Competing In A Whole Market

Daniel Gross notes that Whole Foods is losing its edge, pointing to how “in places where it has been established for a decade or more, [it] seems to be losing market share”:

We are becoming the United States of Ameri-kale. Local food cultures are rising up everywhere, not just in yuppified suburbs and chi-chi cities. And Whole Foods’ success is inviting others into the increasingly crowded aisles. Small chains are gaining scale and resources. Sprouts Farmers Markets, which went public last summer. It has 150 stores, concentrated in Arizona, California, and Colorado. Fresh Market, had 151 stores in January and opened 25 in the last fiscal year. While Fresh Market doesn’t rival Whole Foods across the board, it is a reasonable alternative—especially for bulk items like nuts, and its fruits and vegetables are much more reasonable. Trader Joe’s, a quirky competitor, opened its 400th store last year.

Meanwhile, the higher standards being set by Whole Foods, restaurants, locavores, food blogs, farm stands, and CSAs, are causing mass retailers to up their collective game.

In response, Whole Foods is lowering prices. Alison Griswold wonders whether that will work:

Pricey, high-end brands that were once available only on the shelves of Whole Foods and other boutique stores can now be found in many mainstream supermarkets. Even Walmart announced last month that it would begin offering organic food products from Wild Oats at a fraction of competitors’ costs.

In short, Whole Foods’ grip on the organic market is slipping. The company cut its 2014 same-store sales and earnings outlook for the third consecutive time when it reported second-quarter results on Tuesday. Executives said the growing popularity of organic foods represented a huge opportunity for Whole Foods and that some of the recent gap in sales could be chalked up to the harsh winter. But those hedges didn’t reassure investors. Shares of Whole Foods plunged 18.8 percent to $38.93 when trading reopened on Wednesday and several analysts lowered their ratings on the stock.