Retail Memo: The 'Legal Times' Offers A Legal Legacy of the FTC-Whole Foods' Settlement Agreement; We Offer an Antitrust Case Blast From the Past

FTC v. Whole Foods Market, Inc. - Post Mortem

As regular readers of Natural~Specialty Foods Memo (NSFM) are aware, we've been reporting on and offering extensive analysis about the U.S. Federal Trade Commission (FTC) v. Whole Foods antitrust case, which ended on March 6, 2009 in a mutual settlement agreement signed off on by both the FTC and Whole Foods Market, Inc. [Regular and less than regular readers alike can click here to view a recent bibliography of our FTC v. Whole Foods Market, Inc. coverage.]

Potential FTC-Whole Foods settlement legal legacy

In today's Legal Times, a professional legal trade journal, writer Jenna Green has an interesting piece about the potential legal legacy of the FTC-Whole Foods Market, Inc. antitrust settlement, in which the FTC dropped its nearly two year attempt to overturn the 2007 acquisition of then Wild Oats Markets Inc. by Whole Foods, in return for Whole Foods Market, Inc. (the combined Whole Foods-Wild Oats) agreeing on March 6, 2009 to sell 13 current operating stores, 19 closed stores, and the Wild Oats brand and related intellectual property.

As we've written, the agreement is much ado about nothing, as the net result of it actually is to only force Whole Foods to sell the 13 existing operating stores.

The 19 closed stores are...well, already closed. Many were already on the market for sale prior to the March 6 settlement agreement.

And Whole Foods has essentially killed the Wild Oats brand since acquiring the company in 2007. Therefore, selling the brand and its related intellectual property, assuming a buyer even emerges, won't materially hurt Whole Foods, except that the natural grocery chain would most likely prefer to see the brand die rather than possibly get brought back to life by another food retailer.

But the Legal Times piece offers a look at the settlement agreement from more of an antitrust legal precedent perspective in that it suggests the divestiture agreement (selling the stores) between the FTC and Whole Foods could set an example for future deals.

Such agreements between government regulators and merging and acquiring food retailing chains aren't really new however.

An antitrust blast from the past: The American Stores - Lucky merger

For example, in a major case in California in the late 1980's, then state Attorney General John Van de Kamp held-up the post-acquisition integration of the Lucky Stores supermarket chain by then Salt Lake City, Utah-based American Stores Company (which was later acquired by then Boise, Idaho-based Albertsons, Inc., which was later acquired by Supervalu, Inc. and private equity firm Cerebus) until American Stores agreed to divest a number of its existing Alpha Beta and acquired Lucky stores in the state.

American Stores was at the time the third-largest supermarket chain in the U.S., after Kroger and Safeway.

A brief history: Right after the deal was announced, Van de Kamp asked the Federal Trade Commission to void it, claiming that a combined (over 400 stores in California) Lucky-Alpha Beta would cost California consumers $400 million by reducing competition. The FTC refused to void the deal, although it did force the divestiture of 37 Alpha Beta stores, which were sold in December 1988, the same month 38 Lucky stores in Arizona were also sold.

Van de Kamp then took his case to court, and on September 29, a federal judge in Los Angeles issued a preliminary injunction against the merger. American Stores appealed, and in April 1989, an appeals court judge in San Francisco overturned the injunction. Van de Kamp appealed this reversal to the U.S. Supreme Court.

In April, 1990 the U.S. Supreme Court ruled in favor of the California attorney general. Subsequently, and wishing to avoid additional, lengthy litigation, American Stores reached an agreement with Van de Kamp, whereby the company was allowed to convert 14 Alpha Beta stores to the Lucky name, but also had to sell--within five years--161 southern California stores -- 152 Alpha Beta markets and nine Lucky supermarkets.

Sound familiar? The difference though was that in the American Stores case there were real antitrust results in our analysis because (1) the combined Lucky-Alpha Beta stores gave American Stores Company too much of a supermarket concentration in California; and (2) the stores were supermarkets, where the majority of shoppers, especially in the late 1980's, bought there food.

The concentration therefore didn't offer consumers enough competitive choice in the market (California), although despite the merger there still was quite a bit of competition, mostly from Safeway and numerous regional chains and independents.

At the time, Lucky was the number two market share leader in Northern California, after Safeway. Alpha Beta was number two. The deal put the combined Alpha Beta and Safeway about tied for number one in Northern California, eliminating an independent number two, Lucky.

The combined Lucky and Alpha Beta placed as the number two market share leader in Southern California. Vons and Ralphs were prior to that numbers one and two. Lucky a very strong number three. Alpha Beta number four. The deal eliminated a strong, independent number three, Lucky.

We essentially agree with the U.S. Supreme Court and the California Attorney General on the merits of the American Stores-Lucky merger, although we would have been a bit less harsh on the number of stores the company was ultimately forced to sell. It was too many.

After the multi-year legal challenge and resulting store sell-off, American Stores never was able to get its footing back as a supermarket chain, despite its increased size. It eventually sold the company to then Boise, Idaho-based Albertsons, Inc., which also went away a couple years ago when Supervalu, Inc. and the private equity form Cerebus acquired it.

In an ironic twist, Cerebus bought what was then Albertsons' Northern California division in the Albertsons, Inc acquisition with Supervalu, Inc., which included all of the former Lucky banner supermarkets in that part of California. Albertsons had long before changed the name of the former Lucky stores to Albertsons. In 2007 Cerebus sold the division to Modesto, California-based Save Mart supermarkets. After operating the about 200 Northern California Albertsons stores for a number of months, Save Mart decided that rather than rebrand them as "Save Mart," which it originally planned to do, it would rebrand the Albertsons banner stores back to the old Lucky name, which is the banner they fly under today.

Whole Foods on the other hand is a niche retailer. And as we've argued, a combined Whole Foods-Wild Oats never presented any anti-competitive threat in 2007, or today.

Below (in italics) is the first part of the piece in today's Legal Times by Ms. Greene. After the text, just click the link to read the full story.

Having covered and written about FTC v. Whole Foods Market, Inc. extensively since the deal was announced in the summer of 2007 -- and still doing so in what we are calling our "post mortem pieces -- Natural!~Specialty Foods Memo (NSFM) suggests reading Ms. Greene's piece, as she does an excellent job detailing the antitrust legacy post settlement.

