Tuesday, October 21, 2008

Retail Memo: Natural Grocers Joining Sunflower Farmers Market in Opening First Stores in Whole Foods Market's Home City of Austin, Texas USA

Fast-growing Lakewood, Colorado-based Natural Grocers by Vitamin College plans to open its first natural foods and products store in Austin, Texas USA, the city where Whole Foods Market, Inc. was founded, is headquartered, and operates numerous natural foods supermarkets. The store will be located at 39th and Guadalupe streets in the hip Texas city who's residents have a strong appetite for natural foods.

The Austin, Texas store, which Natural Grocers says is scheduled to open in January, 2009, will be the natural grocer's first Austin unit and its third store in Texas. Currently there is one Natural Grocers store in Dallas, at 7515 Campbell Road, which opened just last month. A second store is scheduled to open next month in Amarillo.

At about 11,000 square feet, the Austin Natural Grocers market is far smaller than the typical new Whole Foods Market store.

However, it's not much smaller than the small-format natural foods stores being opened by two other fast-growing chain's -- Sunflower Farmers Market and Sprouts Farmers Market. The stores of these two natural products retailers average about 15,000 -to- 20,000 square feet. The Dallas Natural Grocers store that opened last month is about 14,000 square feet.

Sunflower Farmers Market also plans to soon open a store in Whole Foods Market's home city of Austin, joining Natural Grocers in its backyard invasion of Whole Foods' home turf. In June of this year, as we reported, Sunflower Farmers Market announced plans to open its first store at 1901 W. William Cannon Drive near the intersection of Manchaca Road. We also reported Sunflower said at the time it plans at least three stores in the Austin area.

Natural Grocers also says it plans to open at least two more stores in Austin if the first store performs well. Those stores would be in the city's Arboretum area and in South Austin, according to Kemper Isley, who is the co-president of Natural Grocers by Vitamin Cottage.

Asked why the retailer is going to locate a store right in the heart of Whole Foods country, Isley says "Austin's demographics fit well with the company's model of a traditional natural foods store." He also says he's not concerned about going into the backyard of Austin-based Whole Foods Market, Inc.

The Austin Natural Grocers' store will be located across the street from Central Market, the upscale natural-specialty format banner of 310-store Texas-based food and grocery chain H.E. Butt (H-E-B). Central Market stores are popular in Texas. The markets feature lots of natural, organic, specialty, gourmet, international and fresh, prepared foods in an upscale setting.

"We've always considered ourselves synergistic with Whole Foods and I think we’ll be the same way with Central Market," says Isely.

In other words, Natural Grocers by Vitamin Cottage believes being located across the street from the Central Market and not to far away from a Whole Foods Market unit in Austin will actually help the store's sales rather than hurt them. At least the Colorado-based natural retailer is betting on that premise.

The Natural Grocers' stores are a bit more traditional or orthodox natural foods markets.

For example, the stores offer only organic produce items, no conventionally grown. Additionally, The company's product ingredient standards tend to be stricter than those of Whole Foods Market and other chain natural products retailers. The stores also put a heavy emphasis on selling natural supplements, devoting about 20% of the store's square footage to the category.

Natural Grocers' stores are modern though. In addition to selling natural and organic food, grocery and non-foods products, the stores also offer specialty and gourmet items as long as those products meet its standards, for example. The store design also is modernistic in look and approach.

Like Sunflower Farmers Market and Sprouts Farmers Market, Natural Grocers puts an emphasise on price, trying to offer everyday retail prices lower than those at Whole Foods' stores and other competitors.

Natural Grocers by Vitamin Cottage currently has 28 stores. All but three of the stores -- the current Texas store open in Dallas and stores in Santa Fe and Albuquerque, New Mexico, -- are in Colorado.

But like Sunflower Farmers Market and Sprouts Farmers Market, Natural Grocers is in a fast-growth mode. Company co-president Isely says the natural products retailer is looking at four locations in North Texas beyond its existing Dallas store and will look at other locations elsewhere around the state.

Additionally, he says the retailer is looking to potentially open stores in Utah, Wyoming, Arizona and Oklahoma. All four of these states would be brand new markets for Natural Grocers.

The retailer first ventured outside of its home base of Colorado in 2003, opening the two stores in nearby New Mexico. It wasn't until five years later that it opened its first store in a third state outside of Colorado, opening the Dallas last month. Now another store follows in Austin in January, 2009 -- and Natural Grocers' store count and new market growth appears to be in rapid-development gear.

Related Stories from Natural~Specialty Foods Memo:

>October 19, 2008: Retail Memo: First Two Sprouts Farmers Market Stores Sprout in Colorado; Another Challenge to What The FTC Says is Whole Foods' Category Hegemony

>October 21, 2008: Retail Memo: H-E-B Set to Open 127,900 Square Foot Hybrid Mega-Store in Houston, Texas Suburb; Aisles of Organics and Premium Delights

>Click here to read a selection of past posts about the FTC/Whole Foods-Wild Oats acquisition issue.

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