Whole Foods, Trader Joe’s, and Natural Channel Grocery Shopping: The Future of Food Retailing

CHAPTER 1: EXECUTIVE SUMMARY

TRENDS & OPPORTUNITIES

Market in Context

Trends and Opportunities

THE NATURAL CHANNEL SHOPPER

Trader Joe’s and Whole Foods

Sprouts Farmers Markets

Local Natural Grocers

WHOLE FOODS MARKET

Company Overview

Amazon Acquires Whole Foods

Company Mission and Ethics

Quality Standards and Programs

Store Placement Strategy

New Store Size Shrinking

Whole Foods Teams Up with Instacart for Home Delivery

“Whole Paycheck” Image Hard to Shake, but Multiple Efforts Ongoing

365 Everyday Value Store Brand: “Fill Your Pantry Without Emptying Your Pocketbook”

The 365 by Whole Foods Market Retail Format: Strategy and Risk

Prepared Foods and In-Store Dining

TRADER JOE’S

Company Overview

Competitive Advantages

Private Label Fame

Attractive Pricing

Some Criticisms in Press

THE RETAIL COMPETITION

Introduction

Retailer Profiles: Natural Specialty Chains

Retailer Profiles: Mainstream Grocers

Internet Retailers

CHAPTER 2: TRENDS & OPPORTUNITIES

CHAPTER HIGHLIGHTS

MARKET IN CONTEXT

Natural Foods Channel a Small but Dynamic Segment of Food Retailing

Figure 2-1 Customer Draw for Top Grocery Channels and Retailers, 2004 vs. 2016 (monthly percent of U.S. adults as shoppers)

Table 2-1 U.S. Retail Sales of Natural and Organic Foods and Beverages, 2012-2021 (in billions of dollars)

Figure 2-2 Top Grocery Store Chains Ranked by Attributes

Figure 2-3 Ranking of Favorite Grocery Store Chains

Grocery Retailing More Competitive Than Ever

Food Deflation and Pricing Pressure

Retailer Upheaval: Consolidation, Reevaluation, and Bankruptcy

Market Entry of Lidl Further Increases Pricing Pressure

E-Commerce Going Gangbusters

TRENDS AND OPPORTUNITIES

Brick + Click

Walmart Fields Multiple Shopping Apps, Natural Retailers Behind the Curve

Illustration 2-1 Walmart Scan and Go App

Wireless and Screenless (Think Alexa) Payment

Brick-and-Mortar Grocers Developing “Click-and-Collect”

Illustration 2-2 Meijer’s Curbside Pickup Program

Illustration 2-3 Kroger’s ClickList

Brick-and-Mortar Grocers Building out Home Delivery Options, Including Via Instacart

Illustration 2-4 Safeway Fresh to Your Door

Illustration 2-5 Instacart Shopping Page for Whole Foods Produce

Self-Checkout and Frictionless Shopping

Smaller Stores Bigger Than Ever

Exclusive Brands, National Brands, and Amazon Consumer Demand for Natural, Organic, and Clean Label

Table 2-2 Attitudes Toward Organic and Natural Foods: Adults Overall vs. Natural Food Channel Shoppers Overall, 2017 (percent of and index among adults)

Table 2-3 Attitudes Toward Artificial Ingredients in Foods: Adults Overall vs. Natural Food Channel

Shoppers Overall, 2017 (percent of and index among adults)

Earth Fare and Whole Foods Creating “Safe Havens” for Non-GMO Shoppers

Table 2-4 Attitudes Toward GMO Foods: Adults Overall vs. Natural Food Channel Shoppers Overall,2017 (percent of and index among adults)

The Future of Trader Joe’s (and ALDI)

Whole Foods, Kroger, and Amazon Tapping into Meal Kits Boom

Illustration 2-6: Meal Kit Display in Whole Foods Store

Illustration 2-7: Prep + Pared Meals Kit Display in Kroger Store

Prepared Foods an Increasingly Important Competitive Chip for Brick-and-Mortar Retailers

Value Pricing a Growing Watchword in Natural and Organic Grocery Retailing

Millennials Big Online—and In-store

Illustration 2-6 Amazon Instant Pickup

CHAPTER 3: THE NATURAL CHANNEL SHOPPER

CHAPTER HIGHLIGHTS

TRADER JOE’S AND WHOLE FOODS

Trader Joe’s Outpaces Whole Foods, Conventional Supermarkets in Customer Growth

Table 3-1 Customer Draw for Trader Joe’s and Whole Foods vs. Other Channels and Retailers, 2004-2016 (monthly percent of adults as shoppers)

