retail

Has Whole Foods Found Its Recessionary Sea Legs?

meatThe good news is that Whole Foods Markets seems to have slowed its sales decline, posting a 2.5% decrease in comparable-store sales for the third quarter versus a 4.5% dip in the second, and a 4% slide in the first.

But the interesting news is that the company admits that it has lost its way, and is trumpeting a return to its organic roots. While John Mackey -- the company's controversial chairman and CEO -- said he was "very pleased" with those third-quarter results in its earnings release, he proclaimed much of the chain's products "junk" in an interview with the Wall Street Journal, adding that the company is on a mission to return the Austin, Texas-based retailer to its healthier roots.

How well that will work, however, remains to be seen. In the last decade, Whole Foods has made its reputation on "the purest foods, not the healthiest ones," says John Moore, a marketing consultant in Texas and author of Tribal Knowledge: Business Wisdom Brewed from the Grounds of Starbucks Corporate Culture.

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"Where Whole Foods veered off course is that it grew up alongside the whole culinary explosion -- starting with the rise of things like the Food Network and celebrity chefs. So the typical Whole Foods shopper swung away from the granola crowd, more to the gourmet side. That led to bigger and bigger stores, filled with more opulent products, and an in-store experience that felt more luxurious."

The emphasis, says Moore, who has also worked at Whole Foods, was on foods that were "clean, which means they don't have any frowned-upon ingredients." Those foods, however pure, might include heart-attack-producing steaks (from carefully tended cattle, of course) or super-fattening chocolate mousse (using organic chocolate.) "What will be interesting is how advice about specific diets -- which will most likely stress less meat -- will play out in stores," he says.

Whole Foods' announcement comes at a time when mainstream supermarkets, led by such chains as Safeway, Hy-Vee and Hannaford, have already enthusiastically embraced healthy eating. Some are employing nutritionists, creating special signage and point systems to help consumers make informed decisions, and rolling out plenty of private-label organics priced well below Whole Foods' offerings.

But while Moore isn't convinced that this quarter's improved results are a trend, he is fairly confident that Whole Foods will hang on to many of its fans -- even those who may be shopping at mainstream stores more now, because of the recession.

"When it comes to consumer commitment about better foods, that's a decision based more on values than value. It's a very conscious decision. And besides, much of Whole Foods' appeal is cosmetic. It's positioned itself as the BMW -- it offers performance and functionality. Sure, a Honda Accord gets the job done, but people feel better about themselves when they drive a nicer car, and they feel better about themselves when they shop in a nicer place."

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