion acquisition.
Griffin, who had been chief operating officer at UNFI for the past eight years, announced his retirement in May. But in July, when UNFI’s purchase of Supervalu was announced, CEO Steven Spinner asked Griffin to stay on and lead the integration of the two firms.
Last week, Spinner said he was delighted Griffin would stay around even longer to be the post-merger CEO at Supervalu. “Sean has more than 30 years of industry experience,” Spinner told investment analysts. “And with him at the helm, we have a high degree of confidence that we’ll be able to capitalize on the synergy opportunities and realize the full potential of this transformative combination.”
Providence, R.I.-based UNFI finished its latest fiscal year on July 28, announced its fiscal fourth-quarter financial results last Thursday and published its annual report on Monday.
In a conference call with analysts on Thursday, Spinner and Griffin reiterated plans to sell Supervalu’s retail businesses, including Cub Foods, the largest grocery chain in Minnesota. They did not give a precise timeline for the sale but laid out financial forecasts for the combined UNFI and Supervalu that did not include retail operations.
“We’re confident that we’ll be able to exit the retail business successfully,” Spinner told the analysts. He said they would aim to have more details by January, when the company is planning a daylong event with analysts and investors.
Spinner mentioned that Supervalu has already sold Farm Fresh and is in the process of selling off nearly half of its Shop ‘n Save stores in St. Louis. He did not talk about Cub.
Griffin told analysts that UNFI and Supervalu have put together teams from both firms to evaluate operations and begin to put them together. The firms hired advisers from PwC to assist.
“Our mission is to run the combined businesses successfully, beginning on Day 1, and to accelerate momentum through the first 100 days post-close,” Griffin said, referring to the closing date of the sale, expected to be late this year.
The executives said they expect sales for the combined companies to be $24.2 billion to $24.8 billion in the first full year after the acquisition.
For the just-completed fiscal year, UNFI had revenue of $10.23 billion. Supervalu had revenue of $14.2 billion in its latest fiscal year, which ended in February. That includes nearly $3 billion in revenue from retail stores like Cub, which will likely disappear soon after the deal closes.
Some of that will be made up from the operations of wholesalers that Supervalu bought last year. Its 2017 results included partial-year revenue from a California wholesaler and a small amount from its purchase of a Florida wholesaler last December.
UNFI executives are aiming to cut $175 million in annual costs from the combined firm by the third year of being together. Initially, they will eliminate duplicate costs related to sales and administration and optimize their trucking operations. The executives also said they will aim to unite, or “harmonize,” purchasing agreements with suppliers.
For UNFI, the nation’s largest distributor of organic food, the purchase of Supervalu provides greater scale and new access to the traditional grocery business. The firm has long been dependent on a single customer, Whole Foods, which accounts for about 40 percent of its revenue. After the merger, Whole Foods will represent about 18 percent of revenue.
To the groceries that are customers of UNFI or Supervalu, Spinner told analysts he believes the firm will be more valuable as a one-stop wholesaler. “The more a retailer, a conventional retailer in particular, can buy from a singular source, the better it’s going to be for them,” he said. “It just drives down costs overall.”