Rivals look to take down Whole Foods and Trader Joe’s

Discussion
Mar 02, 2015

The two titans of natural grocery both have well-established brand images in the minds of consumers: Trader Joe’s has its strong private label showing and talkative cashiers, and Whole Foods has its immersive shopping experience and hot bar with every food imaginable. But the two grocers may have a new wildcard to contend with as Earth Fare, a natural grocery chain based in Asheville, N.C., embarks on a nationwide expansion.

Earth Fare, which began in Asheville, N.C. in 1975, recently brought on new CEO and president Frank Scorpiniti, whose credentials include a stint as senior vice president of pharmacy operations at New York’s Duane Reade in 2008. The chain had amassed only 33 stores in the past 40 years, but has its sights set on opening more than a half a dozen locations in 2015.

On Feb. 25, Earth Fare opened a store in Portage, MI, its first Michigan location. According to an article on Mlive.com, there was a line of more than 150 people when the store opened at 7:00 a.m. The store gave out 100 promotional gift cards of between $5 and 500 in value to those standing in line.

Earth Fare differentiates itself by going heavy on health food ideology. This extends to their selection of products.

The chain’s website features a "Food Philosophy" section, which reads in part, "What really sets Earth Fare apart from other stores is the list of things we don’t offer … like any products containing high fructose corn syrup, trans fats, artificial colors and sweeteners, and synthetic growth hormones in fresh meat and dairy." The FAQ page likewise gets granular about the grocer’s stance on hot button green issues like GMOs.





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Earth Fare is not the only competitor gaining ground behind Whole Foods and Trader Joe’s. Arizona-based Sprouts Farmer’s Market has beefed up its presence recently, announcing the addition of seven new locations slated for 2015.

According to an Albuquerque Business First article, co-CEO of Whole Foods Walter Robb directly addressed the possibility of Sprouts being a threat at a luncheon held by the Economic Club of Phoenix in January.

"They’ve done well. They are not Whole Foods. They don’t have the same standards, though sometimes they would represent that they do," Mr. Robb said of Sprouts. "We are going to continue to be the leaders in this space. We are the leaders, we’ll continue to be the leaders."

According to the article, Mr. Robb said his comments can be considered a "competitive throwdown."

Which chain is more vulnerable to competition within the natural grocery space: Trader Joe’s or Whole Foods? What will Earth Fare, Sprouts and others have to do to cut into the share currently held by Trader Joe’s and Whole Foods?

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19 Comments on "Rivals look to take down Whole Foods and Trader Joe’s"

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Chris Petersen, PhD.
BrainTrust

Even if you are on the right track, you can still get run over if you are not moving fast enough.

No retailer on this planet is immune from the disruptive forces of today’s omni-channel consumer. Neither Trader Joe’s nor Whole Foods can afford to rest on their laurels. Both must continue to evolve their offerings, but especially the consumer experience.

A retailer today can literally copy another retailer’s assortment very quickly. What they can not copy is the “secret sauce” that creates the unique experience that consumers value.

Dr. Stephen Needel
BrainTrust

I don’t see Earth Fare as a competitor to Trader Joe’s. At least here in the South, Trader Joe’s is not positioning itself as a natural grocery chain, although they do have a lot of offerings in that area. They are much more an “interesting foods” type store selling products at a reasonable price.

Dick Seesel
BrainTrust

I question the premise that Trader Joe’s and Whole Foods are successful because they are merely “organic grocery” retailers. So chains trying to crowd into that space (which also has plenty of competition from the big national grocery stores) need some brand differentiation in order to succeed. Fresh Market is another growing chain with a smaller footprint than a typical Whole Foods store.

There is not necessarily anything “natural” about Trader Joe’s well-edited assortment of private-brand packaged and frozen foods. Whole Foods is a lot more than its “organic” positioning because of the “foodie appeal” in its fresh meats and produce. So competitors looking to gain share really need to understand why these two chains are excelling.

Tony Orlando
BrainTrust

This threat is nothing new, as many natural stores are battling as we speak for their share of the pie. Earth Fare better have deep pockets, and find locations with high traffic in high income neighborhoods, because this won’t fly in rural low income towns. The philosophy they talk about is great, but they better sharpen their pencil to provide great value, to make it affordable and grow their market share. Trader Joe’s is an “experience” type store, and Whole Foods can get aggressive on their 365 private label to help combat Earth Fare, which I’m sure they will to protect their turf.

