Whole Foods Market has a problem independents know all too well: competition.
H-E-B. Wegmans. Kroger. Natural Grocers by Vitamin Cottage. Sprouts. Trader Joe’s.
It's all new to the supernatural that’s been the big guy for so long.
Wall Street analysts put Whole Foods co-CEOs John Mackey and Walter Robb on the defensive during this week's earnings call. The unwavering, mission-driven men admit they are in a position they haven't been in before.
“I think for a long time Whole Foods had the field to ourselves, pretty much,” Mackey said. “That was nice. But we don’t any longer. So we’re adapting to the reality of the marketplace, which is increased competition.”
Even as one analyst suggested Whole Foods management “doesn’t appreciate that the world has changed,” Robb and Mackey remained steadfast in their planned steps—reducing prices, cutting expenses and pursuing innovation and differentiation—all while eyeing their 1,200-store goal.
The retailer's report of flat second quarter income didn’t impress the market, sending its stock to two-year-low levels.
We will see if the numbers move.
Kemper Isely of Natural Grocers by Vitamin Cottage also found himself explaining away competitive pressures during his earnings call a week earlier. Natural Grocers' stock hit a 52-week low after the report.
Comparable Whole Foods store sales for its second quarter grew 5 percent; and Natural Grocers’ increased 8.1 percent. Isely said stores without competition were up 13.7 percent. Looking at the natural retail market as a whole, 73 percent of natural foods stores saw an average increase of 11.5 percent last year, according to Natural Foods Merchandiser’s annual Market Overview (being released in June). Eleven percent of stores experienced an average sales decrease of 6.2 percent.
Competition is a familiar issue for independent natural food stores. They have had to face these challenges more and more in recent years as Whole Foods met market goals by adding stores in new and smaller markets. (Nine percent of our survey respondents said the chain opened in their market.) They’ve seen the excitement of the newly public Natural Grocers and the even newer Sprouts march to the beat of big investment. They’ve watched as conventional markets co-opt their missions to build local and organic food systems and spread health to the masses.
They have had to make brave decisions and big investments in the face of this increased competition. We talk to some of these courageous owners in our June Market Overview issue.
Robb, Mackey and these owners have one thing in common, their positivity that all of this mainstream attention—and the growing competition—affirms their greater health missions.