Whole Foods Shoppers Shop Trader Joe’s More Than Vice Versa

Table 3-2 Cross-Shopping Patterns for Trader Joe’s, Whole Foods, and Other Food Retailing Channels,2016 (percent and number of adults in millions)

Trader Joe’s Customers Hew Closer to Grocery Expenditures Norm

Table 3-3 Consumer Base for Trader Joe’s and Whole Foods: By Average Weekly Grocery Expenditure Levels, 2016 (percent and number of households)

Overview of Trader Joe’s vs. Whole Foods Demographics

Table 3-4 Overview of Trader Joe’s vs. Whole Foods Demographics, 2004 vs. 2016 (indexes among adults)

Table 3-5 Trader Joe’s Shopper Demographics, 2016 (number, percentage of, and indexes among adults)

Table 3-6 Whole Foods Shopper Demographics, 2016 (number, percentage of, and indexes among adults)

Trader Joe’s and Whole Foods Shopper Psychographics

SPROUTS FARMERS MARKETS

Cross-Shopping Patterns

Figure 3-1 Cross-Shopping Patterns for Sprouts Farmers Markets Customers, 2017 (percent)

Demographic Patterns

Table 3-7 Demographic Indexes for Shopping at Sprouts Farmers Market, 2017 (index among adults)

Food and Nutrition Psychographics

Table 3-8 Food and Nutrition Psychographics: Sprouts Farmers Market Shoppers vs. Natural Food

Channel Shoppers Overall, 2017 (percent of and index among adults)

Grocery Shopping Psychographics

Table 3-9 Grocery Shopping Psychographics: Sprouts Farmers Market Shoppers vs. Natural Food

Channel Shoppers Overall, 2017 (percent of and index among adults)

LOCAL NATURAL GROCERS

Cross-Shopping Patterns

Figure 3-2 Cross-Shopping Patterns for Local Natural Grocer Customers, 2017 (percent)

Demographic Patterns

Table 3-10 Demographic Indexes for Shopping at Local (Non-Chain) Natural Grocers, 2017 (index among adults)

Food and Nutrition Psychographics

Table 3-11 Food and Nutrition Psychographics: Local Natural Grocer Shoppers vs. Natural Food

Channel Shoppers Overall, 2017 (percent of and index among adults)

Grocery Shopping Psychographics

Table 3-12 Grocery Shopping Psychographics: Local Natural Grocer Shoppers vs. Natural Food

Channel Shoppers Overall, 2017 (percent of and index among adults)

CHAPTER 4: WHOLE FOODS MARKET

CHAPTER HIGHLIGHTS

Company Overview

Table 4-1 Whole Foods Market Growth, 2009-2016

Amazon Acquires Whole Foods

Company History

Illustration 4-1 The First Whole Foods Market Store in Austin, TX

Company Mission and Ethics

Quality Standards and Programs

Store Placement Strategy

Stores with Unique Features

New Store Size Shrinking

Whole Foods Teams Up with Instacart for Home Delivery

“Whole Paycheck” Image Hard to Shake, But Multiple Efforts Ongoing

Illustration 4-2 Whole Foods Website “On Sale” Page

Whole Deals Print Newsletter Out, App-Based and Online Coupon Program In

365 Everyday Value Store Brand: “Fill Your Pantry Without Emptying Your Pocketbook”

Illustration 4-3 Whole Foods Website 365 Everyday Value Page

The 365 by Whole Foods Market Retail Format: Strategy and Risk

Stores in Inner-City Neighborhoods

Illustration 4-4 Crowds at the Opening of the Whole Foods Market Store in Detroit

Prepared Foods and In-Store Dining

Illustration 4-5 Whole Foods Market Hot Bar

Illustration 4-6 Single-Serve Cakes at Whole Foods Market

CHAPTER 5: TRADER JOE’S

CHAPTER HIGHLIGHTS

Company Overview

Company History

Illustration 5-1 Trader Joe’s Original Pasadena Store

Illustration 5-2 Trader Joe’s Store in St. Louis, Missouri, August 2017.

