Unique offerings such as electric car plug-ins, a 95-percent organic produce section and in-house pasta maker haven't been enough to help Boulder, Colo.-based Alfalfa's Market regain past glories. Boulder's first natural foods supermarket, which reopened its doors in April, is delaying expansion plans and laying off up to 20 percent of its 175 employees due to lackluster sales, according to a Dec. 14 story in the Boulder Daily Camera.
Mark Retzloff, Alfalfa's chairman and co-founder, told newhope360 that the majority of the layoffs involve corporate employees. "We have focused our short-term efforts on running the store versus growing the business," he said. "It is unfortunate that we had to do the layoffs, but it is not uncommon in start-up companies. We had more aggressive growth plans and, after running the store for seven months in a down economy, we realize we have to adjust those plans."
According to Retzloff, 140 staff members remain employed by Alfalfa's. "We will continue to focus on bringing the people of Boulder the best natural and organic foods and products in a high-service environment," Retzloff said.
When Alfalfa's was founded in the 80s, it was considered a leading natural products retailer for building a reputation as a community gathering place and advocate for the natural and organic industry. Eventually the store expanded to include 11 locations.
Alfalfa's was acquired by Wild Oats in 1996; Wild Oats was then purchased by Whole Foods Market in 2007. As part of the Wild Oats acquisition, the Federal Trade Commission required Whole Foods to divest certain stores and other assets, and the location for the original Alfalfa's became available.
Retzloff, an original co-founder of Alfalfa's, saw the move as an opportunity to reestablish the store in its former home. In 2010, he received permission from the FTC to buy the location. Last year, the day before the store opened, Retzloff noted in an interview with newhope360 how much Boulder's natural products retail environment had changed in 28 years.
"We now have three Whole Foods, Sprouts, Sunflower, Vitamin Cottage, three Safeways and two King Soopers—all of which have lots of organic and natural foods," he said. "There's a lot of competition here, and there's no doubt that when we open, we're not going to produce food dollars, we have to take them from others."
Retzloff hoped to edge out the competition with conveniences such as Boulder's first in-store wine, spirits and beer shop; an array of Super Fustinox stainless steel dispensers for bulk oils, sauces and vinegars; and a focus on local and organic goods. To create an open, inviting and sustainable space, more than $10 million went into renovations, the Daily Camera reports.
In September, Alfalfa's filed with the Securities and Exchange Commission seeking to raise $8.75 million in financing, to potentially help fund a second location in Denver. However, it appears that disappointing sales figures will keep that dream from being realized for now.
Independents fight to keep up with Whole Foods Market
As Alfalfa's struggles, Whole Foods Market, which has three centrally located Boulder stores, continues to thrive. The national natural foods chain reported an earnings jump of 31 percent to $75.5 million and revenue gains up 12 percent to $2.4 billion in its fiscal fourth quarter.
The store's stock prices also increased this year—up 39 percent—while stocks for Safeway, Supervalu and Fresh Market all slumped, according the website WallStCheatSheet.com.
The seemingly unstoppable chain has been blamed for stealing customers and attention from smaller independent natural retailers.
"Whole Foods continues to expand and add stores and, as a result, some of the older naturals stores that have been at it since the beginning are finding it harder to compete from a price standpoint," said Rick Shea, owner and president of Shea Marketing Consulting , a Minneapolis-based retail consulting firm. "Additionally, if you have an area with many natural products stores, you're going to see oversaturation, and stores like Alfalfa's get crowded out."
Also, natural and organic brands are increasingly appearing on conventional shelves, which Shea said is another challenge. Naturals stores must attract hardcore natural and organic devotees—a much smaller segment of the market—to remain viable.
While Whole Foods seems to have honed in on how to compete with mass by delivering premium natural and organic foods in a refined store model, the store's success can't entirely be blamed as smaller naturals stores, including Alfalfa's, flounder, said Jay Jacobowitz, president of Retail Insights, Brattleboro, Vt.-based retail consulting firm.
"With Alfalfa’s, this was a first attempt at a highly complex, high-end store serving some of the most sophisticated shoppers in the country," he said. "I think it was just a matter of missing the mark by a certain margin. Remember, Whole Foods stubbed its toes several times early on, as well."