Whole Foods-Wild Oats Deal Leaves Controversial Legacy
By Jenna Greene
Legal Times
March 31, 2009

As corporate mergers go, the purchase of natural foods grocer Wild Oats by its rival Whole Foods Market looked like small potatoes (organic yellow fingerling, perhaps). Nobody expected the proposed $565 million acquisition to spark a food fight of epic proportions.

But on March 6 -- after two years, $28 million in legal fees and expenses, and dozens of lawyers -- Whole Foods cut a deal to end the battle. And the Federal Trade Commission carved another notch in its reputation for aggressive antitrust enforcement.

The most important result of the battle may be a controversial opinion out of the U.S. Court of Appeals for the D.C. Circuit that some fear will make it too easy for the FTC to effectively block future mergers. As one antitrust expert says, "so long as their lawyers don't get up there and fall asleep at the podium," the FTC wins. Less than a week after Whole Foods and the FTC settled, a $1.4 billion merger collapsed in part due to the D.C. Circuit opinion.

As for the dispute over merging grocery chains, it's not clear who actually won. The FTC, which snatched significant concessions from the jaws of initial defeat, asserts it came out on top. "Obviously, [the settlement] wasn't the maximum relief we could have obtained," says David Wales Jr., acting head of the FTC's Bureau of Competition, discussing the case at length for the first time. "But we feel it substantially restores competition and did so a lot sooner than if we had continued to litigate."

Whole Foods points out that the merger survived; it wasn't forced to unscramble all the eggs. "It was a settlement -- nobody got what they wanted," says lead lawyer Paul Denis, a partner in Dechert's D.C. office. "If everybody leaves unhappy, you must have gotten it right."

Still, agreeing to divestitures in the face of an antitrust agency's opposition looks a lot like business as usual. Why did Whole Foods spend so much money to reach that settlement? In retrospect, the company may have been too determined to go toe to toe with the FTC -- and caught off-guard by the FTC's similarly battle-ready approach.

GOING FROM 0 TO 60

When the merger between the two grocery chains was announced on Feb. 21, 2007, analysts' reaction was largely positive. UBS called it "a slam dunk," while Morningstar said it was "strategically and financially sound." No one, it seems, had any inkling of the antitrust train wreck ahead. Standard & Poor's was lukewarm on the deal for the opposite reason: The stores faced "increased competition from traditional grocers."

Whole Foods, which is based in Austin, Texas, didn't even start off with specialized antitrust counsel -- it used its M&A lawyer, Bruce Hallett of Dallas' Hallett & Perrin, to submit the required pre-merger notification, a 15-page form with information about each company's business. Whole Foods, with 194 stores, would buy Boulder, Colo.-based Wild Oats, which owned 110 stores total, 74 of them under the Wild Oats brand, for $18.50 per share of stock. The two chains were prime competitors in just 22 markets.

While the FTC and the Justice Department's Antitrust Division sometimes fight over which agency will review a merger for its potential effects on competition, supermarket mergers have always gone to the FTC.
"In the overwhelming majority of cases, it makes absolutely no difference which agency reviews a merger," says Ronald Wick, an antitrust partner at Baker Hostetler not involved in the case.

But as Whole Foods would soon discover, sometimes differences in the two agencies' statutory authority can prove crucial.

The filing was routed to the FTC Mergers IV group, which specializes in retail sector transactions. The deal, Wales says, "quickly jumped out as having potential overlap, potential competitive significance." A partner at Cadwalader, Wickersham & Taft before joining the FTC in 2006, Wales, 39, has been acting director of the Bureau of Competition since Jeffrey Schmidt left in August 2008.

A team quickly took shape. Mergers IV lawyers led by Assistant Director Matthew Reilly began gathering information, talking to the parties, their competitors, and their customers. Less than three weeks later, on March 13, 2007, the agency issued a second request for documents. "It was not a close call," Wales says.

Even before the second request was officially made, Whole Foods got the hint that trouble loomed. But in seeking experienced counsel, it still looked for a familiar firm. The company turned to antitrust lawyer Neil Imus and commercial litigator Alden Atkins, partners in the D.C. office of Houston-based Vinson & Elkins. Atkins had previously handled litigation for Whole Foods involving a store in Washington, D.C. Although Whole Foods would run the litigation, Wild Oats retained Clifford Aronson of New York's Skadden, Arps, Slate, Meagher & Flom.

If settlement with the FTC was desirable or even possible at that point, Whole Foods' lawyers had little time to explore the option. They were too busy fulfilling the second request. The companies turned over 16.5 million pages of material, one of the largest document productions in recent agency history. While once this would have meant 10,000 boxes stacked in a conference room, the data largely came on hard drives -- along with a computer virus. ("Obviously we didn't think they did it on purpose," Wales says). Dozens of FTC staff lawyers began their review.

Then on June 6, 2007, the FTC filed suit in U.S. District Court for the District of Columbia seeking a preliminary injunction to halt the merger. All five commissioners -- three Republicans, one Democrat, and one independent -- voted in favor of bringing the case.

[Click here to read the full story from today's Legal Times.]

[You can follow Natural~Specialty Foods Memo on Twitter.com at www.twitter.com/nsfoodsmemo.]

Store Brand - Private Label Memo: 'Big Score' At 'Big Y' Chain For Safeway's 'Eating Right' Healthy Foods Brand

Retailer Store Brands: Special Report

The family-owned, Springfield, Massachusetts-based Big Y supermarket chain is the first major food and grocery retailer in the U.S. to introduce and carry at least one of the two Safeway Stores, Inc. organic and healthy foods store brands -- "O' Organics" and "Eating Right" -- that the Pleasanton, California-based supermarket chain began marketing to other U.S. grocery retailers and wholesalers through its Lucerne Foods Inc. brands division last year, in its stores.

In Big Y's case, the popular supermarket chain is introducing numerous "Eating Right" brand healthy food and grocery items across multiple categories in its stores in New England.

Privately-held Big Y, which was founded in 1936 by Paul and Gerald D'Amour and was named after an intersection in Chicopee, Massachusetts where two roads converge to form a Y, currently operates 57 high volume supermarkets located in Massachusetts and Connecticut.

Among the Safeway Stores, Inc. "Eating Right" healthy food products being introduced this week at Big Y include: frozen entrees; cereal; soups; pasta; salad dressings; snack bars; cookies; and items in numerous other dry grocery and perishable categories, according to Carrie Taylor, Big Y's corporate dietitian, who's in charge of the supermarket chain's "Living Well Eating Smart" chainwide healthy foods program.

