Stores Embark on Organics 2.0
Corrected 5/24/07. A previous version of this story incorrectly stated the value of organic sales in 2005.
Alex More, a law student in Austin, recently shopped at Whole Foods to load up on sprouted oatmeal, almond milk, and flavored flax crackers. "It's health food that I couldn't get at a normal big supermarket," he says.
Specialty food stores need customers like More in order to survive the mainstreaming of organic food. Three out of every four conventional grocery stores in the country now sell organic food, according to the Food Marketing Institute. In response, specialty stores like Whole Foods are going beyond organic by offering exotic products, locally grown produce, and meat from humanely treated animals, as well as a more enjoyable shopping experience. So far, the strategy seems to be working.
"You can't just slap on an organic label anymore," says Laurie Demeritt, president of the Hartman Group, a market research firm. "Consumers are always aspirational and trying to get to the next layer of quality."
At Wild Oats Markets, a natural-foods chain that Whole Foods is acquiring, that next layer includes selling items like exotic mushrooms, truffle oils, and locally produced honey. Store employees are available to offer cooking and entertaining advice, says spokeswoman Sonja Tuitele. "That's one way we differentiate ourselves from the bigger grocery stores," she adds.
Focusing on high-quality, unusual foods has helped specialty stores retain customers who can now buy organically at supermarkets, says Chuck Cerankosky, managing director at the investment research firm ftn Midwest Securities. "It's an epicurious experience that goes well beyond what most conventional supermarkets even try to approach," he says.
This week, Whole Foods chief executive John Mackey said that the increased competition from conventional supermarkets is having a small negative impact on sales. "They have seen how successful Whole Foods has been, and they are copying us ... We are no longer differentiated on the basis of products," he said. The company is still gaining customers, he added, just not as quickly as it once did.
"It's got to get better, and we have a number of initiatives to do so." One of those initiatives is adhering to stricter standards than federal organic certification requires. It buys meat only from suppliers that follow its animal treatment requirements, which include allowing cattle the freedom to range for at least two thirds of their lives and giving veal calves unlimited access to grain.
The store also promises customers that its buyers personally visit farms where produce is grown. "Customers come into stores with the expectation that we've done our homework for them," says Joe Dickson, organic programs coordinator for Whole Foods.
Local natural stores and specialty chains such as Whole Foods and Wild Oats often post stories about and photos of the farmers who grew the food. Wild Oats launched a "Choose Local" campaign last summer that features local products and growers. Whole Foods' website promotes individual farmers. Michael Straus, executive producer of the podcast The Beyond Organic Radio Show, says, "I really think people are feeling physically and emotionally disconnected from their food. People want a connection-people are yearning for it."
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