Whole Foods Market Inc. wants to cut prices without sacrificing the local products that define its healthy image.
Investors are pushing the organic food pioneer to boost profit by operating more like a big-box grocer. Some smaller suppliers and industry consultants say the shift to a more centralized distribution structure and other changes risk compromising Whole Foods’ ability to keep stocked with the latest foodie trends and hot local brands.
“Shifting to national buyers can certainly deliver cost savings to Whole Foods, but at what price to the soul of the banner?” said Jim Cusson of brand consultancy Theory House.
Many of the changes are being spearheaded by Don Clark, a former Target Corp. executive hired in November 2015 to run Whole Foods’ grocery operations. The data analytics, centralized purchasing and strict shelf management he brought from Target could save money that Whole Foods can use to lower its relatively high prices, addressing a key customer complaint. But matching its competitors on price could also mean limiting how often it updates the products Whole Foods stocks.
Whole Foods has long divided its 462 stores into 11 regions, each with distinct product offerings like local maple syrup and gourmet pickles. A quarter of Whole Foods shoppers that visited the chain in the past month did so for items they couldn’t find elsewhere, according to a survey by Kantar Retail. For those who also shopped at Wal-Mart Stores Inc., only 3% said exclusive brands were a top draw.
The shift comes as Whole Foods looks for a way out its longest stretch of same-store sales declines since going public in 1992. Whole Foods is under pressure from Jana Partners LLC, which last week said that along with allies it had amassed an 8.8% stake in Whole Foods. The firm is pushing for faster operational changes.