"With healthier eating a priority for many of our customers, we are pleased to bring new options to our shelves with the introduction of the 'Eating Right' brand at Big Y stores," Ms. Taylor says. "Our shoppers have long relied on us to meet all of their supermarket needs and with 'Eating Right' we're able to offer a great selection of functional and tasty products designed to help our customers reach their specific health objectives."

Safeway Stores Inc.'s Lucerne Foods, Inc. brand marketing division is handling the marketing of the "O 'Organics" and "Eating Right" brands to supermarket chains and wholesale grocers in the U.S. and globally.

There are currently 225 SKUS in 20 categories under the "Eating Right" brand, according to Alex Petrov, president of Safeway Stores' Lucerne Foods Inc. division.

Neither Big Y supermarkets nor Safeway Stores, Inc. is touting the fact that the "Eating Right" brand being introduced in the 57 Big Y supermarkets in Massachusetts and Connecticut is produced, owned and marketed by Safeway Stores, including the fact that the brand is a Safeway healthy foods store brand. Both are handling the introduction and marketing of the brand just as they would any other brand, regardless of its origin or ownership.

That's also why the marketing of the "Eating Right" brand to grocers like Big Y is being conducted by Safeway's Lucerne Foods Inc. division as a separate function from the store brand merchandising and marketing of the brand (and of "O' Organics") in Safeway's about 1,750 supermarkets in the U.S. and Canada. Safeway Stores, Inc. strategically views the brands not just as store brands, but as what the company hopes will become standalone organic and healthy food brands both in the U.S. and globally in the future.

Safeway doesn't operate any supermarkets in the New England states of Massachusetts or Connecticut where Big Y has its 57 supermarkets.

The closest states where Safeway has stores are in Washington, D.C., Maryland and Virgina.

This is an important distinction because in Big Y's case its customer base won't in most cases even be aware that the "Eating Right" brand items are a Safeway store brand, since there are no Safeway-owned supermarkets in the two states.

Our analysis is that Safeway will need to use this type of strategy to launch the two brands in the U.S., focusing on regional chains like Big Y which operate in markets where Safeway does not have a retailing presence.

For example, we don't see many retailers in the Western U.S., where Safeway is a major player and in many markets is the market share leader, carrying the "O Organics" and "Eating Right" brands because with little exception every retailer in the Western U.S. is a competitor of Safeway's.

Major competitor's like Kroger Co, Supervalue, Inc., Wal-Mart and Costco have their own organic and healthy store brands and aren't going to offer the store brands of a major competitor in their respective stores.

Major regional chains throughout the west also in many cases either have their own organic and healthy foods store brands or carry such private label brands through arrangements with a wholesaler. Additionally, since these regional chains are direct competitors with Safeway in states like California, Oregon, Washington, Colorado, Arizona and the like, they won't in all probability offer Safeway's "Eating Right" or "O Organics" store brands on their respective shelves either. It makes little sense for these chains to compete with Safeway on the brands.

We believe this will hold true in other parts of the U.S. where Safeway has a retail presence like the Washington D.C./Maryland/Virgina tri-state market region, Texas, Florida, Illinois-Indiana and Alaska, in addition to the Western U.S.

As a result, that's why we believe Safeway will have to conduct a niche retailer strategy, placing its "O Organics" and "Eating Right" brands in non-competitive, select chains primarily in parts of the U.S. where it isn't a retail player.

Natural~Specialty Foods Memo (NSFM) was one of the first, if not the very first, publication to report that Safeway Stores, Inc. was marketing its "O Organics" brand to another retailer, France's Carrefour (the world's third-largest global retailer) internationally, in the three stories from December, 2007, and the January 8, 2008 piece, linked below:

~December 27, 2007: Marketing Memo: Safeway's O' Organics Brand in Asia
~December 23, 2007: Safeway's O' Organics Brand: Part Duex
~December 21, 2007: Friday Fishwrap: Safeway's O' Organics Brand
~January 8, 2008: Media Memo: Safeway's O' Organics Brand In Asia

In April of 2008, we first reported in this piece [April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally] about Safeway's corporate plans to market its "O 'Organics" and "Eating Right" brands to other supermarket chains in the U.S.

Linked below are four related past pieces on the topic from Natural~Specialty Foods Memo (NSFM):

~August 6, 2008: Marketing Memo: Safeway's Challenge: Going From Store Brand Marketer to Consumer Brand Marketer With its O' Organics and Eating Right Brands
~April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally
~April 28, 2008: Retail Memo: Safeway CEO Burd Says Shoppers Buying Store Brands Over National Brands By As Much As Six -to- One in it's North American Supermarkets

Safeway's Lucern Foods, Inc. division isn't confirming or not confirming, but based on our reporting, sources and research, Springfield, Massachusetts-based Big Y appears to be the first U.S. supermarket chain that's agreed to carry one of the two Safeway brands, "O Organics" and "Eating Right." In Big Y's case, it's carrying the "Eating Right brand" only at present.

Big Y is a popular, high volume retailer in New England. As a result, landing the chain is a major niche retailer score for Safeway and its "Eating Right" brand, in our analysis.

Big Y also is a well-known regional chain in the trade. Safeway's landing of the chain for its "Eating Right" brand should create greater interest in the brand from similar retail chains in other parts of the U.S., particularly in market regions where Safeway doesn't operate supermarkets in.

We expect to see at least two more regional chains in the U.S. announce their respective plans to carry either just the "Eating Right" healthy foods brand or both the "Eating Right" and "O' Organics" brands from Safeway in the next couple months.

[Readers: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Store Brand - Private Label Memo: Cost Plus World Market Introducing A Spate of New 'World Market' Store Brand Items; We Report and Offer Analysis

Retailer Store Brands: Special Report

Specialty, natural-organic foods, beverage and import goods retailer Cost Plus World Market is introducing a number of new store brand natural-organic and specialty foods items under its "World Market" store brand into its stores.

The Oakland, California-based chain, which has nearly 300 stores located throughout the U.S., sells an eclectic mix of products in its stores, including: specialty and natural foods; beverages; wines and craft beers; confections; specialty coffees (consumables); bath and body care items; and various hard goods products like furniture; kitchen goods-gadgets; gifts and related household-oriented items; most of which are imported from throughout the world.

