From GMOs to Expanding Consumer Demands—Facing Challenges Head On While Remaining True to Our Roots
An Interview with Michael Funk, Chair and Co-Founder of United Natural Foods, Inc. and President of the Non-GMO project
In 1976, Michael Funk, with his signature ponytail, Purple Converse Hightops and a resolve to do what he believed in, took money saved from a job hauling trash and decided to clean up the planet in a different way—by hauling organic food instead. Since then Funk’s company, originally named Mountain People’s Warehouse, has evolved into a $4 billion enterprise known as United Natural Foods, Inc. or UNFI.
As the co-founder of what is now the nation’s largest natural foods distributor, Funk has made it possible for millions of consumers across the nation to have access to over 60,000 organic and natural products at more than 17,000 retail locations nationwide. This includes thousands of independent natural food stores—the pioneers of organic retail—which Funk continues support, offering tools to help them compete and prosper in today’s market.
From his position in the food chain, Funk has a vantage point that not only allows him to see what consumers and retailers are looking for from a brand—but also to see the overall challenges the industry faces.
One major hurdle is the growing threat of GMO contamination. Spearheading the effort to fight this, Funk serves as the president of the Non-GMO project, a non-profit that verifies the non-GMO status of natural and organic products through tracking and testing and provides education on the subject. GMOs, however, are but one of many concerns for today’s informed consumer. Recently Funk took some time to chat with Organic Processing about some of the opportunities and obstacles in the organic industry and the goals UNFI has to take organic and natural foods to the next level while remaining true to its roots.
OP: What has driven UNFI’s success and what are your long-term goals for the
company?
Funk: First of all, I never expected to be running a $4 billion dollar company. When we started, our keys to success were that we worked hard, we were frugal and we were very passionate about the natural food business. We also were one of first natural foods distributors to offer a wide range of produce and groceries. In the beginning, most natural retailers were focused on traditional supplements, but we believed that gradually these stores were going to become more like grocery stores and sell more refrigerated foods and perishables. We made this our core focus and because most of our competition still had their roots stuck the supplement business, we were able to rapidly gain momentum.
Today the natural foods business has changed and the scale of the whole industry has gone beyond our wildest dreams, but my hope is that we don’t lose our core values as our businesses grow. This goes for UNFI and all of the companies that share deep roots in this industry. We must remain true to our roots and passionate about the organic foods business, protecting the environment and promoting individual health. As a long-term goal, I hope that UNFI will become a model for sustainability in terms of distribution and be able to provide support and resources to groups that promote the organic industry and uphold organic integrity.
OP: How is UNFI planning to grow the natural products industry?
Funk: Our dream is to have our products available in every corner store, restaurant and grocery store. While supermarket business is obviously very healthy, there are still a lot of chains that are just barely scratching the surface. Also, in food service there’s a huge opportunity, especially in schools and hospitals. As people focus on the overall health care system and the obesity issue they are wondering why we don’t have healthier food in schools and hospitals.
OP: One issue you have been very vocal about is preventing GMO contamination in natural and organic foods. What first got you involved in the Non-GMO project and why is it so important?
Funk: Retailers were calling us saying, “We’re becoming more concerned about GMOs. Consumers are asking more and more questions. How can we tell if products are free of GMOs?” At the time, there was more and more proliferation of non-GMO claims and as we started talking to manufacturers, we realized that there was no consistency. In many ways it was like the 70s when there was no organic law, and people would say “unsprayed” or make some kind of claim that didn’t relate to a consistent standard. While some companies were spending a lot of money testing and were really being thorough, others were saying, “well, because it’s organic, it must be GMO-free.” However, with the amount of GMO corn, soy and other items in the marketplace, the risk of contamination was continuing to increase. We heard about instances where organic products were being contaminated and we thought the only way to really uphold the integrity of organic products was to create a standard and get the whole industry to participate; where you could claim that “we’re verified non-GMO” and it meant something.
It was a huge undertaking because we first had to develop a standard to define what “non-GMO verified” meant. We had to involve all parts of the industry, manufacturers, farmers, food processors and retailers. We had to get people from the scientific community involved. But I think we have made our mark—today there are around 3,000 products verified. Many more companies are enrolling. We had the first non-GMO month in October, and that brought a lot of education and awareness to this topic. The next step is to get the entire industry on board, and some are still hesitant, but for this to be effective, we need everyone on board, particularly companies that are making any kind of GMO claims.
OP: What are the challenges the Project has faced?
