Whole Foods Not Whole Paycheck
By George Anderson
Whole Foods is tired of being referred to as “Whole Paycheck” because of the perception the chain’s prices are higher than other grocery stores. That’s why the chain is running a series of print ads in New York that will emphasize the great deals consumers can get by shopping at its stores.
Christina Minardi, a Whole Foods regional president who oversees the New York market, told The New York Times, “We are extremely competitively priced. But we are not doing a good job of getting the word out. We are hiding it.”
The new ads that come with the tagline, “More of the good stuff. For less,” are similar in design to those previously run by the chain with the added emphasis on value and price.
As would be expected, some wonder if the new ads might diminish the perception of Whole Foods as an upscale grocer, while others believe it is the right move for the chain as it faces competition from the likes of Trader Joe’s and as conventional supermarkets move more aggressively into organic and natural products.
Allen Adamson, managing director of the New York office of Landor Associates, said the new ads “are inconsistent with what the brand stands for. The reality is that they have a premium-looking store positioned as an all natural place to shop. Both of those signal ‘expensive.’ “
Andrew Wolf, a grocery industry analyst at BB&T Capital Markets, said, “The reality is that they are not a higher- priced competitor. However, if your store looks cleaner and your products are better, you can create a price image that is higher than reality. You are punished for being good.”
Mr. Wolf applauds Whole Foods for its added emphasis on price. The perception consumers have that prices are higher at a store can be “very powerful,” he said.
To his mind, Whole Foods is proactively addressing what may not currently be an issue. “They will not sit here and wait for this to become a problem,” he added.
Moderator’s Comment: What do you think about Whole Foods added emphasis on price in the New York market? Will it
benefit or hurt the chain in terms of consumer perception and ultimately in sales performance? –
George Anderson – Moderator
The specific ad used by Whole Foods was a far cry from the usual “best food day” ads used by many supermarkets that scream about prices and deals. And the three or four items mentioned were not the usual loss leaders. Whole Foods delivers its real message every day in-store. This ad will not hurt them with loyal consumers , it will not create a new “discounter” image, nor will it cause the dollar store consumer to change direction. It will softly make a case, to anyone interested, that Whole Foods is aware of price issues and is willing to make comparisons.
John Mackey has previously said that supermarkets introducing organics has actually helped Whole Foods. He maintains that, once people get comfortable with organics, they then search for the experts in the field, i.e. Whole Foods.
This advertising campaign seems to conflict with Mackey’s original position.
Whole Foods’ core customers trade off higher prices for the other value they derive — healthy products, conducting business with socially responsible values, and great tasting gourmet delicacies. There’s no point in blurring the message with “good stuff for less.”
People may not shop in Whole Foods because of the prices and may not be put off by higher prices but it certainly can’t hurt to build an awareness of value into their proposition. Emphasising the fairness of their prices cannot be a bad thing; it isn’t as if they’re starting to make massive and very obvious cuts to compete with other stores. They’re still doing what they do best but just telling people that it doesn’t necessarily cost quite as much as they seem to think.
You have to compare apples with oranges on prices. Whole Foods 365 brand is ok, but it is no Master Choice. You get what you pay for. When you compare the prices at Whole Foods with those at Food Basics, Food Basics wins hands down for price and selection. Remember Whole Foods is a specialty market. It is not a complete grocer. This is where an A&P Fresh or new concept Food Emporium has the distinct edge.
This ad campaign is not the only effort the chain is making. At my local Whole Foods, and I would assume this would extend to others, their marketing people are now offering “Value Tours” once a week, to highlight things you can buy that won’t break the bank. I haven’t been on one, so I have no idea if they’re getting a lot of takers. The tour offers free samples, naturally.
Also note that the ad campaign is not focusing on perishables, just their private label dry groceries.
People do not shop at Whole Foods for low prices; they shop there for healthy food. In many markets Whole Foods is an excellent choice for those who are looking for healthy and/or natural and/or organic foods. If other stores come into their areas with similar products at lower prices, then Whole Foods needs to differentiate themselves by having those particular products that their loyal consumers want and can only buy there. That does not mean being competitive with low prices on everyday products that can be purchased at mass discount or grocery stores. Being sensitive about price is a defensive move not likely to have much impact. A better move is to think about differentiating themselves even more clearly in the minds of the consumers.
I enjoy shopping at Whole Foods. It’s all about the presentation of their products. Example: produce just jumps out of the case because it looks great and fresh; same with meats. The cheese assortment is great…the big plus is getting free samples to try before you buy. Plus, the store is extra clean. I shop at other stores too. I buy special items at Whole Foods that I can’t find at other stores. I also buy my regular items at regular grocery stores, which get the main part of my business. I shop all ads for best bargins.
P.S. I used to own a grocery store…
The key to the campaign: it’s being run in New York City in The New York Times. Many New York Times ads and Manhattan locations are either ego-driven or attempts to lobby securities analysts or publicity attempts. All retailers with Manhattan locations are well aware that Manhattan is the media capital of the USA. Price-driven customers don’t shop for groceries in Manhattan, let alone Whole Foods. Furthermore, testing a new ad campaign in Manhattan makes no sense for any retailer since New York City is the most expensive ad market in the country and the demographic profile/lifestyle doesn’t match most of the country.