The new items Cost Plus is introducing under its "World Market" store brand include:

~A new, three-item line of all natural pasta sauces imported from Italy. The three varieties are Marinara, Tomato-Basil and Artichoke. The pasta sauces are in 16oz jars with the "World Market" store brand name featured at the top of the label. The country of origin, "Italy," also is plainly marked on the label.

~A new six-item line of organic pasta, also imported from Italy. The pasta line includes specialty cuts like Conchiglie and Strozzapreti. The pasta comes in 16oz clear packages. The word "organic" is on the package, highlighted in white on a red background.

~A new line of "World Market" all natural specialty salsa in five flavors: Three Bean & Corn, Southern Peach, Three Chili, Roasted Tomato and Roasted Tomatillo. The salsa line is in 16oz glass jars with a black lid.

~Two new varieties (line extension) of its "World Market" all natural Tortilla Chips. The two new varieties, in 12 oz bags, are Blue Corn with Flaxseed and Sweet & Spicy with Flaxseed.

~Four new flavors in its "World Market" 3oz all natural Premium Chocolate Bar line. The new flavors are: Chili & Lime Dark Chocolate, Chipotle Chili Dark Chocolate, plain Dark Chocolate and Toffee Caramel Milk Chocolate. There are now 12 varieties in the line. All have a high cocao content ranging from 64% -to- 99%. The chili and lime and chipotle chili varieties are part of a trend towards combining savory flavors with sweet in chocolate confections. We think you will see this trend grow among confection product producers and marketers.

Cost-Plus aggressively growing brand 'World Market'

Cost Plus World Market has been introducing new items under its store brand, along with extending existing lines with new SKUs aggressively since early last year.

For example, in mid-to-late 2008 the retailer introduced a 12-flavor line of pyramid-shaped organic tea bags under the "World Market" brand.

Additionally, in late 2008, Cost Plus introduced a new line of single-origin extra virgin olive oils. The three item line features extra virgin olive oil from a single country -- Italy, Spain and Greece -- in the bottle. The country of origin is clearly marked on the respective bottle.

Many extra virgin olive oils contain oils mixed from more than one country. Olive oil lovers often prefer single-origin oils. This is the consumer (foodies mostly) market Cost Plus is going after with the line. The retailer recently promoted the 750ml bottles of single-origin extra virgin olive oil for $7.99 each, a discount of about 30% over the regular shelf price.

Cost-Plus and consumables

Cost Plus stores devote a significant amount of floor space to specialty and natural foods items, both under the "World Market" brand and those marketed by domestic and international specialty and natural foods companies.

The stores also feature large wine and craft beer departments. Those departments also include non-alcoholic beverages like bottled waters, specialty sodas, new-age beverages and related drinks.

The stores also sell bulk and packaged specialty coffees, including a nine-variety line (24oz bags) under the "World Market" store brand.

Taken together, consumables comprise the largest overall percentage of category sales in the Cost Plus World Market stores.

More store brand items

The "World Market" store brand has increasingly been comprising more of the shelf space in the stores' food section. This is a part of the retailer's strategy to differentiate itself more in the specialty and natural-organic foods category as a retailer by offering and promoting its own brand.

Cost Plus has been struggling as a company for the last three or so years. In the last year things have been even tougher for the retailer because of the recession. A significant percentage of Cost Plus World Market's sales are in categories such as furniture, housewares and gifts, all items shoppers are buying much less of because of the bad economy.

Additionally, overall sales of specialty and natural foods are down as well because many consumers are trading-down and buying convention grocery products instead of specialty, natural and organic items in order to save money on their overall food bills.

As a way to fight this trend, Cost Plus has been promoting its store brand specialty, natural and organic items regularly, both in its weekly advertising circulars and in-store, reducing prices by 15% -to- 30% and sometimes more on the items.

The "World Market" items also are priced below similar manufacturers' brand specialty and natural foods items on the store shelves. By doing this Cost Plus is attempting to build sales of the store brand, which in many cases it obtains a higher gross margin on than it does the manufacturers' brands.

Like most retailers selling store brands, it also hopes to build consumer brand loyalty to the "World Market" brand, thus resulting in repeat trips to the stores, since the only place shoppers can buy the brand is at Cost Plus World Market.

Expect to see Cost Plus continue its aggressive store brand program, including more natural and organic items, both in the form of line extensions and completely new products.

store brand strategy and manufacturers brands

Of course, this strategy isn't so good for specialty and natural foods brand manufacturers-marketers, since there's only so much shelf space on the stores' shelves. Each time a new "World Market" store brand SKU or line is introduced that means room has to be made for the items on the shelf. That room most often comes from discontinuing manufacturers' items or reducing the number of shelf facings given to the items, as is the case with all retailers with store brands.

Additionally, since the store brand items are priced below competing manufacturers' brands, those brand marketers with like items in the Cost Plus stores are experiencing reduced sales, compared to say when there wasn't a competing "World Market" similar brand item on the shelves.

As an example, Cost Plus now merchandises a complete line of store brand spices and seasonings. Prior to completing the full line last year, specialty spice company Spice Hunter was the only full spice and seasonings line in the stores. This resulted in very high sales volume for the Spice Hunter brand at Cost Plus World Market. But now with a competing full spice and seasonings line under the "World Market" brand, the store brand items take sales away from Spice Hunter, as they do in each category in which the "World Market" brand competes with the various manufacturers' brands on the shelves, both domestic and imported.

More consumables' space: store and manufacturers' brands

Cost Plus would likely benefit right now from actually increasing the amount of square footage it devotes in its stores to consumables since few shoppers are buying much in the way of the other hard goods items the stores sell. Even though specialty and natural category sales are down because of the recession, consumers are still buying far more of the items than they are furniture, imported kitchen gadgets and exotic gift items from places like South America.

Perhaps more consumables in the form of both store brand and manufacturers' brand specialty, natural and organic, and even a few niche conventional items, might be the best way for Cost Plus World Market in helping it not only in the current recession, but overall as a way to reverse its fortunes. After all, the retailer was having trouble prior to the recession . Therefore the difficulty is more systemic than it is a result only of the current economic recession, although it is making the problems worse.

Perhaps an additional 1,000 square feet or so (the stores are about 20,000-30,000 square feet in size) devoted to consumables, taken from furniture, gifts and the like, in the Cost Plus stores would be part of the ticket to creating a more healthy Cost Plus World Market for the company? Based on the retailer's continued struggles, we think its worth a shot.