Trader Joe’s and ALDI: Separate but Comparable

Competitive Advantages

Private Label Fame

Illustration 5-3 Signage in Trader Joe’s Store in St. Louis, Missouri

Illustration 5-4 Trader Joe’s Speculoos Cookie Butter

Illustration 5-5 Display of Charles Shaw (“Two Buck Chuck”) Wines in Trader Joe’s in Austin, Texas

Fun Atmosphere

A Carefully Curated Product Mix

Attractive Pricing, and Increasingly So Vis-à-Vis Whole Foods

Trader Joe’s “Fearless Flyer” Newsletter: Something of an Institution

Illustration 5-6 Victorian-style Cartoon from Trader Joe’s Fearless Flyer

Illustration 5-7 “Fearless Flyer” BBQ Sauces Ad (May 1, 2017 issue)

Illustration 5-8 “Fearless Flyer” Multi-Product Ad (May 1, 2017 issue)

Community Involvement

Some Criticism in Press

CHAPTER 6: THE RETAIL COMPETITION

CHAPTER HIGHLIGHTS

INTRODUCTION

Beyond Whole Foods and Trader Joe’s

A Volatile Market

E-commerce in the Natural and Organic Foods Market

RETAILER PROFILES: NATURAL SPECIALTY CHAINS

Earth Fare

Illustration 6-1 Earth Fare Storefront

Illustration 6-2 Earth Fare Private Label Products

Fresh Thyme Farmers Market

Illustration 6-3 Inside Fresh Thyme Farmers Market

Lucky’s Market

Illustration 6-4 Lucky’s Market Private Label Products

Natural Grocers (Vitamin Cottage Natural Food Markets)

Illustration 6-5 Natural Grocers Storefront

Sprouts Farmers Market

Illustration 6-6 Sprouts Farmers Market Layout

The Fresh Market

Illustration 6-7 The Fresh Market’s Refreshed Store Interior

RETAILER PROFILES: MAINSTREAM GROCERS

Albertsons/Safeway

ALDI 172

Costco

Kroger

Illustration 6-8 Kroger’s New Simple Truth Lite Ice Cream

Lidl 178

Publix

Illustration 6-9 Publix GreenWise Storefront

Sam’s Club

Illustration 6-10 Member’s Mark New Organic Chicken Broth

Walmart

Illustration 6-11 Walmart Great Value Organic Ad Spread

Wegmans

INTERNET RETAILERS

Overview

Amazon.com—AmazonFresh, Prime Now, and Prime Pantry

Thrive Market

Illustration 6-12 Thrive Market Website Cost Comparison

Door to Door Organics

Other Online Grocery Delivery Services

APPENDIX I

Table A1-1 Psychographic Patterns by Channel or Retailer: “I Go Shopping Frequently “ and “I Really Enjoy Any Kind of Shopping,” 2016 (percent of and index among adults)

Table A1-2 Psychographic Patterns by Channel or Retailer: “When I Shop I Usually Visit a Variety of

Stores and “A Store’s Environment Can Make a Difference in Whether I Shop There,” 2016(percent of and index among adults)

Table A1-3 Psychographic Patterns by Channel or Retailer: “Am Usually First of My Friends To Shop at New Store” and “Often Go Out of My Way to Find New Stores to Shop At,” 2016 (percent of and index among adults)

Table A1-4 Psychographic Patterns by Channel or Retailer: “Buy Goods Produced by My Country Whenever I Can” and “Would Pay More for Environmentally Friendly Products,” 2016 (percent of and index among adults)

Table A1-5 Psychographic Patterns by Channel or Retailer: “Always Look for Brand Name on Package” and “Like to Change Brands Often for the Sake of Variety and Novelty,” 2016 (percent of and index among adults)

Table A1-6 Psychographic Patterns by Channel or Retailer: “Enjoy Shopping With My Children” and “My Children Have a Significant Impact on the Brands I Choose,” 2016 (percent of and index among adults)

Table A1-7 Psychographic Patterns by Channel or Retailer: “When in Store, Often Buy at Spur of Moment “ and “Often Use the Internet to Help Plan My Shopping Trips,” 2016 (percent of and index among adults)

Table A1-8 Psychographic Patterns by Channel or Retailer: “Usually Only Shop at Favorite Stores Because They Have the Prices I Like” and “Shop Around A Lot To Take Advantage of Specials or Bargains,” 2016 (percent of and index among adults)

