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Quick Take:
A cyberattack on Unified Natural Foods (UNFI), one of North America's largest food distributors, has been disrupting area businesses for more than two weeks. The attack left empty shelves at local stores and forced food vendors to scramble for alternative suppliers. The incident highlights the vulnerabilities of an increasingly consolidated and automated food distribution system.
Two and a half weeks after Unified Natural Foods (UNFI) experienced a cyberattack on its systems, Eugene-area retailers and food service operators are still feeling the impact, although the situation is now almost resolved. Many local stores still have some empty shelves and restaurants and food trucks might either be out of products or have different products than what they usually serve.
“It couldn’t have happened at a worse time, because it was probably one of our busiest weeks this year,” said Kico’s Barbecue food truck owner Paul Torres, about the disruption that started in early June.
What happened?
UNFI, based in Providence, Rhode Island, is one of the largest publicly traded wholesale food distributors in North America.
UNFI is a coast-to-coast distributor providing groceries and nonfood products to about 30,000 grocers, both large and small, throughout North America, according to its latest annual report. UNFI offers about 250,000 products, including national, regional, and private label brands.
On June 9, UNFI issued a statement on its website that the company had “identified unauthorized activity” in its systems and had “proactively taken some systems offline” while it investigated. So far, the company has not provided an explanation of exactly what happened in the attack. Lookout’s attempts to reach the company were unsuccessful, because a contact form malfunctioned on the company website.
The attack forced UNFI to shut down all systems, including email and employee cellphones, in an attempt to contain the breach, said Market of Choice CEO Richard Wright.
“They’re slowly coming back up, but they’re coming up at different paces,” Wright said. “(UNFI) told us that our trucks that were shipping over the weekend (June 21) would be complete, and they weren’t.”
The shipments received on Tuesday, June 24, and Wednesday, June 25, were almost back to normal size.
Wright said Market of Choice didn’t have as many missing products as other stores did. Until the weekend of June 21, he said the store had “done a really good job of keeping our out-of-stocks to a minimum,” but this weekend, he said, “we had trucks rolling with a lot of product, but when they showed up, they didn’t have as many products as we expected.”
Empty store shelves
Certain categories, such as yogurt and other refrigerated and frozen products, have been largely out of stock. Also, many spots for middle-of-the-store dry goods such as pasta, crackers, and chips were empty this weekend.
One hard-hit local retailer was the Chef’Store, which has locations in Eugene and Springfield. On June 13, produce shelves at the Eugene Chef’Store were almost empty. On June 22, there were still many empty shelves, but less so. Employees at the Chef’Store repeatedly declined requests to speak to Lookout Eugene-Springfield, instead referring inquiries to the corporate office.
“One of the third-party product suppliers to our Eugene Chef’Store is experiencing a temporary supply chain disruption, which has temporarily impacted some scheduled product deliveries,” a June 14 comment from an unnamed Chef’Store spokesperson said. “The third-party supplier is working diligently to resolve their disruption as soon as possible. Our Eugene Chef’Store customers remain our top priority, and we are implementing measures to mitigate potential product disruptions.”
For food cart operators like Torres, who rely heavily on UNFI-supplied stores like Chef’Store for ingredients, the disruption sent him searching for new suppliers. His barbecue cart sources a lot of its ingredients, including bell peppers, cabbage for slaw, cheese, and butter, from UNFI-supplied stores.
“Pretty much everything” was hard to find at first, Torres said. “At some point, there was no pasta. No condiments. I would say at least 80% of our food product that we would use normally was affected by what they lost in their hack.”
Torres scrambled to find alternatives. In the process, he discovered other local suppliers have the same or better products, which led to cost savings and better quality products in some cases.
Throughout Capella Market, signs on shelves indicated the store was “experiencing a temporary out of stock issue for some products.” Babs Rubin, an employee stocking shelves over the weekend, said customers have been understanding about the disruptions.
Exposing vulnerabilities
The cyberattack raised questions about the food industry’s increasing reliance on automated systems and consolidated distribution networks. One issue hampering recovery from this cyberattack is related to some distribution centers having switched to a robotic workforce. Warehouses with human pickers could be putting orders together, but in an offline robotic warehouse, there is no method for humans to select products and fulfill an order.
Wright explained that during the 30 years he has been in the grocery business, regional cooperatives have merged into ever-larger entities.
“Every time you have consolidation, the consolidation pushes everything farther away,” he said. “Decisions are made farther away. While that may be economical, it also is very challenging when there are problems.”
Consolidation is “incredibly dangerous,” said Reisa Maddox, manager at Capella Market in Eugene, “and this is an example of why.”
Wright recounts various challenges during his years in the grocery business, such as COVID, flooding that closes freeways, ice storms, power outages, and blocked roads that led Market of Choice to implement its own distribution system to try to insulate the company from these types of events.
“We realized that putting all of your eggs in one basket is not a great way for a supply chain to function,” he said.
Over the last 15 years, Wright said Market of Choice has worked to diversify its supply chain so that it doesn’t purchase more than 30 to 35% of the company’s product from any one distributor.
“Some retailers receive up to 70% of their supply chain through one distributor, like UNFI, and we chose not to allow that to happen to us,” Wright said. “So we, in 2010, set out to build our own distribution system, which we have out in west Eugene.”
The company also has its own central kitchen where it produces prepared foods for its 12 stores.
Waiting on a resolution
Wright said communication with UNFI during the crisis has been limited, leaving retailers uncertain about recovery timelines. On June 21, Wright was told that weekend shipments would be complete, only to receive deliveries that were substantially smaller than expected. However, by June 24, orders appeared to be returning to near-normal levels.
That matches the experience of Maddox, whose store felt the attack’s impact immediately but has seen steady improvement since.
“We knew early on this happened because we are old-school grocery people,” Maddox said. “We didn’t get our Friday order after this happened and we knew when we didn’t get our Friday order that this was not going to be good.”
Following the attack, Capella began sourcing items through alternative channels while waiting for UNFI to come back online. After resuming orders through UNFI, the first order received on June 20 delivered only about half of what the store had been promised. But by June 24, Maddox confirmed that supply levels were returning to near-normal.
Maddox said the best way for stores to avoid something like this happening in the future is to order strictly from local sources. But that’s not the way Americans shop anymore. For instance, most Americans would not be willing to give up bananas and avocados, which don’t grow here. Even if Capella did order strictly local items, it would be difficult to price them in a way that would be manageable.
Maddox said because Capella has a couple of local warehouses, the store is able to order more items in advance and store them, which helps keep some shelves from going empty.
“The best protection that we have is working with multiple vendors, so that if we can’t get stuff from one, we can go to another,” Maddox said. “But I don’t think there’s any way for us to protect ourselves from a distributor’s lack of ability to keep their firewall safe.”
Local connections important
During the time when UNFI was offline, Wright said companies such as Springfield Creamery, which would normally ship through UNFI channels, began delivering its dairy products to Market of Choice directly. Other suppliers used their own trucks to pick up and deliver ice cream and other frozen products to Market of Choice. Some protein suppliers have also delivered items on their own trucks. Wright called these companies “heroes.”
For Wright, the lesson is clear: “That’s where having those local relationships is really beneficial.”
“Oregon’s food network really needs to become more and maintain its local presence,” he said. “If we don’t think local, and if we don’t keep things local, then when there are problems, we could really suffer as a community. And it’s not just us, and it’s not just the retailers that receive product from United Natural Foods. It could also be the larger chains as well, because they keep moving their distribution centers further and further away.”