[Related past posts: January 28, 2008: Monday Marketing Memo: Cost-Plus World Market Restructuring: We Think Specialty Foods and Beverages Can be the Key to a Successful Repositioning ...July 25, 2008: Retail Field Report Memo: Specialty Retailer Cost Plus World Market Is At A Serious Crossroads: We Offer Analysis and Suggestions For Moving Forward]

[Natural~Specialty Foods Memo (NSFM) Editor's Note: Beginning today and over the next week NSFM will be offering extensive news, features and analysis on and about the fast-growing retailer store brand or private label movement. These stories can be indentfied by the header: Store Brand - Private Label Memo. Additionally, each of the pieces will have the sub title: Retailer Store Brands: Special Report.

The growth in conventional, natural, organic and specialty-premium store brands has been moving fast for about the last five years. The current economic recession has been and is increasing store brand or private label product development, marketing, merchandising and sales even more so. It's an important topic and issue. We plan to bring NSFM readers analysis and insight on the topic you can't read elsewhere. Stay tuned.

Read the first story in the special report series here: March 27, 2008: Store Brand - Private Label Memo: Store Brand Organic Products Gaining Prestege With Consumers Says New Study of What Shoppers Are Discussing Online.]

[You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Store Brand - Private Label Memo: Store Brand Organic Products Gaining Prestege With Consumers Says New Study of What Shoppers Are Discussing Online

Retailer Store Brands: Special Report

The introduction and aggressive marketing of high-quality retailer store brand organic products is leading to a change in consumer perceptions in a positive direction, according to a soon to be released research report called the J.D. Power & Associates Private Label Industry Report.

The report is from J.D. Power & Associates Web Intellegence Division, which conducts content analysis research using information from a variety of online sites and sources as a way to guage consumer attitudes and perceptions. Most people know J.D. Power for its industry ranking of automobile quality. However, it's a full service research firm which also focuses on consumer package goods in addition to other consumer products research.

Janet Eden-Harris, vice president of J.D. Power and Associates Web Intelligence Division, which is based in Westlake Village, California, offered a preview of the firm's research into consumer attitudes of store brand organic products this week at the IRI (Information Resources, Inc.) Summit in Las Vegas, Nevada.

She said the J.D. Power Web-based research project shows that consumer attitudes about many store brands have shifted in the last couple years. Rather than has has been the case in the past, in which generally store brands, including organics, have been considered by consumers to be of lower-quality, with a low-price focus (including poor packaging quality), private label brands, particularly store brand organics, are now being thought of as unique and as having quality commensurate with that of traditional manufacturer-marketer brands.

"It's clear that consumers have begun to discard the idea that private label brands are of lower quality than traditional brands, which provides an opportunity for retailers to differentiate themselves with high-quality, reasonably priced store brands," Ms. Eden-Harris said in her presentation at the IRI conference.

The firm's report analyzed about 50,000 spontaneous conversations between March, 2008 and March, 2009 in various Blogs and online message and review boards that mentioned and discussed store brand/private label products from a variety of retailers, according to Ms. Eden-Harris.

Retailers with one-half of 1 percent or more of all discussions during the year are included in the report, she said.

The research report is designed to provide insight to retailers on what drives consumers to purchase their private label brands, as well as to help consumer packaged goods manufacturers develop strategies for differentiating and marketing their brands.

Ms. Eden-Harris said in her presentation at the conference that the complete study and its results will be released in April.

Below are a few highlights of the firm's report regarding private label or store brand organic products from Janet Eden-Harris' presentation at the IRI Summit:

>The report finds that the amount of online conversation about private label products has increased steadily during the past year, with volume peaking during the fall of 2008 as the economic crisis was unfolding.

>Organic store brand pricing is a strong motivator for consumers. But the quality and flavor of private label organic products drive the highest levels of positive sentiment, according to the Web-based content analysis study.

> Store brand food products from Safeway, Trader Joe's and Whole Foods garner particularly high levels of positive consumer recommendations, compared with other private label brands, and are perceived as being particularly healthful and flavorful.

>Positive consumer sentiment for store brand food items, especially organics, is higher than it is for non-food products such as diapers, paper products and cleaning supplies. The report's conclusion: This suggests that these products are perceived by consumers as commodities, purchased for their lower cost rather than as a favored brand in their own right.

In her presentation, Ms. Eden-Harris said the improved perception of store brand organic products doesn't mean opportunity has to be lost by brand manufacturers' and marketers.

"While retailers continue to gain ground with their private label products, there is still enormous opportunity for consumer packaged goods manufacturers," she said. "Innovation is still a big growth driver, and CPG companies still lead in that regard. New and differentiated products that are priced to value will win market share."

We agree with that conclusion since at least in "phase one" of store brand organic product development most of the retailer brand products have been versions of products already produced and marketed by brand manufacturers' and marketers. In fact, retailers like Safeway Stores with its O' Organics brand used sales data from its in-house natural-specialty foods department to decide which items to create under the private-label organics brand.

Additionally, most retailers rely on traditional manufacturers not only to produce their store brands but in many cases to offer advice and suggestions on private label product development.

However, we're now seeing what we call "phase two" of retailer brand organic product development in which select retailers like Safeway, Kroger, Wal-Mart, Trader Joe's (TJ's has always been a "phase two" natural-organic product developer and innovator), Target, Whole Foods, Costco and a few others are innovating and actually creating some products under their respective natural and organic store brands that don't exist under manufacturer brands in the retail marketplace.

In our analysis though food company manufacturers and marketers, particularly in the natural and organic segment, continue to be the innovators when it comes to new product creation and development. Retailers still tend to be followers rather than brand innovators overall in the categories.

J.D. Power's Web Intelligence Division analyzes consumer behavior online by using proprietary Natural Language Processing and machine-learning algorithms to dissect the who, what and why of online opinion, offering in-depth insights for some of the world's leading brands, according to Ms. Eden-Harris. It's a form of content and opinion analysis based on what consumers are commenting and opining on on the Web.

The purpose of the Web-based content and attitude analysis research is to glean what consumers are saying online as a way of better understanding consumer behavior, attitudes, opinions and trends.

With so many consumers now using online product review sites, Blogs, chat forums and social networking sites like Twitter and Facebook, we think such research is now essential, along with more traditional methods, in order to better understand consumer attitudes in the food, grocery and consumer products space.

