Dear Whole Foods: Millennials Have Always Wanted Value

Social conversations reveal that millennials want two things from their grocery stores: Natural foods and reasonable prices. Is Whole Foods listening?

 

From “Buy Goods, Not Bads” and “Hungry For Better” to “Great Prices, Check it Out”  — the bags at Whole Foods annotate the grocer’s evolution.

Whole Foods created a household name for itself by pioneering the ‘organic’ movement and promoting better health choices. But as the story goes, the disruptor has become the disrupted. In 2015, Costco beat Whole Foods in organic sales, and other big-box retailers and traditional grocery stores are similarly eating into Whole Foods’ lead in the organic, natural marketplace.

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And the new competition appears to be affecting Whole Foods’ bottom line.

Earlier this month, the Austin-based grocer’s earnings projected its worst performance in a decade, with falling store sales for six consecutive quarters and nine impending store closures. But this isn’t necessarily a new trend — in 2015, same-store sales plummeted 2.5% and the company’s stock fell by 34%.

But the company has a plan. Whole Foods is trying to correct the course and respond to consumer concerns by launching ‘365,’ a segment of smaller stores offering cheaper private-label groceries to win back organic-loving consumers of today: Millennials.

And, to start, this means trying to change their image as an expensive grocery option.

Whole Paycheck?

“No question, they’re trying to change that ‘Whole Paycheck’ buzz.  They glamorized organic food and succeeded in tapping into an upscale market, but they have a reputation for being expensive, and that’s been a challenge,” an industry analyst told Bloomberg News.

And rightly so, studies show that millennials are the biggest organic-buying group of consumers. Millennial parents account for 52% of organic buyers who contributed the lion’s share of the record $43.3 billion organic sales in 2015.

The company didn’t have to go very far to learn this. A little social listening of consumer sentiment would have thrown up these insights — but better late than never, right?

Looking at conversation volume, it appears so. Whole Foods beat its rivals by a landslide in conversation volume in the 18-34 age category, which happens to be the store’s new target audience.

However, as you move down the list, it is interesting to note that the other grocery stores run the gamut from organic-focused brands (like Sprouts and Wegman’s) to value-focused grocers (like Walmart and Market Basket).

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While it still holds its reputation of being the healthy, organic grocer, Whole Foods fell off the ranks when it came to affordability. Consumers brought this beef about prices onto social media early on. The bulk of social media conversations about grocery stores were grievances of unaffordability combined with lack of healthy food, mostly from millennials and skewing female.

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Maybe Whole Foods wasn’t listening, but competitors were. Big box retailers like Wal-Mart and Costco jumped on the organic bandwagon and seem to be enjoying the ride. Wal-Mart doubled its sale of locally grown produce between 2009-2015 to $825 million, from $404 million and that number will hover around $1.65 billion by 2025. And, as we mentioned earlier, Costco now tops Whole Foods in organic sales.

Clearly, there is a growing market of budget-conscious millennials who want affordable, healthy options from grocery stores. Will the organic-food giant be successful? Will other brands continue to eat away at the organic pie? No one knows for sure, but one thing is clear: social media will continue to offer us the best window into the minds consumers, and their changing preferences about organic groceries.

This is a part of the series on US consumer trends in Food and Wellness. In the coming weeks, we will explore trends in food delivery, dining out and exercise.

Review the Health & Wellness analysis on US Consumer Trends for more detail.

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