Whole Foods is planning to open a new chain of stores with lower prices that aims to attract millennial shoppers. Whole Foods has faced increasing competition from stores such as Mariano’s, Jewel-Osco, and Aldi’s who have increased their promotion of organic and natural products. While hard core Whole Foods shoppers are unlikely to stray to “cheap imitators” there is a market out there among people who don’t want to pay Whole Foods prices — the “Whole Paycheck” at the Whole Foods cash register.
Whole Foods said Wednesday it’s building a corporate team to focus exclusively on the new yet unnamed concept and that it’s already negotiating leases. Stores are expected to start opening in 2016 with a “fairly rapid expansion,” according to Whole Foods. More details from the Austin-based headquarters of Whole Foods will be shared before Labor Day.
Walter Robb, co-CEO of Whole Foods, said the new stores will also appeal to younger customers with a “modern, streamlined design, innovative technology and a curated selection.”
Whole Foods – which has more than 400 locations – has seen its sales growth slow as organic and natural foods become increasingly mainstream. That is pressuring the company to draw a sharper distinction between itself and competitors.
The new chain tailored toward younger consumers could also pressure margins, given its focus on lower prices. But during a conference call, Whole Foods co-founder and co-CEO John Mackey said it will broaden the company’s reach with a new generation of people interested in natural foods. Mackey doesn’t believe the new store would cannibalize sales at existing Whole Foods stores. He claims he still thinks Whole Foods can triple its number of locations in the U.S. Some experts in the industry see the move as a possible way to reinvent the company — using technology to make up for the lower profit margin in the new lower cost stores. Other companies have two lines of stores — Aldi and Trader Joe’s, and Meijer and Fresh Thyme Farmers Market.
Whole Foods reported it will not need a new distribution network for the new concept store.
For the three months ended April 12, 2015 Whole Foods said sales at established locations rose 3.6 percent, or 3.1 percent when excluding the benefit of the timing of Easter this year. The figure fell short of the 5.3 percent increase analysts expected, according to FactSet — a multinational financial data and software company for investment professionals. For the current quarter, the sales at established Whole Foods locations are up 2.8 percent.
GLUTEN- & LACTOSE-FREE COMPETITION …
— Whole Foods Market (@WholeFoods) May 5, 2015
— Mariano's (@MarianosMarket) May 6, 2015
— Sunset Foods (@sunsetfoods) April 18, 2015
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