Alisa Fleming, February 2007 ~ Whole Foods has announced that they plan to purchase rival Wild Oats Market. It isn’t a major surprise to see the country’s largest natural food retailer gobble up their number two competitor. Especially as their slowing growth could benefit from the positive momentum that the Wild Oat’s family of stores has been experiencing.
In fact, Whole Foods has a huge opportunity to benefit from this merger in many ways. Though many Wild Oats and Whole Foods stores are in common cities and regions, Wild Oats seems to pursue lower rent neighborhoods, which are rarely occupied by the big block Whole Foods stores. Strategically, it may permit them to gain a bigger piece of the pie in neighborhoods where they lack presence. In addition, the buyout should allow Whole Foods to utilize their already existing distribution network to reduce costs across the board. Unfortunately, it is also probable that they will reduce costs if they merge workforces and layoff any duplicate employees. Nonetheless, reduced costs and a bigger market share will increase their staying power against the new natural food aisles popping up in traditional grocers.
But, investor relations aside, I can’t help but wonder, how will this merger effect consumers?
I have been a Wild Oats customer for several years. Beyond whole foods, they sell many hard to find products for special diets and food allergies. I have had the pleasure of shopping Capers (in British Columbia), Henry’s Markets (in Southern California), and several of the Wild Oats namesake stores. Some people may be taken back by natural food prices at first, yet I have been very pleased with the quality, service, and competitiveness of Wild Oats.
Wild Oats has followed an admirable path in their pursuit of growth. When they purchased grocer chains such as Henry’s Market and Capers they made very few changes to the stores, at least from a consumer perspective. The same cheap produce, weekly sales, and friendly staff seemed to be on hand, even after the mergers. It is wonderful to walk out with two grocery bags full of fruits and vegetables for just $10, and to stock up on my favorite milk alternatives when they are on sale for just $1.00 to $1.50 a piece. Will Whole Foods follow Wild Oat’s purchasing strategy, or are my sale shopping days numbered?
Unfortunately, I have never had these pleasant experiences with Whole Foods. Their stores are beautiful, the food looks incredible, but their prices could eat up an entire week’s paycheck in a single trip to the store! Okay, I exaggerate (slightly), but even their conventional produce is typically priced at double the market value. To add insult to injury, Whole Food’s idea of a sale is marking five products down to a reasonable (but not good) price for an entire month. The insane (and rather unfriendly) crowds combined with an understaffed crew have also deterred me from shopping at Whole Foods on many occasions.
I would hope that the efficientizing of the Whole Foods / Wild Oats Network would result in lower prices for the consumer. Yet, investors’ demands for higher returns may push the company towards profits rather than price cuts. With luck, Whole Foods will at the very least, leave well enough alone, allowing the Wild Oats family of stores to operate as is, while they reduce costs on the back end.