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What Is Going on at Whole Foods?

The retailer is struggling to compete with other grocers

Michael Kappel/Flickr

Whole Foods, the first national grocery store chain to champion organic products, market wellness as a retail category, and sell three stalks of asparagus in a bottle of water for $6, is going through a tough time. Business at the grocer has been so rocky that its stock rose today amid reports that Albertsons, a mid-scale grocery store operator, is interested in buying the struggling food retailer.

In February, the chain announced its sixth straight month of slumping sales.

With American incomes on the decline and the rise of meal kits and food delivery services competing for consumer attention, Whole Foods has been forced to reconsider its ‘whole paycheck’ reputation. Here’s how the Austin, Texas-based company is trying to get back on top.

Stop the Bleeding

• 365 by Whole Foods, the lower-cost spinoff the brand launched in 2015, was supposed to be the retailer’s salve. However, due to lower-than-expected sales, the company has pulled back on this plan: Instead of opening 10 new 365 stores this year, it will open just three.

• Whole Foods also announced it would be closing locations this year for the first time ever. Nine stores are on the chopping block, including outlets in Davis, Calif., Chicago, Salt Lake City, Boulder, and Santa Fe.

Lower Prices

Company executives realize Whole Foods needs to start competing with other grocers in terms of price point, and after announcing last year they would experiment with coupons and a rewards program, the company confirmed last week it would lower its prices. When and by how much are still TBD.

Innovate

• Whole Foods was somewhat late to jump on the meal kit bandwagon, but last year it partnered with Purple Carrot, the plant-based meal kit company, to offer meal kits on its store shelves. Critics point out that this defeats at least one purpose of meal kits, which are intended to eliminate trips to the grocery store.

• In a somewhat surprising turn, one of Whole Foods’ major investors, Jana Partners LLC, has brought on a name famous in food media circles to act as a consultant. Mark Bittman, former New York Times food and opinion writer — and one-time Purple Carrot consultant — has bounced around quite a bit since he left the newspaper business. Bittman is now involved with an investment board that will collectively advise Whole Foods. Bittman himself is not on the board at this time but could be named to it at a later date, according to the Wall Street Journal. He is being paid $90,000 for his consulting services and has spent $25,000 on Whole Foods stock.

• Earlier this month an investor firm suggested Whole Foods and Target should form a partnership that would benefit both big box retailers by cross-promoting their quality-focused message and offering patrons a one-stop shop. Neither company appears to be actively pursuing this idea, however.

• Finally, Whole Foods has always offered prepared foods in addition to raw produce and proteins, but lately the chain has doubled down on its dining options, expanding its hot food buffets and prepared foods sections to include full-service restaurants, bars, and cafes. But will these so-called grocerants and glorified food courts save Whole Foods from its reputation and attract old and new consumers? Time will tell.

The Rise of the Grocerant [E]
Mark Bittman Adds Activist Investor to Resume in Whole Foods Campaign [WSJ]
Inside 365 by Whole Foods, a Grocery Store You Can Actually Afford [ELA]