WHOLE FOODS TO TRY AGAIN IN CANADA 2004-08-30 (1)

DAVID KOSUB

VANCOUVER, British Columbia -- Whole Foods Market is hoping for better luck this time.

The Austin, Texas-based company held a massive job fair here this month as it prepares to open its second Canadian store: a 38,800-square-foot outlet in the upscale Park Royal area. Whole Foods' decision to enter the Vancouver market follows what some analysts have said has been a less-than-spectacular performance at its first Canadian store in Toronto, which opened two years ago.

Some industry analysts blamed that store's apparent difficulties on poor parking, visibility and area demographics.

"They've picked a location that's a great retail shopping location for high-end and luxury people, but it may not be great for doing your daily or weekly grocery shopping," said Neil Stern, senior partner, McMillan Doolittle, Chicago. "So they've struggled from the outset in Toronto. They've had to remerchandise, and they've had to learn the market a little bit more."

Analyst Bill Chisholm of Dundee Securities, Toronto, said Whole Foods will undoubtedly apply what it's learned to the Vancouver market. "I wouldn't read the apparent lack of success in the Toronto store as an omen that globally they can't expand," he said.

Others are less sure, however. John Williams, a senior partner with the J.C. Williams Group in Chicago, warned that Whole Foods must not repeat in Vancouver the mistake it made in Toronto -- opening a single store.

"When you come in to a market, you don't just come in with one store," Williams stressed. "You need a critical mass to support your overheads: management, materials handling, logistics and other things. You can't do that with one store."

Whole Foods will compete head-to-head with another local natural foods store, Capers Community Markets, which is owned by Boulder, Colo.-based Wild Oats Markets.

If Capers is nervous about the competition, then it's certainly not showing it.

"Anytime companies come into the marketplace, it helps to make everyone grow stronger," observed Aron Bjornson, marketing manager, Capers. Still, Bjornson admitted that Capers has taken a hard look at its operations and product mix, "and made sure that we're offering our customers the best."

Whole Foods' move into the Vancouver market will help educate customers about the unique product mixes offered by natural food retailers, Bjornson added. What sets Capers apart, he said, is its stronger focus on organics and its reliance on "local growers, producers and distributors."

As for the clout that Whole Foods brings to the table from the relative strength of its U.S. operations, Bjornson remarked that he's not concerned.

"We don't foresee a pricing war, but we're going to be interested to see how they come into the market," he said. "Obviously, because they're largely an American chain, they don't have the economies of scale in the Canadian market -- a market that's quite different than the American market."

For her part, Joyln Warford, Whole Foods' regional marketing manager, said the chain's interest in the area may not stop at a single store in Vancouver.

"We will continue to look for options," Warford revealed. "But right now, our focus is on our store in Park Royal."