The Next Whole Foods? Three Emerging Healthy Supermarket Challengers

Whole Foods is often credited with reinventing the supermarket, and today it is undeniably the king of the healthier grocery store category. It has plenty of competitors.

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Customers exit a Fairway market in New York, April 17, 2013.

Whole Foods has been one of the most successful supermarket stories in decades. Billing itself as America’s Healthiest Grocery Store, the chain has expanded—through acquisitions and new store openings—from a mere six stores in 1988 to around 350 locations today. While food sellers such as Walmart, Aldi, and WinCo compete first and foremost by offering low prices, the Whole Foods model was built with a particular focus on organic, all-natural, high-quality foods. Whole Foods is often credited with reinventing the supermarket, and today it is undeniably the king of the healthier grocery store category. But there are plenty of competitors that would like to challenge for the crown. Here are three:

Wild Oats Market
This week, the Yucaipa Companies announced it was purchasing most of the 200 Fresh & Easy brand grocery stores that have been on the market since European supermarket giant Tesco put the struggling brand up for sale last spring. Since anonymous reports surfaced in June, it’s been openly discussed that Yucaipa and its managing partner, billionaire Ron Burkle, had been planning on purchasing the Fresh & Easy stores—all located in Arizona, California, and Nevada—and converting each into a Wild Oats Market, an organic food pioneer that born in Boulder, Colo., in 1987 whose 110 stores were sold in 2007 to (yep) Whole Foods. (Whole Foods was forced to sell the Wild Oats brand a few years later.)

(MORE: Meet the Low-Key, Low-Cost Grocery Chain Being Called ‘Wal-Mart’s Worst Nightmare’)

The Los Angeles Times and others noted that a Wild Oats comeback has been in the works for months. What’s more, as Sam Hamadeh, head of research firm PrivCo, told the paper over the summer, Yucaipa may very well not only rebrand the Fresh & Easy stores as “Whole Foods-style, high-end Wild Oats stores,” but could do the same with two “frankly, old and stale” grocery chains it also owns, A&P and Pathmark. The result could be several hundred freshly branded supermarkets essentially entering into direct competition with Whole Foods.

Nothing official has been announced, and probably won’t be until the Fresh & Easy sale is finalized within a few months. “In the meantime it is business as usual for most Fresh & Easy stores,” a Yucaipa statement reads.

Sprouts Farmers Market
“Mountains of fresh fruits and vegetables, barrels of wholesome grains, nuts and sweets, full-service deli, meat and seafood counters—complete with homemade burgers and sausages.” That’s how Sprouts describes the scene inside each of its locations, which have the “feel of an old-fashioned farmers market.” There are more than 150 Sprouts stores in the South and Southwest, and 20 new locations will open or already have this year.

The chain has been described as a “less expensive Whole Foods” and a potential challenger to Whole Foods due to its focus on value and fresh, local, healthier foods—a focus that’s obviously reflected in the company name.

(MORE: How Two Germain-Owned Sister Supermarkets Became Hot Trendsetters in the U.S.)

Sprouts’ success has come thanks to its “flipping the conventional supermarket model,” Doug Sanders, Sprouts president and CEO, told analysts recently, according to Supermarket News:

“We use our massive fresh produce department in the center of our store to drive traffic, and then offset our price investment in produce by surrounding it with differentiated departments such as bulk foods, packaged grocery and vitamins to blend to the solid margin that still allows us to offer the best prices in the markets we serve,” he explained.

The model has drawn accolades. Sprouts was given the 2013 Retail Excellence Award by Supermarket News, and was also recently named the 2013 Retailer of the Year by WholeFoods Magazine—a publication that, interestingly, is not affiliated with Whole Foods Market. Also interesting: Sprouts was founded by the Boney family, which also created Henry’s Farmers Markets, a brand that was sold to Wild Oats Markets in 1999.

Fairway Market
Born as a fruit and vegetable stand in Manhattan in 1933, the company that became Fairway Market has stayed close to home as it has expanded. There are now 13 stores within an hour’s drive of New York City, up from nine locations in 2011. Further growth for the chain could come rapidly. During the company’s successful IPO in April, investors learned that Fairway planned on opening at least three or four more stores annually around the country, eventually reaching in the neighborhood of 300 locations.

(MORE: Tale of Two Supermarkets: Why Fresh & Easy Flopped and Fairway Flies High)

Known for pickle bins, dozens and dozens of cheeses, abundant fresh produce and specialty-gourmet offerings, and surprisingly decent prices, Fairway stores bear the logo “Like No Other Market.” And without a doubt, one of Fairway’s direct competitors is the larger, better-known “Market,” Whole Foods.

2 comments
VasuMurti
VasuMurti

There's a Whole Foods Market within walking distance of the Krishna temple in Berkeley, CA, and I've seen Krishna devotees casually enjoying vegetarian meals there. A friend of mine from the San Francisco Vegetarian Society lamented, however, that Whole Foods used to be strictly vegan!

John MacKey commented years ago in an editorial in Veg-News, a slick, trendy, vegan periodical out of San Francisco, CA, that companies like Whole Foods can put vegan products on the marketplace, to sink or swim in the waters of free enterprise, but consumers actually have to *want* these products if they are to succeed. That's capitalism.

Ingrid Newkirk, Executive Director of People for the Ethical Treatment of Animals (PETA), similarly commented in an editorial in the late '90s in the now-defunct Animals' Agenda that the veggie burgers and soy "ice creams" you now see in leading supermarket chains didn't appear there magically... They came about through consumer demand!

Far from being wild-eyed leftists, animal activists are working within the system to bring about change.

Hunter_Pechin
Hunter_Pechin

I have never been to any of these markets, but it seems like Sprouts has the best shot of taking on Whole Foods because they are the most distinct with their "flipping the conventional supermarket model." Fairway and Wild Oats sound more like clones, but could be wrong. Trader Joe's, for example, competes successfully with Whole Foods largely because what they offer is distinct: creative, interesting prepared and frozen foods, and affordable versions of items that are usually expensive at other high end stores like wine and nuts.