Who doesn’t like a shiny new store in town, with great high-end products to showcase? We’ll see how this works out, and the consumer will decide with their wallets where they choose to shop.

Ian Percy
BrainTrust

To answer the question directly, EVERY retail company is vulnerable. The one thing none of us get to avoid regardless of industry is the inevitable life-cycle. Before you hit maturity you’d better know how you’re going to re-birth (transform/reinvent) your company. Fail to do that and you’re done.

What I like about Earth Fare (learning about it for the first time) is that they recognize who is not going to be their customer. If you’re looking for Frosted Flakes or pancake syrup apparently this is not your store. The courage to pinpoint who your customers are and who they are not is all too rare.

The net is this—whichever creates the most desired customer experience in the store will not only maintain but grow its tribe. If you define who you are specifically enough there is no need to “cut into the share” of another brand. You build and own your own space.

Max Goldberg
BrainTrust

Whole Foods is more vulnerable due to its high prices. I don’t think that Earth Fare, Sprouts or others will cut into Trader Joe’s sales. With their reliance on private-label items and quirky culture, it will be harder to knock off Trader Joe’s.

Richard J. George, Ph.D.
BrainTrust

Every competitive format in which a chain competes should be considered a threat. The key word is competition. Shoppers, not retailers, define competition. That being said, of the two national players, Trader Joe’s and Whole Foods, in my opinion, Whole Foods is more at risk. Trader Joe’s uniqueness, exceptional private label and fun store format are elements that are not that easy to emulate, let alone positively differentiate. Simply look at what has been done to date to slow down the pace of Trader Joe’s—little.

The key to any new competitor entering a market is to create a unique positioning that resonates with the target market. In the case of these new entries the question is what do they do different and better than Trader Joe’s and Whole Foods?

Gene Detroyer
BrainTrust

Today’s growing and successful grocery retailers have established brands. They are about the banner on the front of the store defining what is in the store. This differs significantly from the supermarket marketing of the last 60 years. Assuming Earth Fare, Sprouts and others are able to build a brand like Whole Foods, Trader Joe’s or even Wegmans and are going to be successful, they are going to take their business from traditional grocery retailers, pulling niche business from them, but they have to be unique. You can’t beat a leader by being the leader.

Mohamed Amer
BrainTrust
Whole Foods and Trader Joe’s have removed the word commodity from selling groceries by getting ahead of, and delivering on, the mega-trend of healthy living (and eating). Sprouts already is making headway in Southern California, yet I don’t see any reduction in loyalty to Whole Foods and Trader Joe’s in that market as I believe the size of the healthy living segment continues to expand. Earth Fare is certainly tapping into that trend and their growth will only be limited by their ability to fund and efficiently execute as they open new markets. Whole Foods has already done a lot of education on the value of organic foods—Trader Joe’s claims that its Trader Joe’s private label product is non-GMO. With a stated mission “to connect communities and improve lives through food,” and a commitment to not having high fructose corn syrup, artificial colors, etc., in the products it sells, Earth Fare will add to the credible choices consumers have in the markets it serves. I see Whole Foods being impacted more than Trader Joe’s in an Earth Fare growth scenario, especially if their pricing is better than Whole Foods. However, I would not underestimate the staying power of either Whole… Read more »
Naomi K. Shapiro
Guest
Naomi K. Shapiro
2 years 7 months ago

I think that Trader Joe’s is a more comfortable, middle-of-the-road store, pleasant and with good prices and variety. The Whole Foods store I know is too much in the stratosphere in terms of price and variety, even a little snobby. Earth Fare’s message is good and timely, but whether they can execute something special or different (i.e., differentiate) to win over crowds (depending on where the stores are located) remains to be seen. And heavy traffic for a promotion for a store opening does not a season make.

Robert DiPietro
BrainTrust

I’m not sure I would classify Trader’s Joe’s as natural but from a competitive standpoint Earth Fare is more of a competitor to Whole Foods. Both Trader Joe’s and Whole Foods have a great position but no retailer is safe if they don’t evolve. Whole Foods is probably mostly vulnerable on price but they can use private label to compete on price and still keep the superb store experience. They call it Whole Paycheck for a reason.

HY Louis
Guest
2 years 7 months ago

What those other chains will have to do to take share from Trader Joe’s and Whole Foods is to develop a cult-like following and find employees who are a step up in class. Trader Joe’s stores regularly do $500,000 or more and Whole Foods has many stores well over $800,000 to a million or more per week. They have some of the highest sales per square foot performances in the country. I don’t see those kinds of numbers coming from any of the “also-rans” like Sprouts or Earth Fare. These lower-volume competitors also do not have the destination dinner offerings that Whole Foods provides.

