Natural selection among grocers
After shopping at conventional stores for decades, Patricia Gonzales has switched to “natural” and organic food.
The Pasadena grandmother worries about serving her family anything genetically modified or grown with chemicals, pesticides and hormones.
“I don’t shop at Ralphs or Vons anymore. I like Whole Foods because they don’t put anything on the shelves that’s not good for you,” she said after a recent trip to the store on East Foothill Boulevard in Pasadena.
Starting next week, Gonzales and shoppers like her will have a bevy of new options.
Whole Foods Markets Inc. is opening a two-story emporium on Arroyo Parkway in Pasadena on Wednesday that will be its largest store west of the Rockies. More than 50% larger than a typical Ralphs or Vons grocery, it will include a wine and tapas lounge, a massage room, an in-house fresh jam and jelly center, a sandwich bar and a seafood counter serving ceviche and shrimp cocktails.
A day later, British retailer Tesco will launch its U.S. chain of small Fresh & Easy Neighborhood Market stores with six Southern California branches. About 75 more are to follow locally over the next year.
In stores the size of a typical Trader Joe’s, Tesco said, it will offer a California-oriented blend of prepared foods, fresh (and often organic) fruits and vegetables, and wine. It’s aiming for in-and-out service akin to convenience stores.
And on the following Sunday, Sprouts Farmers Market, a Phoenix-based purveyor of “natural” and organic food, will open a store in Irvine, its third in the region. Additional stores are planned for Tustin and Seal Beach next year.
“We need to be in California because when you look at the demographics, that’s where the large concentration of customers we attract live,” Sprouts spokeswoman Patti Milligan said.
Their traditional competitors are not standing idly by. Ralphs now has 44 Fresh Fare stores that sell more gourmet wines and meats as well as heirloom tomatoes and other produce once found mainly at farmers markets. Vons owner Safeway Inc. now pitches its own “O Organics” brand and a greater selection of prepared food. Stater Bros. recently added 120 products from the Full Circle brand of “natural” and organic goods.
“People don’t need to drive 15 miles for organic orange juice anymore,” acknowledges Michael Besancon, president of Whole Foods’ southern Pacific region.
Although the new stores mean more competition, experts don’t expect them to set off a price war.
Ron Burkle, the Los Angeles businessman who made more than $2 billion buying and selling supermarket chains such as Ralphs, Alpha Beta, Fred Meyer Inc. and Food4Less, said the new players weren’t appealing to the budget-minded.
“Most people look at grocery shopping as a chore,” Burkle said. “Whole Foods is trying to redefine grocery shopping as a fun lifestyle experience. Tesco is trying to redefine convenience.”
Whole Foods, Fresh & Easy and Sprouts are all going after shoppers such as Erik Sandberg, a 31-year-old freelance illustrator from Pasadena who once lived on a steady diet of mini-mart hot dogs and beer. But then an ex-girlfriend gave him advice that turned his culinary life around.
“She told me what I was eating was going to kill me and turned me on to Whole Foods,” Sandberg said.
Sandberg is hardly alone. Organic food sales are expected to grow 20% this year to more than $20 billion, according to the Organic Trade Assn. in Greenfield, Mass.
Although Whole Foods, Sprouts and Fresh & Easy are building their brands around healthy fare, they don’t exclusively sell organic food. And they offer up plenty of items that could never masquerade as health food.
Whole Foods’ new store in Pasadena is an example of everything from the organic to the indulgent.
A key component of an aggressive Southern California expansion plan by the Austin, Texas-based company, the two-story building fills an entire block and has a quasi-industrial look of red brick, corrugated steel and glass panels. Its 300-space parking lot is below the store.
Shoppers will enter through a 6,000-square-foot produce department stocked with 500 items and a juice bar.
“We are a fresh-food market, and this gives people the concept of fresh when they enter,” Besancon said.
Health products, the massage room and 18 check stands fill up the remaining first-floor space.
A “carveyor” moves shopping carts between the first and second floors and runs parallel to the escalator.
The second level is essentially an upscale food court with Korean barbecue, vegetarian foods cooked to order, a meat carving station, sushi, organic sake and beer. Shoppers can eat in a sit-down area or proceed to browse the large wine department, butcher shop and the packaged goods aisles.
Big stores in dense urban areas such as Manhattan and London have helped Whole Foods ring up a 7% increase in comparable-store sales this year, an important measure of financial health. The figure, which represents sales at a company’s stores that have been open at least a year, is well above the 3% to 5% growth rate among conventional grocers, said Andrew Wolf, an analyst at BB&T; Capital Markets in Richmond, Va. But the format has fared less well in the Midwest and won’t be a competition killer in every market, he said.
Whole Foods must also contend with its reputation for high prices; it’s been nicknamed Whole Paycheck by some shoppers.
Rosanna Skupinsky, whose job is to place music in movies and television shows, works at an office near the Whole Foods on Foothill. She said she liked to eat lunch at the store “because of the healthy options.” But when she goes grocery shopping, she heads to Trader Joe’s, which she believes charges less.
Besancon disputed the idea that Whole Foods is overpriced.
“Look at our 365 brand. If you come here on a budget, you can leave with the best natural food in your basket,” he said as he walked down the pasta aisle in the soon-to-be-opened Pasadena store.
“We have 12 feet of pasta sauce here. It starts at $1.99 and goes up from there.”
Trader Joe’s sells a similar-size jar of house-brand pasta sauce for $1.49. The Prego brand at Ralphs is $3.49. Over in produce, a 6-ounce basket of raspberries sold for $2.99 at Whole Foods this week, the same price per ounce as at Trader Joe’s and $1 less than the identical-size package at Ralphs. A 1-pound box of saltine crackers was selling for $2.49 at Whole Foods and $2.99 at Ralphs; none were available at Trader Joe’s.
Still, Besancon said, shoppers shouldn’t be surprised to find some goods that are more expensive at Whole Foods. It reflects the added cost of producing “natural” and organic products, as well as the large selection of foods, he said.
Whole Foods devotees don’t object.
“I know it costs more than other stores,” said Milt Richardson, a retired lithographer from Altadena. “But the pork chops are fabulous.”