Funk: The big challenge is that a lot of people in the organic industry didn’t really want to talk about this subject because they didn’t want to admit that GMO contamination is possible. They are scared it will damage organic integrity. My point of view is that in order to protect organic integrity, we have to deal with this, otherwise we’re going to see products getting contaminated and that will ultimately lower the consumer’s trust in our products. On the other hand, if they see that we’re doing something to prevent contamination, it will help maintain integrity.
The other challenge is that some people feel like we are just another label that they shouldn’t have to deal with, that the organic regulations prohibit the use of GMOs and so the label should mean, or does mean, GMO-free. We agree, however, we need to work on ways to strengthen the existing USDA organic regulations so that we truly can verify with some kind of testing regimen that is incorporated into the organic certification. This is years away, though, and in the meantime we need the work that the project’s doing so that contamination does not get worse.
Right now, there are products, mainly corn and soy, that companies are testing and finding contamination and they’re rejecting those loads, so that the product isn’t necessarily getting into the stream. So we can tell by some of the contamination levels that the problem is getting worse, not better. The potential of contamination if companies aren’t doing everything they can is certainly greater. If I’m a supplier of any corn or soy organic product and I know that 90 percent of the corn and soy out there is GMO and the contamination possibilities are great, I would want to do everything I can to let my consumers know that our product is free of GMO contamination, and by enrolling in the Project for a relatively small amount of money, I get that extra assurance.
OP: What steps are being taken to prevent contamination?
Funk: One thing we have discovered is that if farmers plant organic seed that hasn’t been contaminated, 95 percent or more are going to have a non-contaminated crop. The idea of drift pollination and things like that is a concern, but the biggest cause of contamination is at the seed level. If farmers are planting their seed and testing it right from the beginning, incidents of GMO contamination are drastically reduced.
OP: Why are some products like tea, which doesn’t have corn, soy or any other GM ingredients, participating in the Non-GMO Project?
Funk: Every day there is a new risk, a new genetically engineered item hitting the streets. We now have sugar to worry about. We have flax seed. We’ve had unauthorized GMO rice contamination. We may have wheat soon. They have a genetically engineered version ready to market for practically every food item in the world and over the next several years, you won’t know if tea is free of risk of contamination. There are also many minor ingredients made from corn and soy. A lot of people don’t know that citric acid is made from corn. If you’re really trying to avoid GMOs, you could be buying a product that has some of these minor ingredients and not even realize it. It’s a little bit of a proactive approach as opposed to waiting for the contamination to hit and then dealing with it from a reactionary standpoint.
What we need to remember is that GMOs are just one part of this conversation. It’s about what’s not on the label. If consumers are not able to choose or discern whether there are GMOs in the product or not, that’s really the problem. Some people can argue that GMOs aren’t a big health hazard, but my point is consumers have a right to choose, and if they don’t know, then they’re not given that basic right. Now you can take that and say, “Well, what else is in my product that I don’t know about?” BPA, a chemical used in canned foods that is known to have carcinogenic qualities, is another hidden thing consumers want to avoid, yet there are very few companies using BPA-free cans. My point to suppliers is whatever it takes, spend the money to get BPA-free cans. There’s no way our consumers want to pay a premium for organic food and then be ingesting chemicals from the can. You hear about these new technologies like nanotechnology that are frightening—and what’s frightening about them is that we don’t know if they’re in our food or not. We have to either make sure that the products are labeled or that they are outlawed and there’s verification to back up the claim. My long-term goal is to make sure that there is not anything in food that is not showing up on the label so that consumers are brought up to speed on what they’re ingesting and they have choices to either avoid those items or buy those items.
OP: Not too long ago you acquired a specialty foods distribution group. Are you planning on expanding into other areas beyond natural foods? Where is the cut off between what you will carry and what you will not?
Funk: It’s about evolving along with your customers. Today we have a wider diversity of customers and a lot of supermarkets want us to carry items in the specialty foods arena. People are looking for more one-stop shopping from their distributor and so we’re trying to meet those needs. Also, the line between what’s considered natural and what’s considered specialty is blurring and I think down the road specialty foods are going to evolve into part of natural foods. The ingredients are going to be cleaned up and they will become items that we can sell to all of our natural products customers. This is where the market is going.
