Whole Foods announces plans for new value-price concept

Discussion
May 07, 2015

Whole Foods is starting a whole new business. Yesterday, co-CEOs John Mackey and Walter Robb announced the company would launch a new business next year under a separate banner that will be geared to appeal to Millennials, both in product selection and value prices.

Mr. Robb said the as yet unnamed concept would be "unlike anything that currently exists in the marketplace" and would "feature a modern, streamlined design, innovative technology and a curated selection."

While Mr. Mackey announced that Whole Foods had a record second quarter for sales and still expects to triple the number of stores in the chain, it’s no secret that a wide array of competitors from conventional grocers such as Kroger to specialty chains such as Sprouts Farmers Market are competing aggressively in the organic and natural foods space.

"Over the past several years, we have explored the idea of new formats several times but never felt the time was right, particularly given our accelerated growth plans," Mr. Mackey said on Whole Foods second quarter earnings call. "That issue is now behind us, as we have successfully increased our new store openings for six years. In addition, we now have a successful track record of opening some smaller format stores with a lower cost structure."

Whole Foods Market

Photo: RetailWire

Although Whole Foods has not yet named its new business, Bloomberg reports the company filed trademark applications for 365, Dailyshop, Clever Egg, Small Batch, Swiftgoods and Greenlife in the past week.

Whole Foods has begun putting together a team to focus on building the new concept and is already negotiating leases, although it did not specify in which markets. The company expects to be able to quickly ramp up the number of stores it operates since store design and product assortment will be fairly standardized.

"We believe the growth potential for this new and complementary brand to be as great as it is for our highly successful Whole Foods Market brand," said Mr. Robb. "We look forward to sharing more details about this exciting new venture sometime before Labor Day."

What will Whole Foods need to do to fulfill Walter Robb’s promise that its new format will be “unlike anything that currently exists in the marketplace?” Is Whole Foods running the risk of cannibalizing its existing business with a lower priced format?

Braintrust
"There’s lots of data that indicates consumers prefer curated assortments. The notion of curating by price point is fascinating, and I like it."
"It is always risky to expand out of a retailer’s core competency into areas that are potentially at odds with their existing niche. The highway is littered with the carnage from retailers believing the best way to grow their business is to dilute their brand and go after shoppers they can’t reach with their current offering."
"Whole Foods is making a big bold statement, that this format will be unlike anything that currently exists. For me it will be interesting to see what gizmo they come up with. Even though I come from the horse and buggy era, I still get excited to see something different."

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26 Comments on "Whole Foods announces plans for new value-price concept"

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Dick Seesel
Guest
2 years 7 months ago

This announcement raises several questions about the kinds of issues being discussed inside Whole Foods’ headquarters:

  1. Is a new concept the best way to overcome what is apparently a price perception problem?
  2. If we are creating a new store for “Millennials,” will we lose them to our core business? If so, why are we continuing to open so many stores?
  3. Will a “modern, streamlined design” offer the kind of “foodie” appeal and presentation that drove Whole Foods’ growth in the first place?
  4. How exactly is the new chain different from the highly curated assortment at Trader Joe’s, Fresh Market and other small-footprint competitors?

Whole Foods may in fact develop a concept that impacts the industry as much as its original stores have done, but for now count me as a skeptic.

Max Goldberg
Guest
2 years 7 months ago

After many years and countless dollars spent building the Whole Foods brand, why would the company want to dilute its brand with a format geared toward Millennials? The new format will feature lower prices. Won’t this simply reinforce the perception that Whole Foods is too expensive? Will the new stores feature greater technology? Be careful about trying to woo Millennial customers who are very fickle and run away from a brand as quickly as they ran towards it. I look forward to seeing the new concept but wonder how it’s going to differentiate itself among a crowded organic food marketplace.

Paula Rosenblum
Guest
2 years 7 months ago

There’s lots of data that indicates consumers prefer curated assortments. The notion of curating by price point is fascinating, and I like it.

Richard J. George, Ph.D.
Guest
2 years 7 months ago

It needs to deliver on the specific needs of its target market. If it is Millennials, as noted in the article, the product selection and value pricing needs to fit the lifestyles and food shopping behavior of America’s largest demographic group. In addition, it needs to address the social media usage and online shopping desires of this generation.

