Whole Foods merges value with health

October 03, 2011

A performance-leading chain seeks mainstream price acceptance as it eyes an eventual goal of 1,000 stores.

Whole Foods is aiming for the whole market.

The chain's recent flurry of value-based activities to lure mainstream consumers is meant to expand its appeal beyond health-wellness-natural-organic leadership.

Its $10 LivingSocial deal for $20 worth of groceries sold at a peak rate of 115,000 per hour, according to The Associated Press. Fifty cents from each of the one million deals sold went to the Whole Kids Foundation, which combats childhood obesity, reported USA Today. Whole Foods also issued a market basket comparing its staples prices against Fred Meyer, Safeway, Wegmans and Publix stores in four cities – Seattle, San Francisco, Atlanta and Fairfax, VA. It claims an average total price of $36.03 vs. competitors' average of $41.41.

Will this be enough to banish the whole-paycheck moniker? It hopes so. Whole Foods is looking to surpass high expectations and keep its status as a Wall Street darling.

Its comparable store sales are on fire – up 8.5% year-to-date through Q3 2011 and 9.5% for the first three weeks of Q4, noted co-CEO Walter Robb in a recent conference call with analysts archived on Seeking Alpha. He attributed "market share gains at a faster rate than most public retailers…to visible value efforts which positively impacted our price image, and then raising the bar in …quality standards and health and wellness." The chain has also seen increases in baskets exceeding $50.

The coupon and market basket comparison came weeks after the analyst call – so Whole Foods continues to try to layer a value image atop its core health strength. The Lempert Report expects to see more of these activities. Why? Findings of a Harris Interactive consumer poll commissioned by the chain show:

•    82% say current food prices have affected their grocery shopping
•    75% have changed their cooking and eating habits due to the economy
•    74% won’t compromise on the quality of food they buy
•    72% will continue to buy the same amount of natural and/or organic foods as they always have
•    71% will buy natural and/or organic foods over conventional foods if prices are comparable
•    32% rely on inexpensive pantry items like beans and whole grains when building meals