Pros and Cons of UNFI and KeHE for food brands

Pros and Cons of UNFI and KeHE for food brands

Pros and Cons of UNFI and KeHE for food brands

Finding a solid distributor should be an absolute priority for Paleo, Keto, grain-free, and other low carb food brands. While many small food brands and businesses get started either selling locally or through online channels, taking your business to the next level requires a solid business strategy. Presenting at the top tradeshows and putting in the effort to contact major retailers are good first steps to test the “market readiness” for your product or brand. You can also consider hiring a broker with proven success in the specialty food market.

However, major distributors have connections, networks, and influence that can help your brand move to a national distribution network. For small startups and entrepreneurial endeavors, working with distributors can increase brand awareness and offer you a pathway towards national recognition of your products. United Natural Foods, Inc. (UNFI) and KeHE are two of the top natural and organic food wholesalers and distributors in the country. In this article, we take an in-depth look at the pros and cons of UNFI and KeHE for Paleo, Keto, and grain-free food brands.


What is UNFI?

The growing obesity crisis, chronic heart disease, and a general lack of health and wellbeing has recently lead to a widespread cultural and lifestyle shift affecting large sectors of the population in the United States and other developed countries. Many people are rightfully concerned about the multifaceted environmental crises, and improved health and wellness education has led many of today’s consumers to demand more healthy, natural, and sustainable products.

While we might consider this lifestyle shift to be relatively recent, market trends that foretold the growing demand for natural and healthy products have been visible for the past two decades, at least. It was back in 1996 when United Natural Foods, Inc. was founded, after a merger of some of the following leading regional distributors of natural food products. From 1996 until today, the demand for healthy and natural food products only continues to grow. Over one-third of all Americans are actively following some sort of diet, and UNFI established itself from the outset as one of the leading wholesalers and distributors for natural food products. Today, UNFI is widely considered to be the world´s largest distributor of natural products.

According to its website, “UNFI is a grocery industry leader and is known for being the premier wholesale food & meat distributor of wholesale bulk food and products.” Unlike other major wholesalers and distributors, UNFI specializes in a wide range of natural and organic products, including natural, organic, ethnic and gourmet foods, general grocery products, fresh and organic produce, perishables, personal care, and dietary supplements.

With headquarters in Providence, Rhode Island, they have operating revenue of over $20 billion USD and employs over 19,000 employees. UNFI has 60 distribution centers located in strategic locations across Canada and the United States in order to quickly supply grocery stores, supermarkets, and other retailers with healthy, alternative food products. Furthermore, UNFI offers a diverse array of services both to its suppliers and retail customers, including category management, merchandising, marketing, eCommerce services, mobile ordering, and delivery tracking.


What is KeHE?

Like UNFI, KeHE is another leading wholesaler and distributor that focuses on natural and organic food options. While smaller than United Natural Foods, Inc., KeHE also stocks thousands of natural and healthy food products to distribute across the country. According to their website, “at KeHE, we stock the brands that consumers crave and bring you the new products that are on-trend and on top of regular weekly purchases, so baskets get bigger and satisfaction with product selection rises.”

The company was founded in 2010 in response to the growth in consumer demand for healthier food alternatives. KeHE has about 5,500 employees and is based out of Naperville, Illinois. The company operates with almost $5 billion USD in annual revenue and operates 500 delivery trucks that run regular routes from coast to coast. KeHe’s 15 distribution centers are strategically located across the United States and Canada to ensure quick delivery to their over 12,000 customers.


Pros and Cons of UNFI for Paleo, Keto, and Grain-Free Brands

Paleo, Keto, and grain-free food brands would do well to develop a solid working relationship with UNFI. As a wholesaler and distributor, they offer a solid range of products and services to their clients. With over 60 distribution centers across the North American continent, everyone from large retail supermarket chains to boutique grocers know that UNFI can deliver thousands of different products to their customers in a timely fashion.

The Category Management program is specifically designed by UNFI for each of its individual customers. In short, experts at UNFI can help store owners determine their customer demographics and lifestyle choices in order to stock appropriately. With about 30 percent of all U.S. households regularly eating organic food (and that demographic tends to be much higher in progressive urban areas), UNFI is actively helping to expand demand for healthy and nutritious food options. For Keto, Paleo, and grain-free food brands, working with UNFI means that you will have a partner helping you to open new markets through convincing store owners to follow overarching demographic trends towards healthier food options.

Another major benefit of working with UNFI is their commitment to environmental responsibility and sustainability. One of their guiding values is: “Feed the planet. Better food comes from a healthy planet, and we do our part.” Also, UNFI operates under the assumption that “everyone deserves access to healthy, sustainable food. We believe that companies should contribute positively. Be a good neighbor. We operate by those core values – seeing the big picture and doing what’s right.” Keto, Paleo, and grain-free food companies can use their association with UNFI to brand themselves as a healthy and sustainable food alternative.

