Supervalu Inc.'s 15,000 square foot Sunflower Market (pictured above) is one of the two small format, price-impact natural foods stores we believe has the potential to be a real player in the natural and organic foods "category killer" retailing segment. The format is no-frills but extremely attractive in design.
Boulder, Colorado-based Sunflower Farmers Markets is the other small format, no-frills, price-impact natural foods retailer we believe has the potential to create a serious impact in natural products retailing with its 20,000 to 25,000 square foot stores.
We aren't suggesting Whole Foods Market, Inc. is in any imminent--or even long-term for that matter--danger of failure. What we are suggesting is that we're seeing the beginnings of a small format, price-impact movement in the natural and organic food retailing niche similar to what is happening in conventional food retailing. The scale is much smaller, the players fewer and they're not nearly as large in size and scope overall. However, we believe the natural and organic foods category killer concept and format is real. And, with 100-plus stores combined between the two "Sunflower" chains in as little as five years, they're going to take a nice chunk of category market share.
The prime drivers of this phenomenon are the super growth of the natural and organic categories, a lack of price reductions by existing retailers to reflect that growth, and a desire on the part of many consumers for faster, more convenient stores to shop in. If you combine these key trends, a small format, no frills, price-impact store focusing on the natural and organic categories makes much sense--and has huge growth potential.
Obviously, Supervalu's Sunflower Market and Sunflower Farmers Market are both betting on that concept. Along side them are numerous conventional supermarket operators like those we mentioned in this piece and many others who are betting on the categories growth to drive their sales and profits. That's why they're investing in upscale, "Whole Foods-style" stores, creating and marketing extensive store brand natural and organic grocery lines, and positioning their stores more and more towards the natural products consumer.
Taken along with what's occurring in the small format revolution being led on the high-low end by Tesco--with it's Fresh & Easy Neighborhood Markets chain which has already opened about 30 stores in one month, with 200 to be opened by the end of next year--and German food retailer ALDI--which is opening up 100 of its small format, no-frills, price-impact stores a year for the next few years (on top of the 850 small format stores it already operates in the U.S.)--what Supervalu and Sunflower Farmers Markets are doing with small format store rapid growth plans further solidifies the reality of the small format food retailing revolution across all product retailing categories and types of positioning.
In fact, Whole Foods itself is getting into the small format food retailing game. Early next year it will open a prototype Whole Foods Express store in an old Wild Oats store building in Boulder, Colorado. The store will be about 15,000 to 20,000 square feet, and is said to offer a mix of grab-and-go prepared foods, a limited assortment of natural and organic groceries and perishables, and other convenient offerings.
By the way, we don't believe the Whole Foods Express format will be a natural/organic category killer, but stranger things can happen. And, if the grocer's new Whole Foods Express format did turn out to be a natural and organic foods category killer, that would make things really interesting.