Supermarkets and natural food stores have long competed for customers, but the rhetoric in that battle took on a sharper tone recently.
John Mackey, chairman, president and chief executive officer of Whole Foods Market, Austin, Texas, told financial analysts that his company was picking up momentum in the war with conventional supermarkets.
"Our third-quarter comps were up 7.6% and theirs are negative, and we believe we're gaining share at their expense," he asserted.
Questioning the conventional supermarkets' commitment to the category, Mackey asserted, "These guys are not promoting natural and organic foods. They're simply feeling heat from Wal-Mart on price, and they're using natural foods to build market share. But very few are aggressive on pricing in this category, and they don't buy as well as we do."
Mackey's pointed comments question whether supermarkets will benefit from this category for the long term. Sure, supermarkets are stocking some natural foods merchandise, but will they show the commitment and smarts necessary to maintain and grow share? Despite Mackey's assertions, there is evidence that supermarkets are laying the groundwork for sustained efforts. A recent SN article (July 28, Page 1) outlined how the largest chains, including Kroger and Albertsons, are putting more muscle behind the category. Kroger's Nature's Market store-within-a-store departments are now featured in 1,200 units, and the company is rolling out a natural products private-label brand. Albertsons is now starting to integrate natural foods with the rest of the assortments to attract more customers to the natural camp. There's also lots of activity at many smaller supermarket chains around the country. Supermarkets will need to be competitive on price in these ventures.
Some observers are concerned, however, that supermarkets will merely educate consumers about natural foods and then lose them to the Whole Foods of the world. This line of thinking assumes that traditional shoppers will quickly progress to become natural foods loyalists.
Not so, according to Laurie Demeritt, president of the Hartman Group, a Bellevue, Wash.-based market research and consulting firm specializing in wellness. Hartman told me her firm's research found that customer progression is usually slow. Typical shoppers only gradually grow their experimentation with natural foods and organics, starting with items such as produce, dairy and baby food, and subsequently moving into juice, single-serve beverages, meat and poultry, cold cereal and snacks, she said. Consumers who seek out more items eventually will embrace frozen foods, canned and bulk goods.
Supermarkets need to gauge the progression of their customers in order to make sure they are in stock with the right items. They can add merchandise as required, but they don't need to replicate the entire assortment of Whole Foods in order to be successful. As Demeritt points out, there is room for both supermarkets and natural food stores as consumers cross over depending on the purpose of the shopping trip.
That is comforting news to supermarket retailers still trying to find their way through the natural foods maze.