In fact, Natural~Specialty Foods Memo (NSFM) uses our own form of Web-based content analysis often to spot, analyze and write about consumer behavior and trends based on information gleaned from search engines, social networking sites, online review sites and message boards and Blogs.

Using the Web to better understand consumer behavior and attitudes will become even more important sense so many consumers are using the Web to search for products, retailers and related information, along with reviewing products at online review boards, and generally increasingly using the Web as an integral part of overall consumer and shopper behavior.

Below is a linked selection of past stories from Natural~Specialty Foods Memo (NSFM) on and directly related to the retailer store brands topic:

~March 12, 2009: Retail Memo: Whole Foods Market is Selling Brand 'Wild Oats'- We Offer Three Retailers We Suggest Could Benefit From Buying the Brand

~January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand

~August 24, 2008: Marketing Memo: Store Brands 2.0: Better Store Brands and Brand and Shopper-Marketing Changing How Food Retailers Sell Their Own Brands

~August 6, 2008: Marketing Memo: Safeway's Challenge: Going From Store Brand Marketer to Consumer Brand Marketer With its O' Organics and Eating Right Brands

~April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally

~April 28, 2008: Retail Memo: Safeway CEO Burd Says Shoppers Buying Store Brands Over National Brands By As Much As Six -to- One in it's North American Supermarkets

~June 4, 2008: Marketing Memo: Ingredients For 'Free Media' Marketing Success: Safeway Stores Finds Them With Announcement of its New 'Eating Right For Kids' Line

~May 9, 2008: Retail Marketing Memo: Safeway Uses Mother's Day Holiday to Launch its New 'mom to mom' Store Brand Baby Products Line in its Stores

~December 27, 2007: Marketing Memo: Safeway's O' Organics Brand in Asia

~December 23, 2007: Safeway's O' Organics Brand: Part Duex

~December 21, 2007: Friday Fishwrap: Safeway's O' Organics Brand

~January 8, 2008: Media Memo: Safeway's O' Organics Brand In Asia

~February 6, 2008: Retail Memo: Raley's Attempts to Come 'Full-Circle' With New Private-Label Natural and Organic Products' Brand

~April 7, 2008: Retail Memo: Wal-Mart, Target, Drug Chains Further Blur the Natural~Specialty Foods' Retail Class of Trade Lines

~October 11, 2007: Thursday Talking Points Memo:
Category Marketing Dominance: How Whole Foods Market, Inc. Became King of the Supernatural Retail Grocery Category and Why it Will Continue to Reign For Some Time

~February 11, 2008: Retail Trends Memo: UK's Asda Pioneering the 'Store-Grown' and 'Store-Raised' Niche: Will Raise its Own Kobe-Style Beef and Grow its Own Truffles

~December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Possible With Mass Market Lift

~November 28, 2008: Consumer Behavior Memo USA: 'Life, Liberty and the Pursuit of Frugality' - America's New Consumer Frugality

~November 28, 2008: Retail Memo: Target Corp. Launching Major Expansion of Food and Grocery Products in its Target Discount Format Stores

~May 3, 2008: Retail Memo: Loblaw's New President Charts A Course to Return the Grocer to Its 'Glory Days' of Being Canada's 'Best' as Well as Biggest Food Retailer

~December 12, 2007: Mid-Week Marketing Memo: Tesco's Fresh & Easy

~January 28, 2008: Monday Marketing Memo: Cost-Plus World Market Restructuring: We Think Specialty Foods and Beverages Can be the Key to a Successful Repositioning

~July 25, 2008: Retail Field Report Memo: Specialty Retailer Cost Plus World Market Is At A Serious Crossroads: We Offer Analysis and Suggestions For Moving Forward

~January 30, 2008: Retail Memo: A Peak Inside a New Trader Joe's Store

[Reader Note: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Retail Memo: Hybird Natural-Specialty Foods Grocer 'Wholesome Choice' Set to Open New Store Tomorrow In Anaheim Hills, Orange County, Southern CA

Hybrid specialty-international-natural and fresh foods grocer "Wholesome Choice" is set to open its second unit in the Southern California city of Anaheim Hills in Orange County tomorrow, according to our sources.

The new market is located in a former Albertsons supermarket at the corner of Imperial Highway and La Palma in Anaheim Hills.

The flagship "Wholesome Choice" store is in Irvine, California, which is also in Orange County. That store opened in 2003.

The independently-owned grocer hasn't officially announced the new store's opening. However, our sources say it will be a soft opening tomorrow, March 27, will a grand opening to follow later.

The "Wholesome Choice" format is an interesting one. Below (in italics) is how the independent grocer describes its format and merchandising philosophy:

"Since 2003, Wholesome Choice Market has been providing the best the world has to offer. With a variety of products as diverse as the cultures that shop at our store, you can trust Wholesome Choice to carry your favorite American brands, plus an impressive line of Asian, Mediterranean, Russian, Eastern European, and even have South African foods. We even have the natural and organic foods you've come to expect, along with delicious market-fresh produce that arrives daily.

The Wholesome Choice difference begins with our hearthstone bakery, located at the front of the store. The special breads we bake can't be found at the supermarket, but you'll see them rising in our ovens throughout the day here! We also feature an international food court, feeding our community with the foods they love - both foreign and domestic! We cater to all cultures, so everyone feels welcome here at Wholesome Choice. You'll find lots of locals eating in our dining area rather than taking their food home, so feel free to come and sit, eat and talk. Then shop around for the extraordinary, which can be found on every aisle of the store."

The grocer has combined a selection of basic groceries with natural-organic, international and domestic specialty foods, fresh foods (produce, meat-seafood and bakery) and prepared foods under one roof.

The stores also include beer,wine and spirits departments along with fresh floral sections, making them a full-service supermarket with an international specialty and natural foods flair.

Below we take you on a brief departmental tour of the Irvine 'Wholesome Choice" market. The new Anaheim Hills store will be the same basic format with a few additions and differences, we are told.

Fresh Produce

Fresh produce is a big part of "Wholesome Choice," including organics and locally-produced fresh fruits and vegetables.

Produce department specialists also offer shopper information in-store on where the produce comes from (imported, local), as well as offering nutritional information and preparation tips.

