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Financial crisis is spoiling organics

A Whole Foods Market in Chicago

TEXT OF STORY

Kai Ryssdal: With the economy slimming down every day, you'd think Americans would be trimming their food budgets, too. And there is some evidence that's happening, at least at the high end of the food chain. Whole Foods is cutting back on expansion plans as it responds to a more frugal shopping public. From the Marketplace Entrepreneurship Desk at Oregon Public Broadcasting, Mitchell Hartman reports.


Mitchell Hartman: When Whole Foods reports its quarterly earnings on Wednesday, analysts expect to see sales growth between 0 and 1 percent. A few years ago, sales were increasing in the double digits. Whole Foods has already cut back on plans to open new stores nationwide. That's not surprising, with customers like Alison Lord. I met her outside the Whole Foods store in Portland.

Alison Lord: I'm much more conscious of prices and price comparison, and thinking, "Do I really need that item or not, or can I make it work with something else?"

Which is not to say that consumers are ready to throw in the towel on organic food. What they are doing, is buying in bulk from organic wholesalers or shopping more at Whole Foods' competition -- lower-cost local grocery chains and food co-ops. Barth Anderson is a director at The Wedge food co-op in Minneapolis. He says business is up.

Barth Anderson : It's wonderful, actually. The downturn in the economy has really brought a lot of people home. They don't say, "Well, we're going to order a pizza." They actually cook.

But, will they keep buying more expensive organic ingredients to do that cooking? Sam Fromartz thinks they will. He's author of the book "Organic Inc."

Sam Fromartz: Consumers, if they really believe in the value of organic foods, they're going to continue to buy it because it's what they're putting into their bodies. So, they're going to cut back in other areas. They're going to try to get them for as cheap as they can.

Which means, says Fromartz, shopping more at mainstream groceries that have added organic lines, like Safeway, Kroger and Wal-Mart.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.
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I would agree with Ms. Lowery that this is slightly misleading. Yes, Whole Foods Market is showing the effects of the troubled economy, albeit for different reasons than what you propose.
The point is made that consumers will continue to buy organic food because of the benefit to their bodies, but they will try to get them as cheap as they can. What is cheap? Is it cheap to purchase produce that is inedible and tastes like its flavor and nutrient content has gone on vacation? Is it cheap to purchase avocados at 2 for $1 that are primarily a pit with green skin? There is a lot of “suckering” going on right now in grocery with some retailers using d-grade produce as a loss-leader to get us into their doors. As a consumer, I am pissed when I have to spend 5 minutes trying to find 3 apples that aren’t bruised or brown and when I have to discard $15 worth of produce because it is spoiled and/or flavorless. Whole Foods does a consistently good job in providing QUALITY perishable products and there is great value in being able to enjoy the food you have spent your hard-earned dollars on.
So why is Whole Foods Market feeling the effects (as are other big-box retailers)? (Perceived) trust and simplicity. Trust; There is mounting insecurity with our food system and the perception is that if you know the person you are buying your food from it is safer. Co-Ops tend to operate in a much smaller space with smaller teams. As WFM has grown the footprint of the stores has gotten bigger. The bigger the store, the more difficult it is to create that one-on-one experience between customers and team members that Whole Foods was traditionally known for. I remember shopping at the Ridgewood, NJ store every week and the fish guy would have a recommendation waiting for me. That experience has been greatly impacted by the grandiosity of the newer (and expanded) stores. Simplicity; if there is one thing that effects the perception of WFM not being a value-oriented shop it is the hyper-stimulating effects of tables stockpiled and craftily displayed, often with “specialty” items. Whole Foods could benefit from getting rid of some of those tables, tooting their own horn about their private label items that are competitively-priced and taste good, and putting their best foot forward 365.

The Minneapolis Star-Tribune conducted a price survey of organic foods back in May, and the co-ops were cheapest on over all basket price:

Our price comparison produced some surprising results. We shopped at seven stores: Cub in Edina, Rainbow in Bloomington, Mississippi Market on Randolph in St. Paul, the Wedge Co-op in Minneapolis, Whole Foods in Minneapolis, Lakewinds Natural Co-op in Minnetonka and Trader Joe's in St. Louis Park.

The price differences weren't dramatic (a 5 percent difference from lowest to highest totals). The Wedge [Co-op] was lowest-priced and Cub was highest-priced.

http://www.startribune.com/lifestyle/yourmoney/18990589.html?page=2&c=y

I work at Whole Foods Market so I feel compelled to point out that your story is misleading since you claim shoppers can find less expensive organic food at co-ops and conventional supermarkets when that is not the case. On like items, our prices historically have been and currently are more competitive when compared co-ops and mainstream supermarkets. A release of a study comparing WFM prices to conventional grocery stores and a Harris Interactive poll revealing Americans are not willing sacrifice quality despite the economy can be found here: http://media.wholefoodsmarket.com/pr/wf/national/8-26-08valuesurvey.aspx. We offer plenty of high quality products at a great value so our shoppers don’t have to trade down during this economic downturn.

Barbara - Those cars belong to people looking for jobs. We're getting lots of formerly $100,000 a year looking for minimum wage work on our organic farm right now.

If Whole Foods is struggling, you would not know it at their new store in Union, NJ, where the parking lot has been jammed since the store's opening on Oct 29.

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