Whether prompted by ennui with everyone else - or hope that it offers a genuine alternative to Tesco and Asda - one name has been generating a real buzz at recent industry events. And it’s not home grown.
Whole Foods Market is the world’s largest natural and organic foods retailer and winner of the best international retailer of the year award at Food from Britain’s Export Awards last month.
Likened to “a Waitrose on steroids” by one commentator, the chain that bought Fresh & Wild last February said then that it planned to open as many as 75 large 20,000 sq ft plus stores in the UK.
At the time, the statement was greeted with scepticism by those all too familiar with UK planning regulations. Yet 11 months on, the retailer has revealed plans to open up to six megastores in and around London (The Grocer, December 18, p5). Purchasing director Tim Sperry, who picked up the FFB award last month, insists that it can not only make a formula that is almost the antithesis of Every Day Low Pricing (EDLP) work - but make it work in a big footprint.
It is a far cry from the days when Whole Foods Market thought one or two stores per city were all it could handle. The first store opened back in 1980 in Austin, Texas. “When we opened our doors, we had a simple mission: to provide more natural
food, an alternative to what most supermarkets were offering,” recalls Sperry. Now, however, the company’s focus on “high-quality perishables that appeal to a broad customer base”, as Sperry puts it, has really come into its own. “Conventional supermarkets are now seen as a gateway experience and you can find many natural foods as you walk in,” says Sperry. “When you walk into Whole Foods Market, you get the whole package.”
It is a package that is clearly increasingly appealing to consumers. The company saw sales rocket 23% to $3.9bn in the year to September 2004. Comparable store sales increased 14.9%, setting a new company record, and average weekly sales rose to $482,000 up from $424,000 the previous year.
Whole Foods Market now has 167 stores worldwide and Sperry promises more: “There are 51 stores in the pipeline. The growth opportunities continue to be vast.”
In Canada, it is now opening 15 to 20 new stores a year, and, says Sperry: “In the UK, we expect to be equal to North American scale in not too short an order. We have seven stores and we look to be adding many more. We’re planning to open larger stores of 30,000 sq ft to 40,000 sq ft and up.” Increasing the average store size is critical to future growth, he argues. “A lot of our concepts are extremely challenging to fit in small stores.”
The Fresh & Wild stores - six in London, one in Bristol -- generate some of the highest sales per square foot within the portfolio despite their modest circa 5,000 sq ft proportions. But elsewhere, where the shift to larger stores is underway, the results speak for themselves. “Over the past five years, while our store sizes have increased by 25%, our weekly sales have increased by 54%,” boasts Sperry.
Despite the UK’s onerous planning regime and the dearth of available stores, the company is confident it can up-scale. Otto Leuschel, regional vice president of Fresh & Wild, confirms that up to six new stores in London are under consideration and that there are plans to open stores in other UK cities as well as mainland Europe.
Because there are so few suitable sites in the UK, Whole Foods Market intends either to develop stores from scratch or secure a change of use, rather than acquire existing supermarkets. Where new stores open in close proximity to existing Fresh & Wild stores, the smaller stores could be closed.
Sperry adds that when the first new store opens it is likely to be branded Whole Foods Market. He hints that the Fresh & Wild brand will eventually disappear in keeping with the company’s worldwide strategy to focus on a single brand. “At the moment there is no intention to re-brand Fresh & Wild, but over time it may be replaced,” he says. In the US, all its acquisitions are now branded Whole Foods Market and, he says, “it’s really paying dividends because people understand it”.
Sperry makes no apologies for the lack of UK activity since the acquisition of Fresh & Wild. “We don’t simply go into a segment we have acquired and say you will do as we do. We study the intellectual capacity of the company and in this case it’s made a phenomenal contribution. It is a very strong and loyal team with established relationships with many local suppliers. We are learning how to do retail here.”
If Whole Foods Market has not fully worked out how to get round the planning system, it is clearly learning fast. But judging by the buzz surrounding the company, it has as much to teach as learn in the UK.
The retailer says that it sells no products containing hydrogenated oils or artificial preservatives, sweeteners, flavours or colours. Yet it has the nerve to dare to sell this niche offer in a superstore - it opened a 59,00 sq ft outlet at the base of the new 80-storey Time Warner Centre in Manhattan last February. This includes hot bars, a sushi area managed by an outside vendor, chocolate, coffee and beauty stations - but isn’t its biggest store.
Whole Foods Market also espouses an “open culture of experimentation” and a decentralised business structure, carrying out buying at three levels: national, regional and store level, says Sperry. Unlike most companies, any member of staff can access salary information about any other in the company, which even caps the salaries of its most senior members of staff at 10 to 13 times the average team member’s salary.
Sperry is the first to admit that it will not be easy to retain this sort of culture as the company grows. But he believes the Whole Foods Market model of selling slow foods fast is the only viable alternative to EDLP. And he is confident of success - particularly in the UK.
“We’re at the tipping point with the brand,” he says. “Our entry into the UK is the harbinger of much more to come.”
A harbinger indeed for Waitrose.
- Whole Foods Market generates 65% of its sales from perishables.
- Its goal is to generate 20% of sales from own label.
- The percentage of lines that are organic varies from 20% to 75% depending on the store’s location.
- The average size of a store rose from 44,000 sq ft in 2003 to 47,000 sq ft in 2004.
- There are 51 stores in the global development pipeline.
- In the year to September 2004, the company’s net income increased 32% to $137m.
- Sales per square foot totaled $786 up from $716 the previous year.
- At the end of the third quarter of 2004, Whole Foods Market had $213m in cash and equivalents and $168m long-term debt.