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

 
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Published Aug 31, 2017 | 223 Pages | Pub ID: LA15280493

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


Defined by the number who shop there at leastonce a month, Trader Joe’s draws 10.5% of U.S. adults as customers, compared with 6.3% for Whole Foods. In contrast to a 10-year compound annual growth rateof only 0.2% in the customer base for Kroger, as the conventional supermarket kingpin, and a declining percentage draw since 2007 among most of the leading conventional supermarket banners, Trader Joe’s has posted a 10-year CAGR in customer base of 5.9%, and Whole Foods of 4.9%. But notwithstanding the multi-decade phenomenon of Whole Foods and Trader Joe’s, the natural channel remains a fragment of food retailing overall.  The U.S. grocery retailing business has never been more competitive, and this may be especially so for retailers featuring natural and organic foods.

A number of trends are putting pressure on food retailers of all stripes, from upscale natural grocers like Whole Foods to heavily price-focused supercenters like Walmart and discount/limited-assortment grocers like ALDI, to dollar stores such as Dollar General for which food is a smaller but growing part of the mix. Among the trends reshaping the competitive landscape are food deflation driven by heavy discounting, shakeups among major chains, and heightened brick-and-mortar competition spurred by U.S. expansion of Germany-based discount/limited-assortment retailers ALDI and Lidl. At the same time, grocery shoppers’ ever-growing expectation that the natural and organic foods they want will be available where they shop is increasingly positioning natural and organic as an essential competitive chip.

This makes for a whole new ball game for natural channel grocers. Gone are the days when the biggest worry of pure-play natural retailers like Whole Foods and Trader Joe’s were other specialists and local natural grocers: while they still face off against the likes of Sprout’s, Fresh, Thyme, and Natural Grocers, consumer demand has broadened the market to include any grocery retailer worth its salt. In June 2017, moreover, Amazon rocked the grocery and e-commerce worlds with the announcement of its acquisition of Whole Foods. Amazon’s surge into brick-and-mortar grocery has established grocers duly alarmed, since Amazon has a long history of sacrificing short-term profits to win market share and traffic, gaining formidable efficiency along the way.

Scope and Methodology

Whole Foods, Trader Joe’s, and Natural Channel Grocery Shopping analyzes the trends shaping the market, including the snow-balling impact of Millennials as avid shoppers both online andin-store.  In addition to a comprehensive assessment of Whole Foods andTrader Joe’s, this report profiles natural and organic foods retailers across the full spectrum, including pure-play retailers like Earth Fare, Fresh Thyme, Lucky’s, Natural Grocers, Sprouts, and The Fresh Market; traditional and non-traditional grocers including Albertsons/Safeway, ALDI, Costco, Kroger, Lidl, Publix, Sam’s Club, Walmart, and Wegmans; and e-tailers includingAmazon.com, Door to Door Organics, and Thrive Market. 

Featuring multi-year Simmons consumer data and exclusive data from Packaged Facts’ national consumer surveys, the report also profiles purchasers of natural and organic foods and customers of natural food supermarket chains and local natural grocers, with an extensive and data-rich analysis covering demographics, psychographics, and purchasing preferences.

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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