Texas-based natural foods pioneer Whole Foods Market Inc has acquired its chief rival, Wild Oats Markets, in a deal estimated to be worth about $565 million. Founded in 1987, Colorado-based Wild Oats operates 110 stores under four banners in 24 states and British Columbia, and notched sales of $1.2 billion last year.
Whole Foods, founded in 1980, is the US's leading natural and organic foods retailer, with 191 stores in the US, Canada and the UK and sales of $5.6 billion. Wild Oats had struggled to compete with Whole Foods and even conventional retailers, and its sales and share prices dropped as a result.
Kevin Coupe, a retail analyst who writes the e-newsletter MorningNewsBeat.com, expressed surprise at the deal. "Whole Foods has been having its own problems lately, in terms of same-store sales and their growth not being what they wanted it to be. It may speak to the fact that organic growth, if you will, is not going to be what they want it to be, and an acquisition of this size is Whole Foods' best bet now," he told The Natural Foods Merchandiser magazine.
"Our companies have similar missions and core values," said John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market. "The growth opportunity in this category has led to increased competition from many players, most of whom are not dedicated natural and organic foods supermarkets, but are considerably larger than we are. Wild Oats Markets will be our largest acquisition and ? we will also gain immediate access into a significant number of new markets."
Whole Foods said it "will be evaluating each [Wild Oats] banner as well as each store to see how it fits into its overall brand and real estate strategy."
Coupe expressed concern at the effects of the merger. "It's hard to imagine it's good for the organic and natural foods arena because instead of having a strong competition between these two players, you're down to one player and a lot of independents and the mainstream stores. Quite frankly, consumers are going to have less choice."
However, he said consumers might see improved quality. "Whole Foods was always the superior operator; in the places where they can bring Wild Oats [stores] up to standards, it's a positive for consumers."