Nearly one year after its acquisition from Whole Foods Market, Inc. by an independent but wholly-owned subsidiary of Southern California-based Smart & Final Inc., 30-store Henry's Farmers Market, which also is based in Southern California, seems to be getting its groove on as an independent identity despite not having the luxury of having the clout and buying power it previously had as a banner of Wild Oats Markets, Inc.
In fact, that independence seems to be liberating both in a innovation sense, as well as in an observational one, as Natural~Specialty Foods Memo recently toured some Southern California Henry's stores which looked far better than in the past, were better merchandised than under Wild Oats' ownership, and during the times we visited the stores had much higher customer counts than we observed in the same stores in the Wild Oats' ownership days.
Whole Foods acquired the 30-store Henry's Farmers Market banner as part of its all-stock acquisition/merger with Wild Oats last year. Soon after completing the merger, the supernatural food retailer sold Henry's to the subsidiary of Smart & Final, an operator of club-type food and grocery stores, created to buy it.
The Henry's stores are sort of a hybrid natural foods/basic grocery/specialty foods store and didn't fit Whole Foods' merchandising philosophy or plans about how it would integrate the Wild Oats' banner stores--plus it was a nice infusion of cash--so the grocer sold the operation to the Smart & Final subsidiary.
One of the improved departments of the Henry's stores we observed is the produce department. Once the signature departments in the stores--hence the Farmers Market in the name--in recent years the departments had become fairly mediocre both in how they looked and in the variety and quality of the fresh produce in them.
That's changed considerably under the newly independent Henry's organization. For example, we observed much more organic produce, much more variety, better merchandising, and a much fresher look overall in the departments in the stores we visited.
We also noticed a major emphasis on "locally-grown" produce, designated by colorful signs. In fact, local and organic produce procurement and merchandising is now a major principle of the Henry's chain, according to Janet Little, the head nutritionist for Henry's
Little says under Wild Oats' ownership, Henry's Farmers Market had only a partial organic produce program. The retailer's local produce program was almost non-existent because Wild Oats focused on growers who could supply the chain nationally at the best price. Therefore, local growers were basically not in the game.
That's changed however. Little says Henry's is now in the process of building a full organic and locally-grown fresh produce program for its stores and will be putting a major marketing and merchandising push on the nutritional benefits of locally-grown organic produce.
Natural~Specialty Foods Memo noticed both the local and organic produce programs taking root in the stores we visited.
The local produce emphasis should be a good one for Henry's, as one of its strengths has always been a feeling by its customers that it was a local store. This goes back to Henry's founding by the Boney family, who were Southern California natives who always put a hometown emphasis into the stores. Members of the Boney family now own Sprouts Farmers Market, which has become a competitor of Henry's in many of the same Southern California markets. The family sold Henry's to Wild Oats Markets, Inc.
Wild Oats never really seemed to know what to do with the Henry's Farmers Market stores. Originally, when Wild Oats bought the chain from the Boney family, the stores were natural foods stores with an emphasis on produce, sort of like Sprouts today. However, Wild Oats toyed around with the format, at one time even making them more of a basic grocery store, selling Tide laundry detergent and Bounty paper towels alongside organic granola.
This type of merchandising can work with a big supermarket like Safeway's Lifestyle format, but is hard to do with a smaller format store like Henry's, especially when its history and past success was as a natural foods and specialty market.
Henry's is sourcing much of its local produce from the San Diego region, which has become a major growing region for organic produce despite its urbanization. According to San Diego County, there are currently about 320 local organic growers producing around 150 different crops--ranging from organic oranges and grapes to avocados.
Sourcing much of its local and organic local produce from the San Diego region allows Henry's, which has all of its 30 stores in Southern California, to be "super local." The local foods or Locavore movement defines a local food as one that comes from no farther than 200 miles from where a consumer lives. All of the Henry's stores are within a 100 mile or closer distance from San Diego.
Of course, not all of the grocer's produce--conventional or organic--comes from the San Diego region. Much of it comes from California's Central Valley, which isn't much more than 200 miles away, and elsewhere like Central America in the case of bananas of course. But the local area it's an increasing source for Henry's local produce program, according to nutritionist Little.
Look for Henry's Farmers Markets to play up its organic and local produce program demonstrably in the months to come, both in-store and in its weekly advertising flyer.
Nutritionist Little, who is currently in training for her first triathlon, also has started leading store tours for customers, in which she gives the groups of shoppers an aisle-by-aisle nutritional seminar as they walk together throughout the store, with a special focus on fresh organic and locally-grown fruits and vegetables and the importance of eating at least five servings a day of them. She also has a blog on the Henry's Farmers Markets website where she offers nutritional tips and other related information.
The retailer also is trying to keep the retail prices of its local, conventional and organic produce as low as possible, something the grocer was known for doing in its "salad days." That's more difficult to do without Wild Oats' buying power. But the retailer also is finding that with the high cost of diesel fuel and gasoline, locally-grown produce actually is becoming less expensive than much of the fresh produce grown much farther away is.
Meanwhile, based on what we observed during the store tours, Henry's new independence is playing well both in how the stores look and how the employees feel. We noticed more friendly, smiling store workers than in past visits under Wild Oats' ownership, for example.
There's still much to do to get the stores looking as good as they can and should look. For example, we think the fresh meat departments need some attention. Additionally, the overall dry grocery category mix needs some evaluating, with some deletions and additions made to create a better and stronger category mix.
However, there's been a marked improvement in what's been less than a year since the Smart & Final subsidiary acquired Henry's Farmers Markets from Whole Foods Market, Inc. Even more positive, there seems to be an overall plan being carried out, which was lacking under Wild Oats' ownership in our analysis. There also seems to be a renewed spirit of teamwork to improve the stores, which is essential in food retailing.
By selling Henry's, Whole Foods just might have created a new competitor for itself in the Southern California Market, in what is so far looking to be an improving Henry's in numerous ways. That's what's great about mergers and acquisitions in many cases--a little creative destruction can lead to fresh new roots being planted in the food retailing soil.