The grocer's merchandising approach in the Irvine store to fresh produce is farmers' market style. The fresh fruits and vegetables are stacked high in bulk form in dry bins and in the refrigerated produce cases. Full case displays are also attractively used throughout the produce department, creating an abundant look and feel.

The place of origin -- domestic, local, imported -- are labeled with colorful signs. The nature of the produce, conventional or organic, also is indicated on the signs.

The store also encourages shoppers to taste many varieties of the fresh produce it sells, particularly the more exotic varieties and locally-grown items.

The fresh produce pricing is competitive.

Meat & Seafood

The meat and seafood department offers the same conventional-specialty-natural and organic hybrid theme that's apparent throughout the Irvine "Wholesome Choice" market, and will be the same in the new Anaheim Hills store.

The department offers conventional cuts of meat, although all of the meats sold are antibiotic-free, 100% vegetarian fed, and have no added hormones, along with specialty items and cuts. For example, the poultry selection includes Rosie Organic Chicken and Empire Kosher poultry.

The meat department also offers a full selection of Halal meats for observant Jews and Muslims, as well as for others who just prefer Halal certified meat products.

A full selection of beef, pork, lamb and other meat cuts are offered in the department, both conventional and organic.

Butchers also will prepare custom cuts by order for customers.

The department also offers a complete selection of fresh fish and seafood, along with a refrigerated case featuring a selection of hot and cold smoked fish products.

Fresh Bakery

The in-store bakery is mostly a made-from-scratch operation. It features varieties of breads from around the world baked daily in hearth ovens. Among the fresh-baked breads are several organic varieties, artisan loaves, French and Mediterranean breads, Russian, Eastern European, Greek and Persian varieties.

The bakery department also offers an extensive selection of fresh-baked pastries and cakes from around the world, along with other sweet treats.

There's also a full aisle of packaged breads and bakery products, ranging from basic brands to specialty and natural-organic brands and varieties.

Grocery

"Wholesome Choice" integrates its extensive selection of basic groceries, domestic and international specialty and ethnic foods, natural and organic items by category throughout the core of the store grocery section. There's no segregation by product type (organic, conventional) or origin (domestic, international).

Below is how the grocer describes its product selection and merchandising philosophy and practice:

"Imagine a variety of little specialty grocers rolled into one big store: your neighborhood American market, a Mexican Mercado, a Mediterranean open-air bizarre, an Asian greengrocer, and a Spanish Boqueria: now you get the idea behind the selection at Wholesome Choice. Every aisle is packed with grocery items grouped by category, not culture. From Organic cereals to wasabi paste, tamarind fruit snacks to German vanilla sugar, it's here. Dried herbs, packaged products and canned goods from all countries, for all types of cuisine. We've got the brands you're sure to know, others you're sure to discover.

Wine, Beer, Spirits

"Wholesome Choice" carries over its eclectic international foods merchandising philosophy and hybrid natural-specialty products focus into its wine, beer and spirits department. The store offers a massive selection of wines, beers and spirits from throughout the world, as well as numerous organic and locally-produced wines and craft beers.

Wines and spirits are merchandised on utilitarian yet attractive warehouse-style racks. There's a large refrigerated case for the beers. Some wines are refrigerated as well. Lots of cross-merchandising tie-ins are created with items such as snacks, cheeses and the like in and around the department. There are also end-caps featuring various wine, beer and spirits items.

Bright yellow signs above the shelving (and refrigerated case) designate each section -- wines, beers, spirits.

Floral

"Wholesome Choice" offers an extensive selection of fresh flowers and green plants in its floral department. These varieties range from the basics to the more exotic. The department also does lots of seasonal floral merchandising, even offering trees and shrubs on a seasonal in-and-out basis. Organic flower varieties are included in the offering.

The floral department also is staffed with specialists who make custom floral arrangements for customers, along with doing special events like weddings, charity functions and the like. It's full-service in that regard.

Deli-Prepared Foods Court

Closing out (last but not least though) our departmental tour of the "Wholesome Choice" market in Irvine, California is the Deli-Food Court. The store's prepared foods department offers an impressive variety of ready-to-eat foods. These include: fresh in-store prepared pizzas; a cold and hot deli; soups and salads; an international grill; and Chinese, Thai, Indian, Persian and Mediterranean foods offerings, all prepared fresh in the store. You can learn more about the food court offerings here.

'Wholesome Choice': Natural~Specialty Foods Memo Analysis

Having toured the "Wholesome Choice" market in Irvine, California, it's our analysis that the grocer is on to something with its specialty-international-ethnic-conventional-natural-fresh foods hybrid format. It's a somewhat similar format to Stew Leonards (although the store isn't as big) on the east coast of the U.S. and Harry's Farmers Market in Atlanta, Georgia, which is now owned by Whole Foods Market, Inc.

The format is sort of a Whole Foods Market without the ingredient restrictions, times an international food court, plus an ethnic and specialty food and grocery emporium.

"Wholesome Choice" waited nearly seven years to open a second store, the new market set to open tomorrow in Anaheim Hills, which proves it's a prudent operator. It's used that time to fine tune its Irvine store.

The only danger we can see with the format is in trying to be all things to all categories. But in our analysis "Wholesome Choice" has avoided that happening thus far by using good product selection and merchandising criteria and skills.

Some years ago, way before its acquisition by Whole Foods Market, Inc., Wild Oats Markets, Inc. repositioned its Henry's Farmers Market banner stores in Southern California into a hybrid format similar to what "Wholesome Choice" is doing. But Wild Oats never got it right, in our analysis. Perhaps it takes an independent, hands on daily, to be successful at what can be a difficult format.

Wild Oats later changed the format a bit more closer to orthodox natural-organic but still left elements of that hybrid nature intact.

Henry's (and the Sun Harvest stores in Texas) are now owned by Los Angeles, California-based Smart & Final, which bought the chain of 36 stores from Whole Foods shortly after the 2007 acquisition of Wild Oats by the Austin, Texas-based natural grocery chain.

Smart & Final-owned Henry's, which operates largely as a separate division from Smart & Final's retail operations, has improved the look of most of the Henry's stores since taking them over in 2007, in our analysis. The stores are still a natural-specialty foods hybrid of sorts but not in the way Wild Oats took them years ago, which included selling mainstream grocery brands next to natural and organic products on the shelves. It will be interesting to see what direction Smart & Final takes the Henry's Farmers Market stores from here.

