NEW YORK – John Mackey, co-founder of Whole Foods Market Inc., helped “reshape how Americans approach eating, transforming health food from a niche market into a booming retail sector attracting millions of urbanites, soccer moms and baby boomers,” writes the Wall Street Journal.
But now, competition has caught up to Whole Foods, which could be forcing the grocer to change its “Whole Paycheck” pricing to a more conventional supermarket model. Furthermore, after 35 years of same-store sales growth averaging 8%, Whole Foods saw its profit decline by more than 5% and its comparable-store sales fell 2.5% in the fiscal year ending last September. Earlier this week, Jana Partners LLC and several allies amassed an 8.8% stake in Whole Foods, writes the Journal, signaling a possible sale.
The Journal continues that Jana said in its filing that it wants Whole Foods to more quickly adopt standard grocery-industry practices: loyalty cards, centralizing product purchasing to improve efficiency, advertising, coupons and discounts.
“We are confident in the actions we are taking to position the company for continued success,” Mackey said in a written statement on Tuesday, “and we remain open to ideas to create further value for our shareholders and all our stakeholders.”
In recent years, more grocers have capitalized on consumer demand for organics and natural products. The Journal notes that over the last 18 months, Whole Foods experienced its longest stretch of quarterly same-store sales declines since going public in 1992. The retailer is down as many as 14 million customer visits over the past six quarters, according to Barclays PLC, and its shares have lost nearly half their value since peaking in 2013.
Today, Costco Wholesale Corp. claims to sell more organic food than any other retailer, and Kroger Co. said in its last fiscal year that natural and organic sales surpassed Whole Foods’ revenue for the year.
More conventional grocers are also carrying specialty products that had once been exclusive to Whole Foods, notes the Journal, and at more affordable prices. Specialty grocers such as Sprouts Farmers Market and Trader Joes have also captured more customers, and CPGs are stocking their products in other stores.
“We take opportunities as they come, and right now, those opportunities seem to be more at the conventional stores,” Matt Oscamou, founder of Frontier Snacks, told the Journal.
Mackey, who spoke at the 2015 NACS Show on the topic of “Conscious Capitalism,” told the Journal that he views the explosion in natural-food offerings, which is also hurting the company’s finances, as “fantastic.” The growth, he says, means that he has achieved his goal of bringing more better-for-you products to the masses. “In capitalism; that’s how it works,” he said.
MacKay is also confident Whole Foods will thrive and survive. “We have a billion dollars in the bank,” he told the Journal. “We are not in crisis mode.”