Industry leader Whole Foods has a challenger in Wal-Mart

By MARIA HALKIAS
The Dallas Morning News

PLANO – Walter Robb studies weekly sales from every Whole Foods market nationwide, but he’s been pulling Plano store numbers more often since an experimental Wal-Mart Supercenter opened two miles away.

“I’m all over it, and so far I can tell you the impact is minimal,” said Mr. Robb, co-president and chief operating officer at Austin-based Whole Foods Market Inc., the No. 1 U.S. organic grocer. “And, if you check the prices, we’re competitive to Wal-Mart.”

The Plano Supercenter has one of Wal-Mart’s biggest selections of organic foods and is where the world’s largest retailer has been learning advanced organics since March. So far, the discount giant sells organics in 374 select stores nationwide.

Much attention has been focused in recent months on Wal-Mart’s ambitious plans to bring organic food to the masses – and that puts a new spotlight on Whole Foods.

“When Wal-Mart enters a category, it usually looks to capture about a 30 percent market share by both expanding the pie and taking share from others,” said Sandra J. Skrovan, director of Retail Forward Inc. — a Wal-Mart program.

“Wal-Mart is taking this seriously because mainstream grocery offers organics – and we all know how well Whole Foods has been doing,” Ms. Skrovan said.

“It doesn’t make sense for Wal-Mart to have it in all their stores, but Wal-Mart is indeed looking to broaden its customer base. They’ve done their homework and know which stores have shoppers who demand organics.”

Organics heavyweight

Whole Foods’ performance in recent years has led the grocery industry. The retailer has posted double-digit sales increases as it’s added prepared foods and other products to its mix. Its new Austin flagship store even has an organic apparel department.

With sales of $4.7 billion last year, Whole Foods is more than four times the size of the next-largest organic grocer, Colorado-based Wild Oats Markets.

Lehman Brothers analyst Meredith Adler said she isn’t worried for Whole Foods.

The analyst wrote in a recent report that the organics leader has considerable expansion opportunity with its “large, perishables-oriented stores.” And Wal-Mart will end up expanding the number of growers and processors, she said.

Formidable newcomer

Organics is a part of Wal-Mart’s new corporate persona. The chain is promoting itself as environmentally friendly under a broad corporate sustainability program. It’s testing ways to be energy efficient at another experimental store in McKinney.

By some estimates, Wal-Mart is the largest seller of organic milk and has its own private-label organic soymilk. It already claims to be the largest buyer of organic cotton.

The company bought out a large organic cotton producer in Turkey to make its private-label George Organic baby clothes, which arrived in stores earlier this summer. Some of that fiber went into an organic cotton yoga outfit for its Sam’s Club chain, which sold out of 190,000 units in 10 weeks.

Mr. Robb, the Whole Foods executive, acknowledged that Wal-Mart’s entry proves organics is not a “fringe category or a fad — and it speaks to the niche’s potential size.”

Still, he said, organics is just another product category for Wal-Mart.

“For us, it’s in our soul,” Mr. Robb said. “The issue is: Who can do it better?”

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