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November 12, 2008
Whole Foods' next niche?
Whole Foods once owned the "organic grocer" category, but no more. Health Magazine's list of healthiest grocery stores now includes traditional chains like Safeway and Publix.
The niche is gone. Organic has gone mainstream.
When that happens, pricing advantage dissipates, as do margins, as Whole Foods announced some ugly profit results last week, including taking a big cash infusion from an investor. With competitors hammering you on price and stealing your market growth, do you compete on their playing field of lower prices, or do you develop a new niche?
A new niche, of course. For Whole Foods, or a like-minded store, one opportunity is "special diets," including those related to food allergies.
It's not a small niche. Food allergies in children have risen 18% since 1997, affecting 3 million children today. Nearly 4% of adults, or 12 million people, have food allergies. Another 3 million people can't consume gluten (ceilac disease). In this niche you could include aging baby-boomers who focus on low-sodium, low-fat, dairy-free diets or people who adopt alternative diets like veganism.
Whole Foods has a breadth of products for special diets but based on my own recent diagnosed condition (candida overgrowth), I had no idea. I discovered by chance that my Whole Foods store has a staff nutritionist who'll freely help customers with special diet meal planning. Carly the nutritionist knew all about candida and helped me understand what I could eat and not eat, and pointed out myriad wheat-free, yeast-free and sugar-free products in the store. I so do not cook, but my Whole Foods has an expansive prepared food case. Every dish is meticulously labeled detailing its ingredients, pointing out clearly if it contains gluten or wheat.
A niche of people who prioritize their health, no matter the price, exists. Is that so much of a luxury?
UPDATE: The nutritionist at my Whole Foods Store (the flagship store at 5th and Lamar) is a pilot project. No other Whole Foods have such a program. Yet : )
Also I just discovered that the Jewel-Osco grocery chain just opened a "green store" in Chicago that is eco-friendly in design and operation and features an on-site dietitian.
Other blogs that reference Whole Foods' next niche?:
hmmm...that may be true, but Whole Foods in Los Angeles still has the hottest looking shoppers.
Gluten free is the next big thing. A few mini-suppliers are starting to ramp up, and those products are going to be the next higher proffit margin items for chains like Whole Foods, or larger health food stores that sell bread and other traditional gluten filled products.
BTW- I have no problems with Gluten...I have just seen this trend developing.
The question will really be "do consumers want to continue to pay more for something that has gone mainstream?" I am sure that some will, and perhaps it will even take off like Apple has. Still, higher prices in this economy is a tough sell.
David,
I agree that people will buy the lowest priced organic goods, in this economy.
This is exactly why I am suggesting Whole Foods focus on a non-price sensitive niche of "special diets." If you or your children have a gluten allergy, for example, and Whole Foods is the go-to place for gluten-free, then you will pay whatever you need to to have food to eat.
The NY Times had a similarly titled piece back in August: "Whole Foods looks for a fresh image in lean times" http://www.nytimes.com/2008/08/02/business/02food.html
Honestly, I found that article a bit campy and this piece far more thoughtful and relevant. Thanks, Jackie, for more great thought leadership!
As you said, there are massive numbers.
In Australia today there are more than 250,000 people suffering from Coeliac Disease - and not all know it or know how to deal with it. There are also many who experience other difficulties with wheat, gluten and bread improvers including Autism sufferers.
In America the numbers are incredible higher, millions of people suffering of Celiac / Coliac disease.
Paul Smith
Interesting solution. I think the issue Whole Foods is going to run into is that they've gotten way too used to an extremely large niche (organic/natural), and anything smaller will still spell short-term setbacks. Can they afford that?
I think we'll also see just how important consumers view "organic" and "natural" in an economy that doesn't encourage premiums. It has been trendy to ride the organic train, but when push comes to shove in terms of your wallet, will the trend continue?
Not sure I buy this angle. Of course at this point organic has gone mainstream. I never thought of Whole Foods as Organic, I thought of them as having the best food. Special Diets becomes too niche, Whole Foods has passed that phase. Whole Foods competes with Dean & Deluca, it competes in gourmet, when only the finest ingredients will do. People will tout organic in the same way that the atkins diet was a craze. Now it's just another diet option. Whole Foods is like the Food Network , changing Americans attitude to food from fuel to something more. Of course we'll never be the French and respect and love food on a mass scale, but Whole Foods along with the Food Network, Top Chef should be about the love of truly good food. Fuel to pleasure.
Special Diets is much too niche, a venture capitalist would shoot that idea down in a heartbeat
Mark,
Whole Foods put organic on the map. They were the first grocery chain to be certified as organic.
I am not saying that they should serve ONLY the niche of "special diets." I am saying that by focusing on this next niche, they move from just being the "organic grocery store" to the "healthy grocery store." Healthy is a good trend to ride, given recent focus on gluten allergies and obesity, etc. in our culture.
As humans, we have taken organic out of society. We were organic 50 years ago. The bulk supplying of foods has caused us to deplete nutrients out of our diets today. There are only a handfull of supplements that we really need. Whole Foods is just another big boy playing the industry game. They are the best Grocer out there, but, there are other ways to get products you need and for free. I encourage everyone I know to take Spirulina the world's best superfoods. Take it and in large quantities. And find out how to get it free! I did!
Thank you for the response, Jackie.
I can start to warm up to a health position, but after re-reading the article it didn't seem headed that way, it seemed much more focused on the following: "A new niche, of course. For Whole Foods, or a like-minded store, one opportunity is "special diets," including those related to food allergies". It's not a small niche.'
Yes there was a mention of healthy minded, but not expressed as a niche. Health then composed of Body, Mind, Spirit. Now I can write a brief. But special needs is but a small reason to believe, rather than the focus of an article. That's what I still have issue with, and why as presented wouldn't pass muster with a more rigorous audience.
