How UNFI tackles higher fuel prices

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United Natural Foods, Inc.’s contract management tactics and in-house technology are helping it mitigate higher fuel costs, according to a talk the company gave at a Goldman Sachs Global Consumer and Retail Conference on Sept. 15.

U.S. on-highway diesel prices have skyrocketed this year, primarily driven by the Iran war. In the month since the conference, prices have continued to surge, reaching $6.18, up $2.51 year over year, according to Oct. 12 data from the Energy Information Administration.

UNFI has been managing the fuel cost pressure using traditional tools like hedging, which is “keeping our exposure in a reasonable place,” CEO Sandy Douglas said at the conference.

Fuel hedging works like a price lock, with a company agreeing to the rate it will pay for diesel in the future, Dean Croke, principal industry analyst at DAT Freight & Analytics, told Supply Chain Dive.

“If prices climb, the hedge covers the difference. If they drop, you miss the savings. Either way, you know your costs and can plan around them,” Croke said in an email.

For companies buying millions of gallons of diesel a year, hedging is still beneficial even if prices dip later on, as it provides reassurance to investors that costs are under control, according to DAT.

The wholesale food distributor is also leaning on Samsara, its AI-powered visibility platform, to keep fuel costs in check. The technology was set to help UNFI gain visibility into transportation data across its network of close to 50 distribution centers and 2,000 delivery vehicles. Douglas said the technology is helping address the issue by allowing the company to be more efficient with customer deliveries while reducing miles traveled.

“Samsara is one of several technologies UNFI is using to continue to improve safety, effectiveness, and efficiency across our transportation fleet,” a UNFI spokesperson said in an email. “The platform helps us identify opportunities to optimize delivery routes and reduce unnecessary miles.”

Other food and grocery companies have also been implementing strategies to contend with higher fuel costs.

Costco has largely offset incremental fuel surcharges through lower contracted shipping rates, Gary Millerchip, EVP and CFO, said during a Q4 earnings call last month. Meanwhile, McCormick & Co. is mitigating higher freight, logistics, packaging and input costs by leveraging savings from productivity initiatives such as its Comprehensive Continuous Improvement program, EVP and CFO Marcos Gabriel said on an Oct. 1 earnings call.