If you can't beat 'em, join 'em. That was one thought that crossed my mind as I read that Wild Oats added conventional brands to a grocery set a few weeks ago (see the report on Wild Oats' recent conference call, Page 22). Granted, it was fewer than 20 SKUs, just some cleaning and paper products.
But something rang odd to me about a natural food retailer that says it is committed to "providing the highest quality, organic and natural food, health and wellness products" selling popular synthetic detergents and cleaning agents. After all, would you find Tide and Formula 409 at competitor Whole Foods?
On a trip to the Whole Foods cleaning aisle, I found a large selection of orange and citrus nontoxic degreasers. The advice from Whole Foods was to bring out the 20-mule team Borax, add some vinegar and lemon juice.
A knowledgeable associate in the aisle told me bleach was the only thing to kill the mold in my refrigerator -- a rather harsh solution not available on the Whole Foods shelf. But without the chlorine, Whole Foods' cleaning offering maintained the faith of the green movement.
So is Wild Oats breaking faith with its mission by selling Tide and other commodity brands? By doing so, does it risk alienating its core natural food consumers all in the name of convenience? Analysts told me they don't think so. In fact, Andrew Wolf of BB&T Capital Markets said Wild Oats did the same thing back in 1999, as he quoted from an old press release. They then reversed course, followed more stringent product restrictions, and now they are trying the strategy again. "It's more of a psychological thing to expand their client base," he said. "It subtly conveys that they aren't holier than thou. They are flexible."
Edward Aaron of RBC Dain Rauscher said it makes sense to carry more conventional items to broaden Wild Oats' customer base. Wild Oats has struggled with attracting crossover shoppers. It was partly to that end that it rolled out its Fresh Look program as part of a turnaround effort five years ago.
Wild Oats has struggled to be operationally focused and consistent in its presentation. In addition to the grocery sets, the company announced earlier this year that it was expanding into gourmet, kosher and gluten-free. Perry Odak, Wild Oats' president and chief executive officer, called Wild Oats' product selection "too narrow. It was a mistake for us to tighten our standards so tight that we were not beginner-friendly."
Wild Oats is moving the dial to the right, to mainstream Americans who are now more conscious than ever of the benefits of pursuing a healthy lifestyle. It is even moving into traditional supermarkets with its health and beauty boutiques in several of Ahold's Stop & Shop supermarkets, and it is working with Ahold's Peapod online grocery service to distribute its private-label products.
It remains to be seen if Wild Oats can maintain a healthy balance for itself with these strategies. Anaylsts warn there is some risk in causing consumer confusion or loss of identity if the merchandising is not executed properly. For now, Wild Oats' second-quarter results are positive, the basket size is up -- if not the customer count -- and everyone is waiting to see if Wild Oats will finally get its act together. Stay tuned retail channel watchers!