Whole Foods Market Inc (NASDAQ: WFM), the United States' first certified organic grocer, opened its first store in Austin, Texas on September 20, 1980. Since then it has expanded to 431 locations in the United States, Canada, and the United Kingdom, driving America's increasing appetite for organic, healthy food. By coupling high-quality organic foods and unique, trendy stores, Whole Foods has now become an iconic brand in the organic foods market.
However, Whole Foods' days of its uncontested stake in the organic supermarkets industry are coming to an end as supermarket chains like Trader Joe's and Aldi find increasing success by catering to a demographic who is turned off by the high price tag of Whole Foods.
Trader Joe's, for example, has gathered an almost cult-like following with its lower price tag, hip store ambiance, and a diverse range of award-winning brand prepared-foods, snacks, and wines. It has a history of slashing prices as it expands - when Trader Joe's hit 300 stores in 2013, it reduced some of its prices, forcing Whole Foods to make similar price cuts to remain competitive.
Aldi on the other hand focuses entirely on speed and price for its approach to shopping. Ali is also pushing back against the trend of offering customers every possible item and brand in the market, and instead sells mostly house brand products. "The customer doesn't have to walk in the store and have so many options and take time to decide. We've done that work for them," says Liz Ruggles, Aldi's marketing director.
Aldi is already a force to be reckoned with its 10,000 stores worldwide across Europe and Australia, and its venture into American soil has proven to be threatening to Whole Foods. Now operating 1,500 stores in 32 US states, Aldi is redefining the grocery shopping experience for Americans. Aldi stores do not have any counter service departments and instead have everything packaged for an entirely self-serviced shopping experience.
In response to the declining sales of as this past year, Whole Foods responded with "365 by Whole Foods Market", a separate chain of lower-priced stores, aiming at millennial consumers who have been less than enthusiastic about the original chain's formula of high prices and huge selection. These stores are experimenting with the "less-is-more" concept by offering just a fraction of the variety of products offered at Whole Foods Market stores, as well as attempting to create a more playful ambiance, making it more inviting to people to just come hang out, if not to shop.
The food industry has seen some dramatic changes in recent years, explained partially by statistics that say Americans are spending more at bars and restaurants than they are on groceries, which happened for the first time in recorded history last year. The demands of supermarket consumers are changing as well, notably due to millennials expressing their preference for convenience and affordability over paying a premium for a higher-quality experience. Competition will continue to grow for Whole Foods as more brands enter the market. However, reviews of 365 by Whole Foods Market has been positive, showing Whole Foods is willing to adapt and that it is not a name to count out just yet.