“Exploding” demand for natural and organic food, especially among the younger generation, combined with increasing retail competition is giving way to a new tech- and value-oriented store concept that Whole Foods Market will launch next year, Co-CEO John Mackey told investors on an earnings call Wednesday.
The natural chain last year entered partnerships with Instacart and Apple Pay in an effort to court the independent and empowered millennial generation. Those efforts have found traction—Mackey said average weekly Instacart sales now total $1.5 million, and Whole Foods is the leading Apple Pay retailer—but the chain sees untapped opportunities to reach the more price-conscious consumers of this age.
“We think a streamlined, hip, cool, technology-oriented store […] that has lower capital, lower costs, perhaps lower labor costs and lower prices, is going to be very attractive to that particular generation,” Mackey explained.
With the new line of stores, Whole Foods is “evolving with the marketplace,” he said. The concept will be able to leverage Whole Foods’ existing distribution channels but will feature “a modern, streamlined design, innovative technology and a curated selection” and offer “our industry-leading standards at value prices.”
It will have its own name and stand alongside the Whole Foods Market brand, Mackey said. “The Whole Foods brand stands for the highest quality, the best selection, the highest degree of service—that brand can bend a little bit, but we’re not willing to break it. But we think we can create a complementary brand that can go places the Whole Foods Market brand cannot effectively go.”
Company leadership is putting together a team to focus exclusively on this concept and is working on negotiating leases with the expectation of starting to open stores next year. Mackey and Co-CEO Walter Robb promised more details by early autumn.
“We think that by creating a second growth vehicle for our company, we can broaden the accessibility to fresh, healthy foods,” Robb added.
In addition to the new store concept, Whole Foods plans to expand some of the initiatives it’s been working on to differentiate itself and fight slowing sales growth. Those include continuing to lower produce prices in more markets and rolling out a second phase of its Values Matter marketing campaign. A new round of online videos, digital display ads and social and mobile ads will surface next week, Mackey said.
Whole Foods Market reported second-quarter sales of $3.6 billion, a 10 percent uptick from last year. It also reported:
- Comparable store sales increased 3.6 percent.
- Diluted earnings per share were 44 cents, a 14 percent increase over the second quarter of last year.
- Leadership still expects a greater decline in gross margin this year than last.
- 11 new stores were opened in Q2, and three have been opened already in Q3, totaling 417 stores.