If the banner is really different and the marketing specifically targeted, the risk of cannibalization is lessened. However, there will be some cannibalization. That is not necessarily a bad outcome, particularly if the new format is attractive to the 75 million Millennials. It may result in some loss from shoppers at its existing business which could be offset by a whole new market segment. Plus keep in mind that other competitors are going after the Whole Foods customer. It is better to eat your own lunch than have someone else eat it for you.

Graeme McVie
Guest
Graeme McVie
2 years 7 months ago

This sounds like an acknowledgement that Whole Foods wants to attract a broader portion of the shopper base to their offering than they currently appeal to. This move indicates that they’re keeping one eye on the future to ensure that the next generation of their core shoppers do not acquire loyalty to a competing, but lower-priced, natural foods retailer like Sprouts.

While they may risk cannibalizing some of their current business, they’re probably working on the assumption that there is an unmet need in the market for lower-priced natural foods and that if they don’t meet this market need then one of their competitors will. But they can’t risk their core business by adapting their current formats, so this is an attempt to leverage all that is good about Whole Foods but with a lower-service, lower-priced shopping experience.

Ian Percy
Guest
2 years 7 months ago
As a Whole Foods fan, I’m looking forward to see what they come up with. BUT: “Unlike anything that currently exists in the marketplace” is not a value proposition. Nor is having a “curated selection.” You could stack the products upside down and it would be unlike any other food store. And “curated” simply means someone chose what items are presented and manages that selection. That’s hardly unique either, every store inventory is curated, just some more brilliantly than others. The “unknowns” have to do what “streamlined” and “innovative technology” mean. Chances are there will still be shelves and aisles, though maybe the decor will be cool. So the big opportunity lies in the technology. If your items are automatically totaled as you put them in your cart and your cart also reads your credit card or phone meaning there is literally no check out, that would be interesting. Is anyone else tired of hearing about low price strategies? Apart from this meaning there’s yet another competitor racing to the bottom, it does run the… Read more »
Mark Heckman
Guest
2 years 7 months ago
It is always risky to expand out of a retailer’s core competency into areas that are potentially at odds with their existing niche. The highway is littered with the carnage from retailers believing the best way to grow their business is to dilute their brand and go after shoppers they can’t reach with their current offering. So is it with Whole Foods. I am certain that they are building this new format in response to consumer research that tells them they are too pricey for some limited-budget shoppers. Millennials come to mind when thinking of those that should love the offerings of a Whole Foods, but consider “Whole Paycheck” to be an aspirational luxury, not a weekly trip. Back to the new format. I am not sure what “value pricing” actually means in the context of Whole Foods. If it involves new lines of lower-quality products at lower prices, there is trouble ahead. The entire brand will take a hit. If their new pricing means promotions and deals that Millennials seem to embrace, with an… Read more »
Tony Orlando
Guest
2 years 7 months ago

Whole Foods is making a big bold statement, that this format will be unlike anything that currently exists. For me it will be interesting to see what gizmo they come up with. Even though I come from the horse and buggy era, I still get excited to see something different, and I am amazed at what creative people keep coming up with.

There are tons of formats out there, and Whole Foods needs to hit this out of the park in order to draw a new crop of foodies to their store, because there isn’t a whole lot of growth out there these days. I will check them out when this happens and blog on it. So until then, all of us in this industry need to stay sharp and look for new ways to make our own little world better, or risk being cast aside to the foodie graveyard.

Hy Louis
Guest
2 years 7 months ago

I am not a fan of downgrading a brand just to make it lower priced. They might not have to worry about cannibalizing existing stores if they are far enough away. It’s like why doesn’t SuperValu open Save A Lot in Minneapolis along with its high-priced Cub stores? Then consumers will ask, why can’t you have lower prices in Cub too? My concern is, will consumers ask the uncomfortable question — why can’t Whole Foods have lower prices in its regular stores? Will this be the Save A Lot version of Whole Foods? My suggestion is not to put the new stores anywhere near a Whole Foods.

patrick conboy
Guest
patrick conboy
2 years 7 months ago

It would appear to me that Whole Foods is likely going to shore up its flanks against the more value-driven and “curated” Trader Joe’s with a competitive model of similar scale.

