Small Players Take on Whole Foods

MARK HAMSTRA

DEERFIELD, Ill. — Small independents sometimes do a better job competing with Whole Foods Market on the strength of their perishables and organic/natural offerings than the big supermarket chains do, according to a new study.

“Whole Foods has achieved excellence in perishables categories, and it's been allowed to achieve a degree of differentiation from most of the chains, which have enabled its success,” said David Rogers of DSR Marketing Systems here, which issued the report based on phone surveys in the St. Louis and Chicago markets. “If the chains that are running away from Wal-Mart are going to be successful with their image position, they had better learn to do a better job of competing with Whole Foods.”

One of the major conclusions of the study is that consumers give high ratings for perishables and organic/natural products to some small independents, particularly in Chicago, and feel less strongly about the perishables offerings of the large traditional supermarket chains in that market, including Dominick's, owned by Pleasanton, Calif.-based Safeway, and Jewel, owned by Minneapolis-based Supervalu.

In St. Louis, local chains Dierberg's, Schnucks, Straub's and Shop 'n Save, another Supervalu-owned chain, collectively fared better in comparison with Whole Foods than their chain counterparts in Chicago, with consumers expressing particular affinity for the fresh offerings at Dierberg's.

“In St. Louis, there is stronger fresh competition from traditional supermarket chains than in Chicago,” Rogers said.

He declined to disclose many details from the study, but he agreed to discuss some of its conclusions with SN.

The report also highlighted the popularity of Trader Joe's as a destination for more affordable organic and natural fare, he said. The chain operates in both markets.

Even though consumers give high ratings to the perishables departments at Whole Foods, they are not shopping there like they do at traditional supermarkets, the study found. Instead, they see the Austin, Texas-based chain as a special destination for certain products, separate from their more routine grocery shopping excursions.

Rogers, whose firm has conducted several studies on the impact of Wal-Mart Stores, Bentonville, Ark., on the supermarket industry, said he decided to focus on Whole Foods this time because of its rapid growth and upscale positioning.