Erewhon, a niche chain in Los Angeles, has had sales growth of over 10% since Amazon took over Whole Foods, on top of annual growth of close to 15%, according to its CEO.
At 9 a.m. today, Tony Antoci, CEO and owner of Erewhon, opened the doors for the first time at a location in Santa Monica. He and his four-store Southern California grocery chain might well be on the cusp of a new trend that aims to take Whole Foods’ place as Amazon makes the chain into a more mainstream version of its former self.
Antoci, along with David Sheldon, vice president at Retail Design Collaborative and the store’s executive architect, and Yuval Chiprut, the developer of the project and head of business development at Slated Projects Inc., invited me to take a sneak peek of the store yesterday while they were preparing for the opening.
Antoci, who has a background in food distribution, bought the only remaining Erewhon store in the country, in Los Angeles, back in 2011. He wanted to get back into the food business after selling his distribution business but was prohibited from doing so by a non-compete agreement. So he bought a grocery store — a very special grocery store that has a strict standard for the products it will sell.
The Erewhon Standard states, “We strive only to sell the purest, ethically and sustainably produced foods, wellness and beauty products and household items.” On the company's website, it lists 14 ingredients, additives, preservatives or flavorings that, if used as an ingredient, will make the chain refuse to sell a product. Among those ingredients are soybean and canola oils (unless they are organic or non-GMO) and refined sugar and flour. Those standards are probably the toughest of any U.S. grocery retailer.
The first time I ever heard of Erewhon was in the late 1960s when my dad, who was a food broker at the time, brought me with him on a sales call to Erewhon’s warehouse on the docks in South Boston. He was there to work with the chain to find a cheese company that could make a product with artificial rennet because many of its customers were vegetarian and would not consume cheese made from animal rennet — an enzyme from the lining inside the fourth stomach of young calves —which was the standard at the time.
As I walked the store and saw the products on the shelves this week, it certainly seemed that Erewhon has the same care and concern about the products it sells and who supplies them.
This store is just a few blocks away from a large Whole Foods. I asked Antoci what his reaction was when he heard about Amazon's acquisition of Whole Foods. “Like every other grocer in the country,” he told me, “when we heard about it: 'Oh, my God, what’s going to happen?'" He actually told his team to slow the store opening down — that is, until his other three stores saw a major bump in sales. Almost immediately following the sale of Whole Foods, those Erewhon stores saw a 10% jump on top of their existing growth, which was averaging 10-15%, Antoci said.
“People like the fact of a local grocer, not corporate America, and Amazon taking over Whole Foods took it up to a whole different level,” he said. Customers have told him that they just won’t go there anymore and that they love the fact that Erewhon is a local, family-owned grocer.
Erewhon has a good model to learn from: It is getting back to the core values of what Whole Foods was 30-plus years ago. Chiprut added that he felt that Amazon/Whole Foods was facing a challenge in prepared foods, which is an opportunity for Erewhon. “We talked internally and questioned how are they [Amazon] going to take over a new infrastructure, focus on distribution and also focus on the minutiae of the prepared foods section and how that translates into their profits," he said. "They are going to look for all the efficiencies, and that normally dilutes the quality. And that’s exactly the opposite of what we do.”
Antoci says Erewhon is all about the experience, and creating an environment where you can find unique products you can’t find elsewhere. Chiprut says that the landscape for all these different food providers is much different now, with a lower barrier to entry for these mom-and-pop producers. The internet has helped, and better distribution has helped, and now that Amazon has taken over Whole Foods, eliminating an opportunity for these small brands, Erewhon has an opportunity to incubate them.
Antoci hopes to increase his store count to 10 and expand his footprint a little more in the Los Angeles area over the next five to seven years. He says that he want to see where it goes and that, down the road, 20 or 30 stores is certainly within his scope.
Erewhon's foodservice and prepared foods are 95% or more organic. Its in-store kitchen is open to in-store customers and has windows that line Wilshire Boulevard, which allow people walking by to gaze in and watch the chefs create the food. The prepared food offerings vary every day and in each of the four stores, depending on the wants and desires of the chefs and customers. I tasted a pizza made with a broccoli crust (instead of the now-trendy cauliflower crust) that was simply amazing. The vegan chocolate donuts looked delicious.
Erewhon's store brand is a small percentage of sales today, but the company expects it to grow as it moves into a new commissary and expands into other categories. The Erewhon soups, sauces and meats all looked terrific; I didn’t have the opportunity to taste any but can’t wait to get back into the store and buy the pasta with clam sauce, which looked as good as in any Italian restaurant.
The store is small by design — just 10,000 square feet — with narrow, 44-inch-wide aisles. Erewhon want its customers to interact, to touch shoulders and bump elbows, to get to know one another and the community. The shelves are also unusually high at 7 feet 6 inches, bucking the trend in which most grocery retailers are lowering their shelves to give their stores a more open feeling. The reason? Erewhon has its employees in the aisles and wants people to ask them for help so they can get to know their customers better and build a relationship. It’s also so the store can offer a wider assortment in the smaller footprint.
The store has hired 150 people, all full time, to serve the 3,000-4,000 transactions per day typical of Erewhon's stores. The stores’ differentiator, Sheldon said, is that level of service. The volume is extraordinary for a store this size, and many of the transactions represent more than just one person shopping, so you can imagine that bumping into someone else in the aisles is a reality.
As the grocery industry prepares for the mega-battle between Amazon/Whole Foods and Walmart to see who can offer the widest variety and lowest prices, it's great to see a retailer that prides itself on being unique and community-focused.
Erewhon doesn't see Kroger, Thrive or even Whole Foods as competition. Antoci is the first to admit his prices are higher than other grocers'; in fact, he points out that others’ buying power is greater than Erewhon’s. But he doesn't think his customers mind, and with the kind of growth the chain has shown, there is little doubt he is correct.