Whole Foods To Launch Lower-Cost Chain

Whole Foods (WFM) is trying to change its reputation as a grocery store chain with fresh food at high prices, by opening a separate chain of lower-priced stores aimed at Millennials. The new stores will cater to a younger generation of shoppers who are still interested in organic and natural foods, but want a different shopping experience, executives said.

Walter Robb, co-CEO of Whole Foods, said the stores will also appeal to younger customers with a, “modern, streamlined design, innovative technology and a curated selection”. He also added, “This marketplace continues to grow and explode, and I think we think by creating a second growth vehicle for our company, we can broaden the accessibility to fresh, healthy foods”.

The company made the announcement Wednesday, as part of its second-quarter earnings release. Whole Foods shares fell after the earnings announcement missed analyst expectations and continued to trend down on Thursday, slumping nearly 10% to $43.07. [1]

As organic and fresh foods have become more popular at mainstream grocery chains, Whole Foods has been losing market shares recently. The chain had earned the nickname “Whole Paycheck”, which mocks the incredibly high prices of its products.

“[Whole Foods] still has a problem on price,” Neil Saunders, CEO of retail consultancy Conlumino said, and “(Millennials) just don’t have the disposable income to make that their destination of choice for grocery shopping“.

The co-CEO believes that these new stores will have a “modern, streamlined design, innovative technology and a curated selection” and they hope to attract not only young health conscious millennials, but anyone who is interested in quality organic foods at a reasonable price.

The new chain follows other retail giants like Walmart and Target, which have been opening smaller, convenience-focused stores in urban markets. These stores typically have fewer products and are heavily focused on fresh food and snacks. The new Whole Foods stores will likely compete in the same space, Saunders says, though will stand out because the brand has already built a reputation for high-quality food. Still, Millennials want convenience.

The new stores will open next year and more details about the enterprise will become available around Labor Day. The development reflects a monumental shift in how Americans view nutrition. Organic food sales in the United States jumped from $11 billion in 2004 to $27 billion in 2012. Whole Foods currently operates 417 stores, and plans to open 23 new ones this year. The company is expecting sales growth this year of more than 9%, and same-store sales growth in the low to mid-single digits. [2]
There are numerous incidents that reveal their is a growing trend surrounding the skepticism of synthetic foods. Consumers are the king right now. This was seen when consumer outrage forced Subway to remove rubber from its bread, and when Panera Bread recently announced that it will remove many of its unhealthy ingredients.

While the FDA is busy approving harmful and toxic substances used in certain foods, consumer awareness has forced companies to resort to health organic food to survive and make a profit.

Furthermore, with escalating distrust of companies like Monsanto, and genetically modified food in general, it is highly likely that this organic trend will continue to get larger and become more accessible to the general public. [3]

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SOURCES:

[1] http://www.usatoday.com/story/money/2015/05/07/whole-foods-cheaper-millennial-chain/70934302/

[2] http://abcnews.go.com/Business/wireStory/foods-shares-fall-sales-disappoint-30854281

[3] http://theantimedia.org/whole-foods-announces-new-low-cost-organic-grocery-chain/