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Whole Foods Losing "Staggering" Amount of Traffic

By NexChange
Capital Markets

Whole Foods is bleeding customer traffic at a rate that a Barclay’s analyst calls “staggering,” as the high-end grocery chain faces increasingly stiff competition from its competitors, most significantly Kroger, as Business Insider reports (via Grub Street).

The declining customer base for Whole Foods, considered one of the pioneers of bringing organic food to the masses, has been an ongoing concern for the Austin, Texas-based company. And now Barclay’s analyst Karen Short says the grocery chain’s traffic has dropped by 3 percent.

“A 3% traffic decline may not seem like much, but this equates to 14 [million] customers,” Short writes.

Short adds that if each of these customers bought between $30-$50 per trip to Whole Foods, that would translate to about a loss of $9 million to $15 million in annual transactions for Whole Foods. Given its “meaningful overlap” with Whole Foods, Kroger “is likely a direct beneficiary” of these losses, according to Short.

In explaining how Kroger has benefited from Whole Foods’ struggles, Short points to the $16 billion in organic food sales that Kroger had in 2016, compared to $15.8 million for Whole Foods. One caveat here: As Grub Street notes, “Kroger has 2,796 locations and Whole Foods has 462, but still.”

Business Insider explains how Kroger has made aggressive inroads on Whole Foods’ market by ramping up its organic food offering at cheaper prices.

Kroger — a conventional grocer not known for organic offerings — has not historically been regarded as a significant threat to Whole Foods.

But in recent years Kroger has ramped up its supply of organic foods in a bid to steal market share from Whole Foods and other niche grocers such as Sprouts Farmers Market and Fresh Market.

Kroger now devotes several aisles in its stores to organic and natural foods and offers a variety of organic meat and fresh produce. The chain has its own line of organic goods under the “Simple Truth” brand, and it’s prices are about 15% cheaper than Whole Foods’ prices, according to a study last year.

Whole Foods has responded to the increased competition by offering more affordable organic food through its 365 brand. The company’s stock has plunged 11% over the past 12 months.

Photo: Getty Images

 

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