UNFI’s break with Key Food costs 700 jobs, one DC, and billions in potential sales

United Natural Foods, Inc. (UNFI) will shutter a warehouse near Allentown, Pa. and eliminate hundreds of jobs as the result of the loss of a key client, the Matawan, N.J.-based Key Food.

UNFI first partnered with Key Food in 2020 and built the distribution facility specifically to meet the customer’s needs. The facility opened in late 2021, but it is now scheduled to close. More than 700 jobs will be lost.

The agreement will officially terminate on Sept. 20. 

“This enables UNFI to exit an unprofitable relationship and further optimize our northeast DC network by ceasing operations at our Allentown facility,” UNFI CEO Sandy Douglas said during the company’s third quarter earnings call on Tuesday.

UNFI said in an emailed statement to Supermarket News that it continuously evaluates its distribution network to ensure it serves customers and suppliers efficiently and effectively, and moving Allentown’s volume to nearby DCs will help meet that goal. 

UNFI currently operates 11 distribution centers in the Northeast market. Facilities in Harrisburg, Carlisle, Philadelphia, and York will help absorb the volume from the Allentown closure.

The UNFI–Key Foods deal was originally expected to generate $1 billion per year in sales over 10 years for the wholesale distributor. UNFI supplied branded and private label foods, both conventional and natural, to Key Food’s 300 member stores across New York, New Jersey, Connecticut, and Pennsylvania.

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At the time of the agreement, UNFI believed the partnership would strengthen its competitive position in the Northeast and allow it to capture market share in the New York metro area.

“We made the decision based on a very factual analysis of the current situation and after exploring all potential options to turn that agreement with Key Food into a positive one,” Douglas said during the third-quarter earnings call. “Following that, we chose to exit because it was the best decision for our shareholders, and I believe Key Food made the same decision for the same reason.”

UNFI has also been dealing with a cyberattack this week that has left customers facing product shortages. Whole Foods, Cub Foods, and other retailers have been affected.