Be careful what you decry… .
There was a reason for “Chez Tarjay” and it was positive — not negative — consumer-speak for recognizing them as a cut above Wal-Mart and Kmart. “Whole Paycheck” may be more of a “badge of affluence” for core Whole Foods shoppers than a genuine revolt against their pricing structure.
Please, please, not another retailer making a “mad dash for the middle”!!!!
It is obvious to me that Whole Foods is preparing for the storm of low prices that will hit organics sooner than perhaps anyone thought. SuperValu’s Sunflower Market, Wal-Mart’s expanded offerings in organics…get ready. They’re even following Wal-Mart in their reframe-the-discussion sound bites (Wal-Mart isn’t going “upscale,” they’re becoming more “relevant” to consumers…Whole Foods is not “Whole Paycheck,” they just haven’t done a good job of getting the word out about their pricing). It would make sense for Whole Foods to close the gaps between “good” and “best” and throw in a bit of “good enough,” right about now.
I agree with others. There is no “harm” in this ad. I heard a frustrated executive making a statement about how “wrong” perceptions are by others.
Here’s a thought: if you are perceived as higher priced and in fact are not, then why not BE higher priced? I would argue that Whole Foods is better off selectively identifying those items they are giving away margin on. No one is going to shop WF right now based on price. Be competitive, but don’t be lower. Why? You don’t want to be in a price battle. You want to be in a total value and experiential delivery battle. One you win. Hands down.
It’s seductive and painful to try to be everything to everyone and compete on all areas. Pick your competitive arena, and be consistent and aligned toward those aspects. Take margin everywhere you can…and invest it in continued training, store improvements, merchandising, and environmental benefits to the consumer.
Another case of the NY Times saying, “OHMYGOSH! LOOK AT THIS MOLE HILL!” Hardly a mountain. This won’t affect sales really one way or the other. I know that John Mackey, the president, really, really hates the Whole Paycheck cracks. It really gets under his skin. So it might be that simple; a presidential edict to “do something.” And, well, of course their prices are higher. Just go out and comparison shop for 5 minutes, and you’ll know that. But it hasn’t hurt them. If they really want to get in and play the price game, which is not wise, they can raise the prices on their private label and lower the prices on their national brands. I’ve said before here that their price gap between private label and national brands is too large, leaving profits on the table, and leaving consumers wondering if the product can be any good, since it’s so cheap. (By the way, it’s really good.)
If its not broke, don’t fix it. I think Whole Foods is trying to solve a problem it doesn’t really have. They have been very successful so far. Whole Foods and A&P are two grocery chains notorious for high prices. One is successful and the other is not. Whole Foods has a history of delivering a compelling shopping experience which has resulted in weekly sales per sq. ft. performance of about $18-$19. A&P on the other hand is lucky to get $6. For A&P high prices is a problem because they cannot deliver on the operations end. My fear is Whole Foods might be becoming too much of a slave to Wall Street and are getting worried about items such as sales and building too many stores too fast. Lets hope Whole Foods can stay focused on being successful over the long haul and not be distracted trying to squeeze a few more low margin customers into its stores.
I also wouldn’t think there’s much harm in the ad. However, is it helpful, worth the expense, worth the distraction? Consumers have and will continue to have a price “perception” about Whole Foods. My answer is – let them. It just may not be a negative.
Worth recalling as we discuss this action by Whole Foods are the recent forays by Safeway and Wal-Mart into organic packaged foods. WF knows it will be facing price competition on comparable items in the very near future, if not already. Its store “idiom” clearly positions it as a more luxurious shopping experience than the local W-M Neighborhood Market. So a little talk about value is a valid strategy for Whole Foods. It’s competitive situation is evolving as conventional supermarkets respond to its success. A smart strategist doesn’t don blinders, it responds proactively.
This reminds me of our recent discussion about retailers focusing on what they do best as opposed to being all things to all people. Whole Foods certainly should include references to competitively priced products in their advertisements, but making the “More Good Stuff for Less” claim borders on not being believable and should not be their main emphasis.
I think this is a good example of corporate ego sensitivity. I just don’t believe price is a “deal breaker” with most of Whole Foods target audience (upscale and down market). I’m a firm believer in not mixing messages. John’s right, it won’t hurt them with their target market because this is hardly, “Organic Tibetan Arugula” — 12 pounds for $3.00!!!!!” kind of advertising. Still, I think they’re safest when they stick on message.
Reading through the previous comments, I was not entirely sure how many of the posters actually shop at Whole Foods. My company competes against Whole Foods and we are keenly aware of their strengths and weaknesses.
The bottom line is price perception, and it is just that – perception. The way to manage perception is to address it clearly and directly. I am once again impressed by how this company is not afraid to make a clear statement about their corporate values and mission. The fact of the matter is they have tremendous buying power in the natural foods arena. I am not entirely convinced they deserve the “Whole Paycheck” label. I’ve watched people dismiss them for over a decade now as they continue to grow market share in an otherwise flat industry. I do not believe they are not like Neiman Marcus, for instance, who can apparently afford to be labeled as “Needless Mark Up.” The organic market is heating up and the last thing you want to be in the next several years is perceived as the most expensive place to purchase these items.