Li McClelland
Guest
Li McClelland
2 years 7 months ago

I think Ian’s observation that Earth Fare knows who their customer is not going to be (Frosted Flakes or pancake syrup for instance) and that it is a positive for them, is interesting. I’m not sure I agree. Some food retailers are apparently increasingly confident that consumers will eagerly shop at their place and then willingly make a second trip to another store to get basic products that members of their family use but were not available at store number one. I question this assumption in this era where so many people are over-booked in terms of both time and energy and are financially stressed.

That said, Whole Foods sort of has that same problem, and so I think Whole Foods is vulnerable in the natural food market space by anyone who can provide quality but undercut them on price.

Bill Hanifin
BrainTrust

Grocery shopping has become complicated, but maybe that just translates into more choices making each shopping visit more “considered.” Using our South Florida area as an example, the decades old two horse-race between Publix and Winn Dixie has exploded into a much wider field.

Costco and Walmart meet some shopper needs, while Fresh Market, Aldi, Whole Foods and Trader Joe’s all compete for specific shopper types and for specific portions of each shopper’s basket. In the course of one week, it would not be unusual for a family to frequent up to four of these competitors.

Though Trader Joe’s seeks to be known as a natural grocer, they seem to have their own niche of private label brands and a unique store environment but don’t scream “natural” to me (opinion). Whole Foods sits apart as a natural grocer, but their offering is mixed enough that they may be vulnerable to the Earth Fare offering.

In this market at least, I wonder if there is room for one more chain. If there is, it would be to compete directly with Whole Foods and it sounds like the commitment Earth Fare has to truly natural foods could present solid competition.

James Tenser
BrainTrust
Like some others here, I hesitate to place Whole Foods and Trader Joe’s under a common heading of “natural” grocery. Could we call them “specialized” food chains instead, and include Earth Fare, Sprouts and Colorado-based Natural Grocers (92 stores) in the grouping? Within that vibrant competitive set, I still believe that powerhouse Whole Foods is the market maker, while its newer, younger competitors are nipping at the corners of its business. Whole Foods has little to worry about at present. It’s well-run and its positioning is nearly iconic, even if it faces some pressure on margins. Trader Joe’s is another instance altogether, because it caters more to pleasure-foodies than to health-foodies. All the others offer expanded selections of organic products. Whole Foods, Sprouts and Natty Gs are heavy into supplements and nutrition bars (not my idea of “natural” at all). Let’s be clear: This group of competitors are all about skimming an attractive share of some attractive consumer wallets. It’s far better to be positioned for higher margins than it is to wallow in the “big middle.” I don’t see them stealing share from each other so much yet. How counterproductive would that be while there are still so many… Read more »
J. Peter Deeb
BrainTrust

The reality is that anywhere an Earth Fare or Sprouts and others pop up, they are a threat to take business from almost any conventional or upscale retailer. The demographics have to be right for these more specialized stores to prosper and it may well be that they will not worry about which retailers are in place but put their stores where there are the most consumers likely to sample their outlets and products and then build a base of customers from there. The fact that they appear to be more similar to Whole Foods means that Whole Foods may be more vulnerable, but they also know how to compete and that makes entry more difficult.

Jerry Gelsomino
BrainTrust

Whole Foods is more vulnerable. TJ’s offers something none of the others have tried—developing a totally FUN atmosphere in which to shop. We have Whole Foods, Earth Fare, Fresh Thyme, and Trader Joe’s in the Indianapolis market. TJ’s is still #1 with me, except for convenience as they are further away from my home.

Kai Clarke
BrainTrust

Both of these chains are vulnerable to competition. This is space is dynamic, changing and very competitive. Moving to compete with Trader Joe’s or Whole Foods will require leadership that understands what excellence in retailing is all about, and then goes beyond this. Every retailer knows this, and the ones who are growing understand that success can be fleeting if they are not presenting their best efforts every day.

Mark Gardiner
Guest
Mark Gardiner
2 years 7 months ago

Trader Joe’s brand is built on frontline customer service. As long as they maintain the existing retail culture, they’re safe. That said, any rival that offered better quality and more truly “organic” approach *and* great service would be able to poach hard-core green customers from either TJ’s or WF.

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