Whole Foods Has A Big Problem: Everyone Else Copied Whole Foods

Whole Foods Has A Big Problem: Everyone Else Copied Whole Foods

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Whole Foods was once a novel experience — a grocery wonderland where everything from organic tortilla chips to locally-grown salad greens made you feel good at last! about eating again.

It was a unique enough niche to fuel the company's growth for decades. But the niche was tempting enough that competitors large and small underwent their own Whole Foods-esque makeovers — adding aisles of organic produce and grass-fed, cage-free, no-antibiotics-ever meats.

The result poses a serious question to the O.G. of fancy groceries: do shoppers still need a store like Whole Foods, when so many other places have turned into Whole Foods replicas?

“The world is very different today than it was five years ago,” Whole Foods CEO John Mackey said on the company's latest earnings call. “And Whole Foods Market is adapting to the new world it finds itself in.”

The reasons for the company's current struggles are as cliche as the chain's “whole paycheck” nickname. The problem with Whole Foods boils down to price — it's simply more expensive to buy all your groceries there.

Whole Foods stores “feature a wide variety of non-GMO, vegan, gluten-free, dairy-free and other special diet foods,” the company explained in its latest annual report. But in 2017, that doesn't sound particularly unique — many supermarkets now have a decent selection of organic fruits and vegetables, almond milks, cage-free eggs, and “natural” snacks. Industrial food producers like Tyson and Perdue have made commitments about animal welfare and antibiotics use, giving even mainstream meat a more feel-good vibe.

The natural food movement Whole Foods helped to pioneer is now totally mainstream, but the company still only has 446 outlets in the US. More than half of them are within five miles of at least one Kroger, the country's number-two supermarket, and one that has jumped on the fancy food train with much enthusiasm. Even Wal-Mart is building up a serious organics business.

In an ongoing survey about Whole Foods by YouGov BrandIndex, which asks “Does it give good value for what you pay?” more respondents consistently say no than yes. Competitor Trader Joe's scores much better in the same survey.

Consumers now have “a good enough alternative in some cases,” Mackey told investors. “Many of our stores where people used to drive long distances on the weekends and do big shops, we're seeing a little bit of a decline on that.”

There are “signs that Whole Foods Market may be approaching saturation,” according to an analyst note from Goldman Sachs. In February the company said that it made “the difficult but prudent decision” to close nine underperforming outlets and abandoned plans to grow to 1,200 stores.

Some have speculated a competitor like Kroger or even Amazon should acquire the company, although Amazon reportedly never followed through on deliberations to take over the chain.

Whole Foods is well aware of its problems, and is trying to offer more affordable items and make its existing stores more efficient to cut costs. If a competitor is carrying the same brands, “we feel like we really need to be competitive on those prices,” said Mackey.

It is also opening smaller, cheaper “365” stores to compete with regular grocers. But executives “want to see how this next round of stores perform before getting more aggressive,” Mackey told investors in February.

“We are confident in the actions we are taking to position the company for continued success, and we remain open to ideas to create further value for our shareholders and all our stakeholders,” a spokesperson said in an email.

But it all could be too little too late.

Growth at Whole Foods had been slowing for years, and sales fell by 2.5% in its last fiscal year. Stores still bring in an average of $682,000 each week, but that's down from $722,000 in fiscal 2014. The chain expects another decline of 2% this year, or at best, level sales.

Since October 2014, Whole Foods' share price has fallen by nearly half.

BuzzFeed News

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