Thursday, January 18, 2007

Proving a Concept Isn't Always Rewarding

This recent article about drops in share prices for Whole Foods raises an interesting point about being the company that proves that a market is viable.

When John Mackey started out in 1978 with his alternative grocery store in Austin called Safer Way — a takeoff on the name of the mainstream giant Safeway — he was on the fringes of the grocery industry.

Most mainstream shoppers would have considered Mackey's place to be a hippie store.

But today the mainstream has co-opted his Safer Way philosophy: offering natural and organic foods for healthy, environmentally friendly living. And Whole Foods Market, a very similar concept he opened with friends two years later, has been riding an amazing wave of success, becoming a darling of Wall Street — that is, until last year.

So what happened? A number of things, including extensive expansion (perhaps too much)... but more importantly, other grocers have seen the success of Whole Foods and emulated it in their own way.

Following Whole Foods' lead, other grocers are creating their own upscale models, which include natural foods and organics, Beyard noted.

H-E-B's Central Market and H-E-B Plus, for example, have an impressive offering of gourmet foods and an expansive selection of quality produce, meat and fish. Kroger and Randalls are also revamping stores to reach the same market.

Wal-Mart recently expanded its organic line of foods. In some stores, "we may offer as many as 200 different organic selections," Wal-Mart spokeswoman Karen Burk said.

I've noticed that the local Kroger now carries things I used to have to go to Whole Foods for. Yes, they keep it in a strange little health-food ghetto at the side of the store; no it's not as pleasant as going to Whole Foods. It is, however, four blocks from home instead of across town.

They've even started carrying organic beef - no small thing if you are cooking for somebody with enough allergies that the traces of antibiotics that wind up in a lot of meat can trigger a reaction.

If the success of Whole Foods leads to healthier products being available in regular grocery stores all over America, in a way, John Mackey will have accomplished the mission that led him to open a store in 1978. However, he might not be the one reaping all the benefits of that success.

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