Lee Kent
Guest
2 years 7 months ago

Having visited the new flagship Whole Foods in Atlanta and being highly disappointed in the touted digital interactive displays, I’m not feelin’ so good about this new concept.

I do love what they are thinking, however, I suppose I would have liked to see them test some of the concepts in-store before launching a new brand. There are many things they are already doing that attract millennials.

Just saying…for my 2 cents.

David Livingston
Guest
2 years 7 months ago

All Whole Foods needs to do is go to the smaller markets where Sprouts, The Fresh Market, Fresh Thyme, and Earth Fare are going. In fact many of those stores are struggling and might wish to sell out.

My advice to Whole Foods is go look at markets that instead of having an expensive university, major medical complex or deep six figure incomes, go look at markets that have a really nice minor league baseball stadium but no Whole Foods. This is an opportunity to put some hurt on all those smaller format organic stores that seem to be stealing the headlines.

Tom Redd
Guest
2 years 7 months ago

Dude, it’s for Millennials. Be different.
1. POS on XBOX or PS/4.
2. When you check out, a message is sent via text and Twitter on what you bought—it is a social grocery.
3. All items in the store positioned in a manner similar to the “doing a text” head/neck bend. A common position for Millennials
4. All food packaging self-recycles in 4 days…and contains no wheat.
5. Parking lot has extension cords for Prisms and other electric vehicles.
6. iPhone chargers are available throughout the store and 6 Starbucks mini stores inside the store itself.

Walter may not use all these great ideas…the 18-29 year-olds mystify me. The 30-34 (still Millennial) are more stable and will hit a Kroger Marketplace for cost savings and good assortments.

TRedd – Hip, yet old….

Carlos Arambula
Guest
2 years 7 months ago

What makes Whole Foods appealing to Millennials is that they feel they discovered a grocery store with unique product offerings. It appeals to their “explorer” nature and they like Whole Foods regardless of high prices.

I believe they are misreading the Millennial consumer if they believe they can steer them to a “value” concept. Within the Whole Foods space there is a need for a “value” concept, but I believe they will appeal to a different consumer, perhaps the Trader Joe’s consumer or the consumer Fresh and Easy failed to attract.

I don’t believe there will be cannibalization, it will be an entirely new consumer approaching the concept and it will not be the Millennial visiting their current format.

Lee Peterson
Guest
2 years 7 months ago

They could have 100 or more of these right now. They already have a name: 365. I believe WFMI has permission to do a lot more as well: Health & Wellness Centers, Fitness Stores, Restaurants, Coffee Shops, Juice Shops, Burger Stands, on and on. The “Urban Brands” model of creating a new brand for different segments (vs. one thing to all people) is retail of the future. Bring it on.

Craig Sundstrom
Guest
2 years 7 months ago

I find it unsettling that they can’t even agree on a name, having filed no fewer than six trademarks. (Admittedly this could be described as “covering your bases,” but for me at least it furthers the perception that this isn’t a very well thought-out idea.)

As Ian noted, it’s not very hard to come up with an “unlike anything” concept, but it is hard to come up with a viable one. I wish them well.

Howard Davidson
Guest
2 years 7 months ago

Looking at the millennial segment as if it’s just one segment from a format, pricing and merchandising perspective is hugely flawed. This is a huge audience that has many strata of consumers—and a group that has proven it will pay for what it uniquely values in product and experience. Perhaps orienting formats by market will get them closer to resonating with multiple audiences.

Matt Schmitt
Guest
2 years 7 months ago

This should be accretive and positive for them. Many young people are likely “locked out” of the existing offerings because of price. They’ll likely put a lot of effort into presenting a launch with a strong focus on lifestyle branding and an experiential shopping design with a big focus on connecting customers through technology. I’m upbeat on this, and excited to see it.

Jeff Hall
Guest
2 years 7 months ago

Whole Foods is a brand that consistently operates with intention. They boldly innovated the fresh/organic/high end of the category years ago and I’m enthusiastic about what this next brand launch will look and feel like. There is room for a new format that likely won’t impact or cannibalize their existing stores.

Cathy Hotka
Guest
2 years 7 months ago

Trader Joe’s has succeeded with a curated selection and reasonable prices, and a distinctive store experience. What can the new Whole Foods brand do to beat it?

