Wild Oats Markets Tests Lower-Priced Concept: Bloomberg Forum
Boulder, Colorado, March 31 (Bloomberg) -- Wild Oats Markets Inc., the No. 2 natural-foods grocer, is taking a stab at industry leader Whole Foods Market Inc. with a concept it hopes will appeal to price-conscious consumers with an appetite for healthy foods.
Wild Oats' Evanston, Illinois, store, named the People's Market, satirizes Marxist propaganda with a ''good food for the masses'' motto, and tries to capture the communal feel of a 1960s co-op in a modern, 20,000-square-foot warehouse environment. Shoppers can find staples such as organic vegetables, vitamins, and prepared meals, plus specialty items ranging from olive oil to Italian cookies to dried flowers, at prices 10 percent to 30 percent cheaper than Wild Oats' other stores.
The prototype People's Market, which opened last week, is helping Boulder, Colorado-based Wild Oats push into a region where Whole Foods is entrenched with six stores. Since going public in 1996, Wild Oats has nearly doubled its size to 68 stores -- mostly in the Western U.S. and Canada -- through a combination of acquisitions and openings. ''The idea is we're bringing adventurous, exotic food at really good prices,'' Chief Executive Michael Gilliland told the Bloomberg Forum. ''We compete very well with Whole Foods,'' and the People's Market ''gives us another weapon in the arsenal.''
Wild Oats and Austin, Texas-based Whole Foods already go head to head in about 10 markets, Gilliland said, including Wild Oats' home of Boulder, where Whole Foods set up shop last year.
People's Market is able to lower prices by offering only about half Wild Oats' typical inventory of 25,000 items. It rotates a variety of items to ''create a fresh experience'' every time a customer comes in, Gilliland said. ''You won't always see the same olive oil,'' he said. ''And instead of having five different varieties of canned soup, we'll have one at a really great price.'' All the food will adhere to Wild Oats' guidelines of no preservatives, additives or artificial ingredients, he said.
Successful Introduction
Initial sales at the People's Market were more successful than any store opening in Wild Oats' history, Gilliland said.
That's good, because investors need convincing that the company's strategy for growth -- which calls for more than tripling its market capitalization to $1 billion by 2001 -- is viable. Wild Oats shares have fallen about 25 percent in the past 12 months. ''The stock has been suffering from small-cap lose,'' said Merrill Lynch analyst Sandy Raju, who rates the shares ''accumulate.'' ''And Whole foods has had earnings problems lately. That's a double negative.''
Whole Foods, whose fiscal first-quarter profit suffered from higher costs, has pulled shares of comparable natural foods grocers down with it, she said.
Gilliland said he doesn't expect the People's Market to become ''the major growth vehicle'' for Wild Oats, but he does foresee as many as two dozen more stores in urban settings with more-educated consumers and large college populations such as Cambridge, Massachusetts, Los Angeles and San Francisco.
Cost Savings
And he's hoping to transfer cost-saving methods at People's Market to his standard-format stores, which also operate under Alfalfa's Market and Sunshine Grocery banners. ''It taught us to be more aggressive in terms of purchasing,'' he said. ''We buy everything in that store either by the pallet or by the truckload.'' With no-frills displays and self-serve prepared foods, People's Market is also holding down labor costs, he said.
The company is good at taking out costs, Raju said, and its comparable-store sales -- those at stores open at least one year. |