On the downside, working with UNFI can be extremely competitive. They have a supplier network of over 10,000 food brands from across the country and distribute over 300,000 products. Their buyers and market analysts are always searching the market for consumer trends that are shifting the food industry. If your food brand is not open to innovation and staying ahead of the market, there is a good chance that UNFI could move on to other suppliers. On the upside, however, UNFI does offer its retail clients an ever-expanding selection of 1,000 new products every month from national brands to local entrepreneurs.


Pros and Cons of KeHE for Paleo, Keto, and Grain-Free Brands

KeHE has a solid distribution network with over 70,000 SKUs and 12,000 store customers across the continent. Among their solid customer base, 23 of the largest 50 national food retailers work with KeHE.  As a small Paleo, Keto, or grain-free brand, the connections that KeHE has made will drastically increase the probability of getting your products into major retail outlets.

Like UNFI, KeHE also goes beyond the simplistic business ethic of “maximizing profits” and incorporates other considerations for the brands they choose to work with. They state that “KeHE has the best brands. The ones you can rely on to position you as the go-to natural and organic destination for great healthy living.  And the ones that give you exclusivity in your market.” A solid branding campaign by small Paleo, Keto, or grain-free startups can attract the attention of KeHE´s Innovation Gurus who are always looking for innovative takes on healthier and more wholesome diets.

One of the challenges that comes with working with KeHE is that they do operate some of their own brands to distribute to their network of clients. Cadia® and Made•With™ are two of their food brands that deliver high volumes of natural, organic, and non-GMO Project Verified foods to their clients. If your Paleo, Keto, or grain-free brand offers similar products to those marketed by KeHE´s brands, there will obviously be higher levels of competition.

Lastly, it is also important to mention that KeHE is an employee-owned company, which provides company stock ownership to employees. This not only protects KeHE from stock market fluctuations but also instills a vested employee interest for improved production targets.


Considerations for Choosing the Best Wholesaler or Distributor for your Paleo, Keto, or Grain-Free Brand

Whether you decide to work with UNFI or KeHE as a wholesaler or distributor, both of these companies can help to expand your markets. Working with a distributor will give you easy access to their large network of retail contacts and clients. Paleo, Keto, or grain-free brands should do their research to see which brands currently distribute through UNFI or KeHE and choose the distributor that has the least amount of brands with a similar product line.

Lastly, both UNFI and KeHE offer great customer service. If your small food brand is always strapped for time, working with UNFI or KeHE can help free up some of your time to focus on other aspects of your business. If your brand shows early success, both UNFI and KeHE could even help through educating retailers’ staff about the benefits of low carb products.





4 Responses

  1. How much of a cut do they take and how much are start up costs? I’m interested in getting in with them or another distributor but margins are thin enough, I can’t give up 10-20% of the price to get in with stores that will only work with distributors.

    • The MCB’s are bruuuutal and severely affect us as a growing company. Also highly unpredictable when anything hits your books for accounting. Good luck

    • Hi Brittany,
      I ran into your comment and I thought I’d share what I know. Depending on your product, kehe’s margin will be %30-40, plus $.25-.40lb freight. – In addition to manufacturer chargebacks, fees; often mandatory or “encouraged” ads, promos, especially at the beginning. If your goal is to get into medium-large chains, a distributor like kehe is probably necessary, but expect a year or two of seeing good part of your revenue (after fees) going to promotional efforts and ads. – Ex you’re in Texas and a store in Florida or Arizona wants to see if your product sells, instead of a slotting fee, you agree to a one-time “free-fill” for their shelf (real-estate), with a case of each SKU. So 100% discount. You sell your product to kehe for $5 Kehe sells to Retailer for $6-$8 (depending on size of retailer), so your “Regular Wholesale Price” (kehe jargon for: full price that nobody pays) is $8, not $6. Kehe will base the discount on $8.
      Let’s say the store’s cost is $7. Kehe credits your account for $5, and debits your account for $8. You owe KeHe $3 per SKU. Then come ads, fees etc. -We see it as a marketing expense.
      If you have 100 stores, 5 SKUs in 6 packs, thats 3000 units.
      When you average 2 units/store/day, and you keep going…. that’s not too bad – Getting there is the issue. Put aside an extra $100K for marketing that year, and if you have a good product, and a good team, you should be fine.
      Keep in mind, while a “free-fill” is a one time expense usually, retailers like ongoing quarterly promos.
      %25 quarterly discount to retailers? Kehe buys for $5, retailer buys for $7, Regular Wholesale Price is $8; your 25% discount costs you $2. You really sold it for $3, that’s 40% off your initial price.

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