• by Sarah Mahoney  @mahoney_sarah, June 15, 2016

New research from Nielsen shows that increasingly, Americans are looking for better-quality and more convenient items when they go food shopping, and are willing to pay more for them. That should be good news for Whole Foods Markets, still struggling with its reputation for overpricing — except the Food & Drug Administration has just issued a warning to the company, saying “serious violations,” with multiple “contamination with filth” issues, pose harm to consumers.

First, the Nielsen data: The new report says that an increase in urbanization and growing Millennial spending power around the globe have driven key shifts in all retail structures, with smaller-format stores gaining ground, and mass-market approaches becoming less appealing.

For example, among U.S. consumers (who differ from those in other regions in this regard), better-quality produce is more important than price for 58% of the survey, while convenience is more significant to 56%. 

As a result, it is projecting just 2.6% annual growth for discount chains in the 2015-20 time period, compared with 6.8% per year for retailers selling natural and gourmet chains. And in what may be a testimony to growing consumer confidence in the United States, 47% of Americans say they’d continue buying fresh and frozen fruits and vegetables even if prices jumped by 10% or more, and 43% say the same about meat and poultry.

The survey, based on online responses from 30,000 people in 61 countries, says this means it’s time for food retailers to break their addiction to price promotions, and instead focus on delivering what consumers most want, which is quality, value, convenience, and selection. In North America, dairy, personal care products and produce (both fresh and frozen) are the least price sensitive categories, while prepared foods, alcoholic beverages and sweets are most sensitive.

Whole Foods, meanwhile, says it’s fixed all the problems cited by the FDA, and in a statement, says it is surprised that the FDA released a statement without reflecting the changes. “We were honestly surprised,” says Ken Meyer, operations EVP for the Austin, Tex.-based retailer. “We’ve been in close contact with the FDA, opened our doors to inspectors regularly since February and worked with them to address every issue brought to our attention.”

Last year, Whole Foods paid $500,000 to settle a probe by New York City for overcharging customers.