May 5, 2017

What’s The Future Of Whole Foods Market – And Where Does That Leave Smaller Brands

getting products onto store shelfThere are a lot of rumors swirling in the industry about what’s going to happen to Whole Foods Market but in this age of ‘fake news’, let’s see if we can make heads or tails because there could be some very real changes coming to the upscale grocery chain that could have very real impacts on smaller food brands.

Small food producers oftentimes look to Whole Foods Market (WFM) as the ultimate retail partner.  So many times in talking with food entrepreneurs they mention that their goal is to get into WFM on either a regional and/or a national basis.

Unfortunately, WFM has been losing customers and that’s causing it to rethink its strategy entirely.  A report by Barclays analyst Karen Short indicated that WFM had lost approximately 14 million customers which is a lot of foot traffic even when spread across all of WFM’s stores.  Part of the decline is being blamed on WFM’s high prices and on the fact that offering organic and natural products is no longer a differentiator.  In the same report, Short found that Kroger now sells more natural and organic products than WFM.

With everyone from Costco to Kroger getting in the natural and organic game, why should customers shop at WFM when they can get the same products elsewhere – and oftentimes for less money. That’s another part of the WFM crux.  The grocer has long been identified as having high margins and is nicknamed by many ‘Whole Paycheck.’

In an effort to lower prices, WFM is looking at centralizing purchasing which is different from the 11 regions that WFM is currently broken into which have some autonomy over their own purchasing decisions.  This is why you’re much more likely to find local and regional products on WFM shelves.  A more centralized system doesn’t mean that those smaller brands will be gone entirely, but it could certainly make it harder to gain shelf space.

Speaking of shelf space, there is also talk that WFM may reduce the number of items carried in their stores in an effort to lower prices.  The new smaller footprint stores that have been opened recently carry close to 7000 items which is a far cry from the 25,000-35,000 items in the larger WFM stores.  There’s good and bad in this for small food brands – the good being that if you get onto the shelf there are going to be less options for consumers to choose from and that means you have a greater chance of getting purchased.  The bad though being that it will make it that much harder to get onto the shelf in the first place – especially if  you throw a more centralized purchasing process into the mix as well.

Lastly, there are questions being raised as to whether WFM is ripe for a buyout by a company like Albertsons, Kroger, or even Amazon.  I’ll leave you to read the financial experts linked should you want to know more about why and how WFM may get folded into another company.  If, ultimately, WFM does get bought-out, it does raise questions about what that will do to the brand as a whole and also how that may impact smaller food companies who look to WFM as THE place to showcase and sell their products.

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