Table A1-9 Psychographic Patterns by Channel or Retailer: “Coupon Could Draw Me to a Store Where I Don’t Usually Shop” and “Am Drawn to Stores I Normally Don’t Shop at by Sales,” 2016(percent of and index among adults)

APPENDIX II

Table A2-1 Psychographic Patterns by Channel or Retailer: “Shopping for Groceries Is a Bore,” 2016(percent of and index among adults)

Table A2-2 Psychographic Patterns by Channel or Retailer: “I Really Enjoy Cooking” and “The Kitchen Is the Most Important Room in My House,” 2016 (percent of and index among adults)

Table A2-3 Psychographic Patterns by Channel or Retailer: “I Like to Try New Recipes” and “I Usually Refer to Recipes When Cooking,” 2016 (percent of and index among adults)

Table A2-4 Psychographic Patterns by Channel or Retailer: “I Often Read the Recipes on the Food Products That I Buy” and “I Can Be Swayed by Coupons to Try New Products,” 2016 (percent of and index among adults)

Table A2-5 Psychographic Patterns by Channel or Retailer: “I Like to Try Out New Food Products” and“I Am Usually the First of My Friends to Try New Food Products,” 2016 (percent of and index among adults)

Table A2-6 Psychographic Patterns by Channel or Retailer: “Prefer to Eat Foods Without Artificial Additives” and “When Shopping for Food, I Especially Look for Organic or Natural,” 2016(percent of and index among adults)

Table A2-7 Psychographic Patterns by Channel or Retailer: “I Usually Look for the Freshest Ingredients

When I Cook” and “When Shopping for Food, I Make an Extra Effort to Buy Locally Grown,”2016 (percent of and index among adults)

Table A2-8 Psychographic Patterns by Channel or Retailer: “I Often Eat Store-Made, Pre-Cooked Meals” and “I Often Eat Frozen Dinners,” 2016 (percent of and index among adults)

Table A2-9 Psychographic Patterns by Channel or Retailer: “Simple, Easy to Prepare Foods Are My Favorites” and “Prefer Fast Food to Home Cooking,” 2016 (percent of and index among adults)

Table A2-10 Psychographic Patterns by Channel or Retailer: “I Eat Several Small Meals Throughout the Day” and “Breakfast Is More Important Than Lunch or Dinner,” 2016 (percent of and index among adults)

Table A2-11 Psychographic Patterns by Channel or Retailer: “Lunch Is More Important Than Breakfast or Dinner” and “Dinner Is More Important Than Breakfast or Lunch,” 2016 (percent of and index among adults)

Table A2-12 Psychographic Patterns by Channel or Retailer: “I Often Snack Between Meals” and “I

Often Feel I Overeat,” 2016 (percent of and index among adults)

Table A2-13 Psychographic Patterns by Channel or Retailer: “I Frequently Eat Sweets” and “Salted Snacks Are My Favorite,” 2016 (percent of and index among adults)

Table A2-14 Psychographic Patterns by Channel or Retailer: “I Enjoy Eating Foreign Foods” and “I Try to Eat Gourmet Foods Whenever I Can,” 2016 (percent of and index among adults)

Table A2-15 Psychographic Patterns by Channel or Retailer: “I Prefer Foods Cooked With Lots of Spices” and “Prefer the Taste of Food Without a Lot of Spices,” 2016 (percent of and index among adults)

Table A2-16 Psychographic Patterns by Channel or Retailer: “I Like to Try New Drinks” and “I Often Drink Alcoholic Beverages at Restaurants,” 2016 (percent of and index among adults)

Table A2-17 Psychographic Patterns by Channel or Retailer: “Nutritional Value Is Most Important Factor in Which Foods I Eat” and “I Usually Am Quick to Try a New Nutritional Product,” 2016(percent of and index among adults)

Table A2-18 Psychographic Patterns by Channel or Retailer: “Most of the Time, I Am Trying to Lose Weight by Dieting” and “Normally Count Calories of the Foods I Eat,” 2016 (percent of and index among adults)

Table A2-19 Psychographic Patterns by Channel or Retailer: “Try to Include Plenty of Fiber in My Diet”and “Usually Only Snack on Healthy Foods,” 2016 (percent of and index among adults)

Table A2-20 Psychographic Patterns by Channel or Retailer: “Most Snack Foods Are Not Healthy” and

“Most Frozen Dinners Have Little Nutritional Value,” 2016 (percent of and index among adults)

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