Kris Kelvin
Guest
2 years 7 months ago

Whole Foods without high prices is like Apple without Steve Jobs. (Or Apple without high prices.) High prices are part of the exclusive brand appeal.

Apple learned that lesson when it launched the iPhone 5c: an ‘affordable’ species of iPhone that, by all accounts, hasn’t done so well. People that want an expensive iPhone, it seems, want an expensive iPhone. It follows that people that want a $7 head of lettuce want a $7 head of lettuce.

Me? I use Android, and shop at Henry’s (now Sprouts).

Joan Treistman
Guest
2 years 7 months ago

Compiling a few points with which I agree and adding another:

“Unlike anything” doesn’t guarantee appeal.

Targeting millennials may not produce the revenue such a huge investment requires.

Shunning other customers in favor of some segment may transform current customers to former customers. That’s over and above the cannibalization threat.

Why announce something based on promise without substance?

And what are the most viable geographies for this initiative?

Can’t wait to see this roll out.

Vahe Katros
Guest
2 years 7 months ago

Millennials—I hate using that term—are generally very smart about all their choices because it’s not hip to be stupid about things like what you put in your body, how you spend your money, and who you spend your money with.

Food choices can be complex and hugely important and outside of people who are trying to extend their lives after a chronic disease, the Millennials are right behind. And why not?

When you sell organic food or products that are more than the mass produced flavorless processed junk that is sold in supermarkets, or the phony “good for you” stuff that is inauthentically sold at phony formats, one has to think: there has to be a better way.

I can’t wait for the Millennial culture to have an impact on sedentary time bombs with lousy diets. Perhaps the health savings that are generated can help offset some retirement of college debt.

Oh, and hey, this is not a bad idea. Rock on dude.

Mike B
Guest
Mike B
2 years 7 months ago

Eye off the ball. We will see through this cheap version of Whole Foods. Diluting an image built over the years is not wise. Reminds me of when a conventional grocer starts a discount format. Oh we all remember Pak n Save (Safeway), Super Saver (first under American Stores then repeated a decade later under Albertsons), Bottom Dollar…okay I guess the difference here is While Foods is opening new stores in the new format and not downgrading existing stores, right?

Whole Foods price issues are on fresh items only. Packaged items are very competitive; far lower than the same items at Safeway.

I think the entire natural and organic and “local” fad is playing out and at this point people will want all those things but will no longer pay the premium they once did.

Gordon Arnold
Guest
2 years 7 months ago
A look at the numbers shows little cause for concern to investors. However, the interest we see in Whole Foods’s desire to explore other market segments is no longer a curiosity, it is now a fixation that should be explained by the company. The company can not provide or demonstrate a unified market plan in an orderly coherent manner. Dual CEOs, awkward and/or incoherent announcements and big plans with incomparable goals do not allow for long-term successes. Are we seeing panic, indecision or maybe political infighting? I’m thinking all that and more. As the “all natural” food supply sees increases in consumer interest and demand the desire for other grocers to go big is very near. With more and more large-scale growers moving into the market, the prices will decline unless Whole Foods can continue to buy the entire production of viable products. Whole foods has had a good run as the favorite retailer in this market. Unless they can escalate the levels of consumer demand for new and/or better product(s) that only they can… Read more »
vic gallese
Guest
2 years 7 months ago

WF has the horsepower to do about anything to differentiate. The real question will be, can they do it profitably? At worst, they should get some learnings to take back to the core stores.

They should have their demographics down pretty well. But yes, the will cannibalize sales depending on location selection. They will probably lose more than over 30 shoppers to the new concept than visa versa. Everybody likes a deal!

Be careful what you wish for….

wpDiscuz
Braintrust
"There’s lots of data that indicates consumers prefer curated assortments. The notion of curating by price point is fascinating, and I like it."
"It is always risky to expand out of a retailer’s core competency into areas that are potentially at odds with their existing niche. The highway is littered with the carnage from retailers believing the best way to grow their business is to dilute their brand and go after shoppers they can’t reach with their current offering."
"Whole Foods is making a big bold statement, that this format will be unlike anything that currently exists. For me it will be interesting to see what gizmo they come up with. Even though I come from the horse and buggy era, I still get excited to see something different."

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