Grocery industry growing organic
The Whole Foods supermarket at Colonie Center was bustling Monday, its novelty still strong after last week’s grand opening.
Knots of shopping carts made maneuvering the store tricky, especially in the produce aisles and at the bakery. The salad bar and nearby grab-and-go section were crowded, too, no doubt a new lunch stop for Wolf Road’s many office workers.
Whole Foods, the chain, is part of a segment of the grocery industry called “fresh format,” a niche popular with consumers for its focus on natural, organic, ethnic and, of course, top-quality fresh products. The segment also includes The Fresh Market, which added a second Capital Region supermarket in May in Saratoga Springs.
The category’s numbers may be small — passing just 1,000 stores nationwide last year — but its sales grew a respectable 10.4 percent in 2013 to $14 billion, according to Willard Bishop, a suburban Chicago retail consulting firm. That’s just a sliver of the overall $1.1 trillion spent on groceries last year in venues that include traditional supermarkets, convenience and drug stores, supercenters, wholesale clubs and dollar stores, Willard Bishop said in its latest report on food retailing.
But the consultant predicts “swift growth” in the fresh format over the next five years, reaching 1,700 stores and $26.9 billion in annual sales by 2018.
That is, unless another segment of sellers gets in the way.
Last Wednesday, on the day Whole Foods’ Colonie store opened, Willard Bishop held a webinar on trends in the industry, coinciding with the release of its annual report, “The Future of Food Retailing.” Looking back over 2013, partner Jim Hertel talked about how traditional supermarkets — the likes of Hannaford, Price Chopper and ShopRite — continued to be “challenged” to maintain the foot traffic they enjoyed for so many years, now that groceries can be bought almost anywhere. And players like Whole Foods can be especially competitive when they pile on new stores and sales at the rapid pace seen last year, he said.
But while the fresh format has enjoyed a unique focus, others are ready to elbow their way in. Hertel said the stores “will be facing headwinds going forward,” challenged in kind by traditional supermarkets and the big supercenters.
He noted that Walmart, part of the latter category, is looking to capture some of the organic market by stocking the Wild Oats brand. Closer to home, ShopRite devotes a couple of aisles in its stores to organic and natural products, and Price Chopper, at its new Market Bistro prototype in Latham, reimagined supermarket shopping by adding a food court of fresh and prepared foods to an expansive selection of meat, produce and groceries.
After the webinar, Hertel told me the changes were having some impact. As more grocers embrace natural and organic, “it makes standing out and sustaining price premiums more difficult for the pure-play N&O retailers,” he said.