BOULDER, Colo. -- Natural-food supermarket chain Whole Foods Market has taken its food fight against rival Wild Oats Markets into the latter's turf here, and is using fresh prepared foods as ammunition.
When John Mackey, chairman of Austin, Texas-based Whole Foods, decided to open his first Colorado store here in Wild Oats' face, he had two reasons.
One was his desire to hit his company's biggest and most aggressive competitor where it hurts, at home, in retaliation for Wild Oats invading such markets as Los Angeles, Chicago and Dallas, where Whole Foods has established itself.
Mackey has said he believes Wild Oats is using profits made in Boulder to fund expansion into Whole Foods territory -- and he would like to make a dent in that war chest.
Boulder County, which has a population of 260,500, also happens to be one of the nation's best markets for natural foods, which made it an obvious expansion target for the fast-growing Whole Foods. Now, the competition between the two is heating up, and the fresh-foods departments are the prime battleground.
At the new 39,000-square-foot Whole Foods store -- which adjoins a new Barnes & Noble bookstore on one of Boulder's busiest intersections -- the prepared-foods section allows people to customize their meals. They can choose any combination of entrees, salads and side dishes. Choices range from ribs and roasts to vegetarian lasagna and grilled vegetables.
"You can build your meal any way you want and you can price it any way you want," said Marcia Schurer, president of Culinary Connections, a food-service consulting and training firm here.
Schurer said the prices for prepared foods at Whole Foods are very reasonable. A chicken breast meal with two side dishes sells for about $5, while a large serving of salmon, with rice and a vegetable, sells for about $7.
Much of the preparation is done on-site. The store has a fully equipped kitchen, and an area where food is roasted, grilled and sauteed. Food is prepared fresh throughout the day in small batches.
To help wedge its way into the local food psyche, Whole Foods acquired Daily Bread, a popular Boulder bakery, and sells its breads and desserts at the store. It also sells a selection of prepared foods from other Boulder-area businesses, from soups to scones.
Schurer said the new Whole Foods has pulled in people from outside Boulder, and many apparently come just for the prepared foods. Because of this intense level of activity, it often is difficult to find a place to sit in the dining area.
"Everyone's trying to hold on to market share," she said. "But Whole Foods will be taking market share away from other retailers. It's only natural, no pun intended."
The new store has exceeded expectations, according to Mackey. It had the most successful opening of any in the 84-store chain, averaging $640,000 a week in sales during its first three weeks, Mackey said during a presentation at the Healthy Living Conference in New York in March.
Until then, the highest sales for a new Whole Foods store had been closer to $460,000. Now, Whole Foods officials, who initially estimated the store should post annual revenues of between $16 million and $18 million, may have to revise those estimates.
Sales have been so brisk that the company is moving the bakery to make room for more checkstands. "We've never done that well, that quick," Mackey said.
Whole Foods has pulled out all the stops for the Boulder store, from its larger, more customer-friendly nutrition department to a dining area featuring a blazing fireplace and a view of the Flatirons and the jutting peaks of the Rocky Mountains behind them.
The store features one of the company's largest and most impressive prepared-foods sections. In addition to a large salad, soup and potato bar, the section features a wok station, sushi chefs, a wood-burning pizza oven, a rotisserie for roast beef and prime ribs and a lengthy case of entrees and salads.
A large selection of packaged dinners, prepared in a special cold-pack room, is stocked in a nearby refrigerated case.
"Eatzi's has had a huge influence on us," a Whole Foods employee told SN, referring to the high-profile Brinker International concept in Dallas and Houston that specializes in prepared foods.
If the specialty-foods section in the back of the new Whole Foods unit is one of the company's most elaborate, it is thanks to Richard Rosenberg, the company's new specialty-foods coordinator and a 20-year veteran of the specialty-foods industry. The section features gourmet olives, cheeses, pastas and nitrite-free smoked meats.
The store also features a cooking school, where customers can sit around the grilling area and watch the activity.
Most importantly to the ongoing rivalry, the store boasts noticeably lower prices, a strategic decision by Whole Foods executives to garner market share. A cart of groceries at the new Whole Foods will cost about 20% less than anyplace else, said Juan Nunez, the company's regional vice president.
During its first week, the store advertised such specials as New York Strip loin steak for $6.99 a pound, whole fryers for 79 cents a pound, dried pasta for 89 cents a package and a pound of organic baby carrots for 99 cents.
Both Whole Foods and Wild Oats have been rapidly expanding to take advantage of the estimated $20 billion appetite for natural food and supplements. Whole Foods has grown to 83 stores in 18 states and the District of Columbia, while Wild Oats has 53 stores in 12 states and British Columbia.
Both companies have also been on a buying binge, targeting the nation's independent natural-food stores. In 1996, Wild Oats merged with Alfalfa's Markets, its Boulder neighbor and longtime competitor.
Wild Oats grew 60% last year and expects annual growth of 35% over the next five years, said Mike Gilliland, the company's chief executive officer. He expects the chain to pass the 100-store mark by the end of 2000.
Gilliland doesn't profess to share Mackey's proprietary view of the natural-food market, however. "John has made it clear he'll do what he can to keep everyone else out of the business," Gilliland said. "I love going up against Whole Foods, but we keep it more lighthearted."
Wild Oats is not slouching when it comes to prepared foods, however. Late last year, it embarked on a major project to strengthen its food-service marketing, with plans to give the department upfront billing in stores, inject more theater into operations and start relying on central kitchens.
Gilliland, who started Wild Oats 11 years ago with wife Libby Cook, said he believes there's more than enough room in Boulder for his stores and Whole Foods.
The industry has been growing at a rate of roughly 20% each year, making it the fastest-growing segment of retail. Conventional supermarkets have experienced between 3% and 5% growth.
"There's not an industry in the world without two major competitors," Gilliland said. "We're not looking to go toe to toe, but we'll be sharing markets in a lot of cases."
And with competition comes better stores, which draw in more mainstream shoppers who might never have ventured into a health-food store 10 years ago.
"Everybody's uncomfortable for a while, but at the end of the day, you both end up growing the market," said Gilliland. "It's not a zero sum gain."
Gilliland said the opening of Whole Foods has done "pretty much what we expected." One source said Wild Oats saw sales drop 20% during Whole Foods' first few weeks, although that now has tapered off to the single digits.
He said the company's comparable-store sales may be affected. But he believes Whole Foods is drawing less than 20% of sales from Wild Oats, instead pulling the bulk of its customers away from conventional supermarkets in the area.
Wild Oats, meanwhile, is apparently taking steps to remain competitive at home. The chain recently launched its "Wild Shopper" card, a customer-loyalty program that provides store discounts. And in interviews with SN, some Wild Oats customers said they have seen more aggressive pricing because of the presence of Whole Foods.