Is Whole Foods’ approach healthy?

For a company whose main selling points are healthy living and environmental friendliness, Whole Foods Market Inc.’s huge new store in Pasadena seems dedicated first and foremost to excess.

The two-story, 77,000-square-foot emporium is like a Disneyland for foodies. From the upstairs wine and tapas lounge to the downstairs massage room, this Whole Foods is all about indulgence, sprinkled liberally with a sense of self-satisfaction for patronizing such an ostensibly “green” business.

Wandering from the store’s seafood bar to its “eco-chic” clothing section, I had to remind myself that I was in a supermarket and that, at heart, this was a place where people shop for groceries.

“Whole Foods is selling an experience,” said David Livingston, a supermarket consultant based in Wisconsin. “They’re selling a lifestyle. You go to Whole Foods and you know you’re someplace special.”

You also know you’re going to drop a hefty chunk of change for all that organic produce and free-range meat -- a matter that Whole Foods disputes but that regular shoppers know to be all too true.

Don’t get me wrong. I’m not here to dis Whole Foods or smirk at its eco-happy image. This is a company that clearly knows what its customers want and does an impressive job of providing it to them.

Last month, Whole Foods reported a nearly 25% increase in quarterly sales to $1.7 billion, although profit slipped to $33.9 million from $39.8 million a year earlier because of the company’s acquisition of rival Wild Oats Markets Inc.

For the coming year, Whole Foods is predicting a sales increase of as much as 30%.

The new Pasadena store, which joins other recently opened “larger format” branches in El Segundo and Tustin, suggests grander plans for the Austin, Texas-based chain. It seems almost as if Whole Foods is looking to none other than Wal-Mart Stores Inc. and its armada of discount superstores for inspiration.

The big difference, though, is that Wal-Mart uses its volume-driven market clout to bring lower prices to customers. Whole Foods, catering to a more affluent demographic, is focused instead on making people more comfortable while they shop for pricey produce and additive-free fare.

For a chain predicated on the notion that healthy ingredients make for healthy meals, Whole Foods also seems determined to get people out of the kitchen and eating the company’s costlier prepared foods.

It’s telling that more space is devoted to prepared foods and other goodies at the Pasadena store than to produce.

Nearly all customers I chatted with at the Pasadena store said the prices were the one aspect of shopping at Whole Foods they didn’t like. Yet every one of them said that didn’t deter them from patronizing the place.

“Nothing justifies these prices,” said Pasadena resident Joe Reisz, 31, who was on his way upstairs to get some lunch. “But if I can’t buy what I want anywhere else, I’ll keep coming here.”

L.A. resident Elda Boyce, 55, said that even Whole Foods’ reputation for quality didn’t justify the price points. But she still likes being at the store.

“It’s like entertainment,” she said. “There’s a whole vibe here.”

That’s precisely what Whole Foods is offering, said Livingston, the supermarket consultant.

“It’s almost a status symbol to shop at Whole Foods,” he said. “People want to be seen there.”

And that foodie fashion statement doesn’t come cheap. Analysts say Whole Foods enjoys a roughly 6% pretax profit margin, whereas the margin at traditional supermarkets is closer to 3.5%.

“They charge a premium, and people are willing to pay it,” observed Mike Griswold, research director at AMR Research. “They’ve conditioned the market to believe that if you want high-quality natural foods, you have to pay more for it.”

So do you get more bang for your buck at Whole Foods?

“Personally, I would say no,” Livingston answered. “I don’t see any appreciable difference in quality. A lot of their customers are simply buying into the company’s image.”

Michael Besancon, Whole Foods’ Southern Pacific regional president, countered that the proof’s in the pudding -- customers wouldn’t return if they weren’t satisfied.

“No one will tell you that going into a conventional grocery store is something they relish,” he said. “We’re trying to find ways to draw you in.”

Besancon said Whole Foods was deliberate in creating a retail environment that is as much a lifestyle experience as it is a trip to the store.

“All these other things for sale are the accents to completion of the total experience,” he said.

Besancon also bristled at the suggestion that a visit to Whole Foods will cost you an arm and a leg -- the “Whole Paycheck” thing that he said drives him nuts.

“The criticism is not valid,” Besancon declared, noting that for every high-priced brand sold at Whole Foods, there’s almost certainly another brand that can go toe-to-toe with pricing at traditional markets.

That is, if you’re shopping for bargain-priced goods, which most Whole Foods customers aren’t.

As for the future, Livingston said he saw Whole Foods and its ilk -- Gelson’s Markets, Fresh & Easy, etc. -- increasingly dominating the higher end of the economic food chain, with Wal-Mart and other big boxes overshadowing the lower end.

The squeeze will come in the middle.

“We’re seeing a slow extinction of traditional supermarkets,” Livingston said. “Gradually, you’ll see the likes of Safeway, Ralphs and Vons closing.”

After that, he predicted, Whole Foods and Wal-Mart will meet somewhere near the center as the former heads down-market and the latter heads upward.

Whole-Mart? Wal-Foods? I’m not sure about that particular vibe.

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Consumer Confidential runs Wednesdays and Sundays.

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