Delivering the week’s top organic food news
9.5.2017
100% Non-GMO

Lower Prices at Whole Foods Are a Double-Edged Sword


As the Internet was abuzz last week with prices at Whole Foods down by as much as 43%, let’s remember one thing — there is no free lunch.

These price cuts have to come from somewhere, and the idea that Amazon will finance losses indefinitely is severely misguided.

The way that Whole Foods is going to offer a significant decrease in prices to its customers, on a long-term and sustainable basis, is through SKU rationalization. No one is doing this better than Lidl, which is achieving prices 9% lower than Walmart.

How exactly is Lidl making this work?

First, Lidl carries 2,000 products versus Whole Foods, which has, in some stores, up to 100,000 products.

Second, Lidl has its own store brand and carries a very limited number of other national brands. In some product categories, there is only one other national brand.

Third, labor costs are kept low, and there’s a heavy emphasis on technology and automation.

It’s highly unlikely that Whole Foods will go to the same extreme as Lidl. However, Lidl is the playbook for how lower prices are successfully achieved, and I believe this is the direction that Whole Foods is moving towards.

Here is what I expect to happen:

– Getting and staying on the shelves of Whole Foods will become much more difficult. For those that do remain, organic brands will be forced to lower their prices. In turn, brands may want their distributors, suppliers and farmers to lower their prices as well, helping to absorb the decrease in margin.

– If Whole Foods lowers their prices, other supermarkets are going to have to do the same, which will put many of them out of business. A report by Inmar Willard Bishop estimates that by 2021, we will have lost more than 4,200 traditional grocery stores.

– Getting into Whole Foods as a young brand may prove to be incredibly difficult. Established national brands will have a significant advantage.

– Whole Foods stores will look very similar across the country, and its selection of hard-to-find or local items will slowly disappear.

– The level of customer service will no longer be what it was, and team members will come to the harsh realization that this is not the Whole Foods they used to know. To get insight into how Jeff Bezos ruthlessly manages his companies, take a look at this op-ed piece by a Washington Post staffer. It is an eye-opener.

– Questions about how lower prices at Whole Foods will impact organic and animal welfare standards currently remain unanswered, yet I predict they will succumb to the pressure as well.

**

Organic brands would be wise to plan for a vastly different retail environment in the years ahead, as price decreases at Whole Foods will have a massive ripple effect on the entire industry. It is going to be more uncomfortable and more challenging than most people realize.

Have a great day!

Max Goldberg, Founder

This Week's News Items

Weekly News Summaries

First Course
Food Dive

Growth in Conventional Produce is Dropping, Organic is Soaring

By Erika Kincaid

In a recent survey from Category Partners and Beacon Research Solutions, sales of conventional fruit and vegetables are decreasing while organic continues to expand market share.

Fortune

Organic Will Be Critical for General Mills

By Susie Gharib

General Mills' new CEO Jeff Harmening says that innovation and fresh organic products will be critical to the success of the company.

UC - Santa Cruz

UC Santa Cruz is Awarded $2.5 Million for Strawberry Research

By Jennifer McNulty

UC Santa Cruz has been awarded $2.5 million for organic strawberry research, with a focus on optimizing biological methods to manage soil-borne diseases and pests.

Capital Press

Organic Hazelnut Growers Association is Formed

By Aliya Hall

With less than 1% of hazelnuts grown in the U.S. being organic, an association was formed to help raise awareness of this industry.

Second Course
Agweek

Beware of the "Peel Back the Label" Campaign

Conventional dairy farmers have launched a "Peel Back the Label" campaign, which intends to combat "Non-GMO" and other labeling claims.

Sustainable Pulse

In Defiance of the EU Commission, France Will Vote Against the Renewal of Glyphosate

France has decided to vote against the reauthorization of glyphosate, the primary ingredient in Monsanto's Roundup. The ramifications of this are enormous.

The Independent

STUDY: Birth Abnormalities Linked to Pesticide Exposure

By Ian Johnston

Scientists at the University of California at Santa Barbara reported that high exposure to pesticides, as a result of living near farms, appears to increase the risk of giving birth to a baby with “abnormalities” by about 9%.

Third Course
Fast Company

Amy's Drive Thru to Go Nationwide

By Eillie Anzilotti

The success of Amy’s Drive Thru, America’s first vegetarian, organic, gluten-free-optional fast-food restaurant, has encouraged the owners to think about a national footprint.

Food Navigator

Hippeas is on Track to Become a $100 Million Brand

By Elaine Watson

With its incredibly rapid growth, the founder of Hippeas, Livio Bisterzo, claims that his company could be a $100 million brand within the next few years. Based on what his company has achieved so far, I believe it.

Fortune

Juicero is Closing Down

By Beth Kowitt

Unable to continue as a standalone entity, Juicero has halted operations and is looking for a buyer.


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This Week's Quick Hits

Quick Hits

* While I am sure there are many organic food companies that have donated generously to Hurricane Harvey relief efforts, huge kudos to the Stephens family at Nature’s Path. The company has donated $500,000 worth of its organic food products to victims in the Houston area. Amazing, thank you!


* Congrats to Alejandro Velez and Nikhil Arora, Co-Founders of Back to the Roots, for being featured on NBC’s Today Show.


* Please take action and tell members of Congress to support the bill to ban chlorpyrifos, which the EPA failed to do earlier this year.


* Despite his legal woes in Miami, Chef Matthew Kenney’s empire continues to expand, as he plans to open a new plant-based restaurant in London.


* Throughout the month of September, Natural Grocers is sponsoring a national fundraiser to raise money for the Organic Farmers Association.


* Throughout the month of September, Natural Grocers is sponsoring a national fundraiser to raise money for the Organic Farmers Association.


Organic Insider