Wednesday, September 26, 2007

More competition for Whole "Paycheck" Foods, Publix Supermarkets

I knew this would begin to happen. Do you remember Boston Market and how everyone thought they were the best thing ever for hot family style foods? Then the grocery stores realized they could easily remodel and provide areas in their stores for the same purpose, which killed BM's market share. The shares tanked and they ended up closing most of their stores after over expansion.

I love Whole Foods, Wild Oats, PCC, etc, but I'm sure you have noticed can very expensive to buy Organic from Whole Foods. In addition, Whole Foods and Wild Oats were two of the only national chains and for a while, were able to command higher prices. While there expansion has not been as aggressive as Boston Market, I think Whole Foods may have taken their situation for granted. I've told Ferbit that it's only a matter of time before the supermarkets begin to expand their organic sections. Plus, smaller stores like Trader Joes will begin to carry more organic foods to enter this hot market. I'm sure jitters about new competition is why Whole Foods stock isn't performing that well.

This article from CNN/Money is a further example of what I have been talking about. Publix, a large chain in the south is opening a smaller sized chain store called GreenWise. Even though it is a separate store, it can still leverage the strong buying power, shipping, and warehousing of Publix.

I would really like to see Whole Foods succeed and believe they made a great decision merging with Wild Oats. It was really funny to see people arguing during the merger that these two companies would form a "monopoly" in the organic foods market. Whatever!!

As Whole Foods grows, one thing that concerns me is the amount of money they put into their new stores in order to be green. It's great to be green to help the environment and save energy costs, but at some point it can get a bit obnoxious and waste unnecessary expenses. They also have a practice of paying more for stock items, because they want to make sure the supplier makes more money. It's really dangerous to set alternative prices (price floors) against the free market, even in the organic/local market.

Here are a few quotes from the article that says it all…

"Prices really draw in consumers. Most consumers can't go out and spend their whole paycheck on natural products," she said.

In recent years, Wal-Mart Stores Inc. (WMT), Safeway Inc. (SWY), Albertson's and other big supermarket chains have also expanded their organic offerings and other smaller supermarket chains including Kroger Co. (KR), Lund Food Holdings Inc. and Hannaford have become certified organic retailers.

"I can't wait," said Kim Jones, 40, of Jupiter, who only buys organic and often shops at both Publix and Whole Foods. "It will be nice to have one-stop shopping at GreenWise and hopefully their prices will be more competitive than Whole Foods."

1 comment:

CMaerling said...

Mr Anonymous has decided to give himself a name...

My name is Chris and I am from NJ. I worked for a Natural Foods company previously but I am not back in college to become a teacher.

What I can say is that whole Foods Market will continue to be the big mover and shaker for organic vendors. They have demonstrated that they can truly move product. with the increased competition I beleiev the WF solution to this is to work more with local vendors. This will keep the pressure on teh more extablished natural foods vendors to proce things right.

In terms of competion and prices goes, I don't see perishables going down in prices for the mere fact that the drive Ethanol fuel will efffect corn prices, which effects the price of Organic feed and natural feed.

My experiences with the Krogers, Price Shoppers, Hannafords & Walmarts of the world is that they create biz for the natural fodos industry but it takes much more merchandising work (baby sitting by vendors and brokers) to make sure it actually sells and that the products are being treated well on teh shelf for sale. Groccery items are much more easier to maintain.

The WO merger will be good in places like Indiana, the Northwest and some parts of Florida. It will also be gppd for local distributors, which WF prefers.


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