WHOLE FOODS TO SOW OWN-LABEL ITEMS IN SUPPLEMENT FIELD

GREG GATTUSO

NEW YORK -- Whole Foods Market said it will use its newly acquired nutraceuticals producer, Amrion, to launch a line of private-label nutritional supplements.

Peter Roy, president of the Austin, Texas-based chain, said Whole Foods expects the products to generate $25 million in sales over the next three years.

Speaking before investors and financial analysts here at a conference sponsored by Robertson, Stephens & Co., San Francisco, Roy said nutritional supplements and other natural wellness products have the highest margins of any Whole Foods department.

The new line of products will be sold at Whole Foods supermarkets, as well as via the Internet and through a mail-order catalog set to launch in 1999, Roy said. He did not say when the line would debut or how many stockkeeping units would be included. However, he said the chain intends eventually to become a rival to GNC for market share in the category. Roy said Whole Foods will take advantage of the low level of brand recognition in the natural products industry. The chain will also count on its team members -- recognized as some of the most enthusiastic and empowered in the industry -- to push the store brand. "Employees at conventional supermarkets have virtually no impact on what the customer buys," Roy said. "At natural-foods supermarkets, it's the opposite."

The new private-label products will be merchandised in a customer-friendly environment, organized in stores by the types of ailments they are meant to cure, he added.

Roy said the growth of the homeopathic cures and the entire natural-food sector is due to a trend among consumers that includes healthier eating and a "self-care revolution."

Whole Foods currently has two lines of private-label groceries: a premium line of artisan-produced products, made in small batches with organically grown ingredients; and the 365 brand, which has everyday low prices 15% to 20% below the premium brand.

Whole Foods operates 75 stores in 17 states and Washington, and has 17 new units in development. The company operates under the Whole Foods, Wellspring, Fresh Fields and Bread & Circus banners. Sales are expected to top $1 billion this year.

Amrion, Boulder, Colo., had sales of $54 million last year, an increase of 40% over the previous year. Net income was $4.5 million, a 45% increase over the prior year.

As reported in SN, Whole Foods and Amrion agreed to a merger which called for each share of Amrion to be exchanged for 0.87 shares of Whole Foods Market stock. The transaction, which closed earlier this month, was valued at approximately $146 million.

Under the terms of the merger, Mark Crossen, Amrion's chairman and chief executive officer, retains the CEO title and joins the Whole Foods Market executive team and board.