Whole Foods: The canary in the coal mine?
“Whole paycheck,” somebody once dubbed Whole Foods. I’ve understood why ever since they built a Whole Foods around the corner from where I live.
People are willing to pay a premium for the food they buy there, but those days may be numbered. Yesterday’s Wall Street Journal had two articles, one on the cover of the Marketplace section called “Slow to Cut Prices, Whole Foods Is Punished,” while the other, shorter piece was headlined “Biting Into Prices at Whole Foods.”
The upshot: on Wednesday, the 380-store chain’s stock price plummeted, “vaporizing more than $3 billion of the company’s market value” due to flat earnings and “a key measure of sales growth [that] hit its weakest pace since early in the U.S. economic recovery more than four years ago.”
The flat growth apparently is because consumers are wising up to the fact that they’re paying far more for organic kale and fair-trade chocolate than they have to. Other grocers are moving in on Whole Foods’ turf, and “this competition is just getting started,” the WSJ predicted.
The comparison with overpriced wine begs to be made. I bet you that the demographics of the Whole Food shopper and the buyer of premium wine are more or less identical. According to this analysis, Whole Foods customers
- Gravitate to lifestyle brands
- Form a loyal customer base
- Are better educated and wealthier
- Are willing to pay higher prices for higher quality food in a pleasant shopping environment
- Are largely Baby Boomers – the largest consumer group in America is getting older and they are seeking healthy, preservative- and pesticide-free foods to ensure a long and healthy life
That sounds a lot like premium wine drinkers, doesn’t it?
Are people getting smarter about what they buy—less willing to pay a premium for something that makes them feel good, but doesn’t actually taste better? If so, it’s undoubtedly an after-effect of the Great Recession, which made more of us more frugal than we were in the high-spending pre-Recession days. My own feeling, living in a Bay Area that’s increasingly young and diversified, is that people are less susceptible to marketing and more sensitive to the actual value of the things they buy, whether it’s groceries, clothing or wine. This could be very good news for value wine brands—not necessarily cheap wines, like Two Buck Chuck, but those wineries that offer the high quality of their competitors, yet at a lower price point. We’re already seeing signs that high-priced wines are having a hard time—witness such deep discounters on the Web as WineAccess.
There’s no evidence that consumers aren’t still swayed by famous name wines and glorious appellations, but there’s plenty of evidence that younger consumers, unlike their parents, aren’t quite so willing to shell out big bucks, if they feel there’s a bargain to be had. And thanks to the vigorous competition we see all around us, especially on the Internet, there are bargains galore to be had.