In general, we’ll avoid the products that our stores aren’t going to carry; those with artificial colors and flavors, etc. But in instances where we have retailers who will want to carry some of those products, our job is just to make sure that our retailers totally understand that this product contains x, y or z. Today there’s so much information that people want and demand—whether an item has gluten in it or sugar or GMOs. This is our area of focus and what we have to continue to do.
In some ways, when we branched out into specialty it was a very difficult thing because we didn’t want to carry products that had artificial ingredients, for example. But I think the bigger picture is that if we stay strong as a company, we’ll be able to promote the products we believe in most, i.e. organic and natural items. And, hopefully be able to convince suppliers who are selling the specialty items with artificial ingredients that they need to clean those things up. If we have a little bit more market share, our voice is going to be louder when we speak to those manufacturers. We can influence the market much more by being a participant in it, as opposed to just not carrying any specialty products.
OP: What is UNFI doing to promote small and/or local companies?
Funk: We have been evolving over the last 5 or 6 years. Climate change, the local movement, fuel prices—all these things are pushing us in a direction to open up more facilities so that we drive fewer miles and can handle more of a specific product mix including more local items. It’s becoming more cost effective for us to do that as well as it is more environmentally friendly to reduce miles and not buy the gas to begin with. The problem is that with our distribution network, we’re probably not able to carry as many of the smaller vendors’ items as we would like to. There has to be kind of a minimum threshold of movement that is needed, so we can’t always be involved with every small supplier, but certainly it’s in our benefit and our industry’s benefit to maintain a healthy diversity of small emerging suppliers in the marketplace. That’s the lifeblood of the industry and some of the small ones today become the bigger ones of tomorrow. It’s very satisfying to participate in the growth of those companies over time.
OP: What advice do you have for a company seeking to gain distribution with UNFI? What are some of the do’s and don’ts?
Funk: Generally start-ups should begin in one region and develop their market. Sometimes we’ll get started with them when they’re at that stage, but it’s more likely we’ll work with them when they’re ready to go national or broaden their distribution out of their home turf. One piece of advice is don’t expand before you’re ready. Many times people have done fairly well in a region and when they tried to expand nationally they were just overwhelmed. Whether it’s financial resources or staffing—it’s a big jump. Sometimes it’s better just to bite off the country in chunks and UNFI can often help do that with products.
Number two is to remember that you always have to build relationships with the retailers. Manufacturers need to get out, see people, be in the stores and create relationships that will ultimately drive their success. There’s no substitute for just hitting the road and developing relationships as opposed to sitting in an office and making phone calls or relying on distributors or brokers to make those relationships.
OP: How important is it for you to see organic grow and maintain value amid all the other claims out there including “natural” which is a large chunk of your business?
Funk: We want to grow organic and the way you grow organic is more consumer education and supporting organizations like the Organic Trade Association as well as the Organic Center, which is doing studies on the benefits of eating organic. The issue around natural is huge because in recent polls, people recognize natural more than they recognize organic in terms of the benefit. And we need to change that. We need to have organic mean the highest level and natural needs to be defined in terms of an industry standard or a legal standard. Consumers need to understand that as of now there is nothing regulating the use of the word “natural.” I would like to think that organic is the real natural. We need programs like “Got Milk.” We need to go out and say, “Got Organic,” and spend money letting people understand what that label’s all about. But, until we get the dollars, we’re going to struggle with educating consumers.
OP: What initiatives are you working on to make distribution more eco-friendly?
Funk: Our renewable energy programs have been well publicized and now we’re working on making our buildings LEED certified and energy efficient, as well as focusing on zero-waste programs in our facilities. Transportation is a big one, too. We’re trying to a) drive less miles and b) look for second-generation biofuels that are truly sustainable options, not the GMO soy biofuels that are out there. We are also experimenting with things like using hydrogen fuel cells to run our forklifts. We are taking risks not only to act as a role model for companies on the sustainability side, but also to offer test sites for new technologies.
OP: As we go into the next phase of the food revolution, what do you see as the most important steps to take?
Funk: My expectation is that consumers are going to become more educated and are going to demand more from us based on that. The companies that are able to address those needs—whether it’s dealing with GMOs, BPAs in cans, nanotechnology, packaging, or your carbon footprint—are going to have a leg up on the competition. The other thing is authenticity. A lot of the companies that are successful today have been able to establish that with consumers. People see real passion behind these companies. Brands like
Nature’s Path and the Clif Bar have values that come through in their products and resonate with consumers. This is going to become more and more important as the level of awareness and education goes up and manufacturers, retailers and distributors will all need to raise the bar to meet those needs.
