Monday, June 23, 2008

Retail Memo: Whole Foods Market, Inc.'s Plans For its First of the Format 'Whole Foods Express' Small-Format Market in Boulder, Colorado On Hold

Whole Foods Market, Inc.'s plans to convert the Wild Oats natural foods market at 2584 Baseline Road in Boulder, Colorado, Wild Oats' former corporate headquarters town, into the first store of its Whole Foods Express small-format, fresh foods-centric natural and organic foods format store has been put on hold, Natural~Specialty Foods Memo has learned.

As we reported last year and updated throughout this year, Whole Foods' has planned to have the Whole Foods Express market in the converted Wild Oats' store open by the end of this year, possibly as early as late summer. However, the lease on the Wild Oats market building is coming due, and Whole Foods is currently in negotiations with the landlord of the building, which is located in Boulder's Basemar Shopping Center, over the terms of a lease extension, according to Will Paradise, Whole Foods Market, Inc.'s Rocky Mountain region president.

A spokesperson for the landlord would only say the lease discussions are ongoing and that no agreement has been reached as of yet.

When Whole Foods acquired Boulder-based Wild Oats Markets, Inc. last year, it inherited a number of Wild Oats banner and owned natural foods markets in the hometown city. These stores include: A Wild Oats store at 1651 Broadway; a Wild Oats Natural Foods Marketplace (a larger store) at 303 Marshall Road in nearby Superior, Colorado; the Wild Oats banner store at 2584 Baseline in the Basemar Shopping Center (the one set to be turned into the Whole Foods Express store); and Ideal Market (at 1275 Alpine Avenue), a Wild Oats'-owned store it bought from a local independent many years ago but retained the name because the store and the store name have historic significance in Boulder.

Whole Foods is currently remodeling Ideal Market, and will keep the name, according to Paradise. The remodeled historic boulder store is set to open in August, paradise says.

The supernatural foods retailer converted the larger former Wild Oats Natural Marketplace store into a Whole Foods Market banner store in January.

Another project coming up in Boulder is to remodel the Wild Oats store at 1651 Broadway. Whole Foods has a unique plan for this store, which is to completely remodel it and rename it Alfalfa's, which was the popular Boulder-based natural foods store chain Wild Oats acquired in the late 1990's, according to Rocky Mountain region president Will Paradise. Wild Oats renamed all the Alfalfa's stores Wild Oats.

It's doubtful Whole Foods is attempting to create a new national, or even regional, banner by bringing back the Alfalfa's name, although they might use it to a limited extent elsewhere in the Rocky Mountain region.

Rather, Whole Foods has approached the Rocky Mountain region, and especially Wild Oats' hometown of Boulder, Colorado, in a unique way because of its history of being where the no longer Wild Oats Markets, Inc. was founded, along with the fact Whole Foods inherited numerous stores in the city.

Prior to the Wild Oats acquisition-merger, Whole Foods had only one Whole Foods Market in Boulder. That store, which is located on Pearl Street in the city, still remains open along with the others mentioned above. Whole Foods has plans to enlarge and remodel that store as well. Plans are to have the project completed by late 2010 or early 2111, according to Paradise.

Meanwhile, with the lease negotiations for the Wild Oats building, which is set to be converted to the first of the format Whole Foods Express, still in progress, it appears the conversion of the store into the new fresh, prepared foods-focused 15,000 -to- 20,000 square foot natural and organic small-format food store is in limbo at present.

Since Whole Foods has had problems arriving at the lease extension terms with the landlord thus far, the retailer has yet to begin converting and remodeling the store to the Whole Foods Express format. Therefore, it's unlikely that even if the parties agreed on the terms of a lease extension this week, it would be possible for Whole Foods to open the Express store this year.

The supernatural foods retailer hasn't given up on or shelved the Whole Foods Express format though, according to Paradise. Rather, it's a lease extension issue on the Wild oats store building, not a format issue.

Converting the store into the Express format though is key to Whole Foods' Boulder strategy, which is to have two Whole Foods banner stores, one Alfalfa's (which will have some format differences as well), one Ideal Market (which is a bit different format than a Whole Foods market), and the Whole Foods Express small-format combination fresh, prepared foods and natural foods market.

If the lease negotiations fall through, it's likely Whole Foods would close the Basemar Shopping Center Wild Oats banner store.

The conversion of the Basemar Shopping Center store also is important in that it will be Whole Foods' first Whole Foods Express format store and thus a model for any others the retailer might want to open in other parts of the U.S.

It also would spell Whole Foods Market, Inc.'s introduction into what Natural~Specialty Foods Memo calls the small-format food retailing revolution currently going on in the U.S. and internationally--with players like Trader Joe's, Tesco's Fresh & Easy, Aldi, SuperValu's Sav-A-Lot, Safeway's "The Market" format and numerous others all leading the charge in America.

We will report on any new developments regarding the lease negotiations between Whole Foods Market, Inc. Rocky Mountain region and the Basemar Shopping center Wild Oats store's landlord as information becomes available. At present though, it's our best analysis that it's unlikely the Whole Foods Express store will be able to open at the Boulder location this year.

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