Meanwhile, although a single-store retailer up until now, and soon to be just a two-store retailer when its second unit opens, we think "Wholesome Choice" has an opportunity to extend its format into additional store locations successfully if it chooses.

We're told the new unit in Anahiem Hills will feature some additional touches that the current Irvine market doesn't have, but will keep the same basic format and focus, which in our analysis is a good idea.

We think taking a basic format blueprint and then "localizing" it to the particular community and neighborhood a store is in is the best approach. But we do mean real "localization" rather than just lip service. For "Wholesome Choice" that won't require much "localization" since the two cities are close by and share many characteristics. But they also have qualitative differences, which is why "localizing" a unit to its neighborhood within its basic blueprint is so important for grocers to do. "Wholesome Choice" has a good eye and ear for local merchandising based on our observation.

"Wholesome Choice" adds an additional element to the already competitive, multi-format Orange County, Southern California, food and grocery retailing mix. We think that based on how the independent grocer has performed with its Irvine market, "Wholesome Choice" should do well with its new store in Anaheim Hills, despite the current recession.

Of course, like all retailers regardless of format, our basic rule applies. That rule is that in the current economy, all grocers must focus on the value-proposition in their own unique and individual ways, whatever the format.

Retail Memo: Whole Foods Market Opens New Store in Santa Cruz, California Today ... And There's Plenty of Competition

Pictured above is the famous "Giant Dipper" roller coaster at the Santa Cruz Beach Boardwalk in Santa Cruz, California. Built in 1924 it is one of the oldest roller coasters of its kind in America. With Whole Foods Market opening its first store in Santa Cruz today, we suggest there will be a natural foods retailing competitive roller coaster ride soon hitting the city.

Fresh from reaching its settlement agreement with the U.S. Federal Trade Commission (FTC) on March 6, Whole Foods Market, Inc. today opened a 31,500 square foot natural foods supermarket in the coastal Northern California city of Santa Cruz, home to the famous Santa Cruz Beach Boardwalk, and what's considered one of the most attractive campuses of the University of California, the University of California, Santa Cruz, the campus with the unique mascot -- Sammy the Banana Slug.

The new store is the first for Whole Foods Market in the city of Santa Cruz, which has a very high natural-organic foods shopper demographic. Northern California, which is one of the U.S. regions in which Whole Foods Market has the greatest number of stores, is one of the best market regions for the natural grocery chain in the country.

An interesting aspect of Whole Foods' opening its new natural foods supermarket in Santa Cruz so soon after its March 6 settlement agreement with the FTC regarding the regulatory agency's near 20-month legal battle to overturn the 2007 acquisition by Whole Foods Market, Inc. of Wild Oats Markets, Inc., is that Santa Cruz, a city of about 100,000 residents, is a very competitive natural foods retailing town.

For example, in the natural foods retailing class of trade, locally-based New Leaf Community Markets has long been the leader in Santa Cruz. In fact, New Leaf just opened on March 11 a brand new nearly 18,000 square foot natural foods market on the westside of the city. The New Leaf store is about three miles from the new Whole Foods store, which is located on the city's east side. The new store replaces an older New Leaf market on the westside. There's also a New Leaf store in downtown Santa Cruz. There are six New Leaf units in the region.

Another popular independent natural foods market in Santa Cruz is Staff of Life Natural Foods Market, which has operated in the city for many years and has a loyal following.

There's also a Trader Joe's natural and specialty grocery store in Santa Cruz. With its extensive selection of natural, organic and specialty products, Trader Joe's draws many of the same customers that Whole Foods Market stores do.

Safeway Stores, Inc. has a supermarket in Santa Cruz. The grocery chain, which is based in Northern California's San Francisco Bay Area, is in the process of building one of its brand new "Lifestyle" format supermarkets in the coastal community.

In addition to being filled with conventional food and grocery products, the new Safeway in Santa Cruz will be stocked full with natural, organic and premium food and grocery items, including the chain's popular "O' Organics" organic products brand and its "Eating Right" healthy foods brand. The two Safeway brands combined did about $1 billion in gross sales in Safeway's 1,750 stores in the U.S. and Canada in 2008.

The new Santa Cruz "Lifestyle" format Safeway also will feature a fresh, prepared foods-deli department and in-store special features like a fresh nut bar, which Safeway includes in its new "Lifestyle" stores. The new wave "Lifestyle" format stores often look in many cases very similar in design to a larger, new Whole Foods store.

Sacramento, California-based Raley's (130 stores, $3.5 billion in annual sales) has one of its Nob Hill banner supermarkets in Santa Cruz. Raley's is a major player in natural and organic foods retailing and the Santa Cruz Nob Hill store offers a strong selection of natural and organic products, reflecting Raley's competitiveness in the categories.

Add to this competitive mix Shoppers Corner, a longtime Santa Cruz independent supermarket that offers both conventional groceries and natural, organic and specialty foods. The grocer "stacks product high" and "sells it cheap," often offering natural and organic items for less than all its competitors.

In other words, Santa Cruz is a perfect laboratory to test the FTC's (now historic) antitrust argument that a combined Whole Foods-Wild Oats is monopolistic. As we argued throughout the legal case, in today's natural-organic foods retailing world in the U.S., Whole Foods competes against not only natural foods stores, but also certain supermarket chains (like Safeway) and hybrid format retailers (like Trader Joe's).

Therefore, since Santa Cruz has three high volume and competitive natural foods markets -- the two New Leaf units and Staff of Life -- along with Safeway and Trader Joe's, plus Shoppers Corner, it's our analysis that Whole Foods will have its competition cut out for it in the coastal city. It won't be a cakewalk on the boardwalk for Whole Foods Market in Santa Cruz.

By the same token, Whole Foods will inject a massive dose of competition into the food and grocery retailing business in Santa Cruz. The natural foods supermarket chain is going after the city's consumers aggressively with discount pricing, hot promotional deals, special events and other merchandising and marketing schemes designed to fill the store's aisles.

But the local guys will fight back. That's why the market was right, and why the FTC ultimately gave Whole Foods a sweet settlement deal. The competition abounds and is always changing and growing.

[Suggested reading: Jondi Gumz, a staff writer for the Santa Cruz Sentinel newspaper, has a comprehensive and insightful piece published in the paper today about Whole Foods' opening of its new store in Santa Cruz, and the competitive aspects having the new big league player in town might have on the city's existing retailers. Read the story here. There's also a color slideshow of photogrpahs of the new store at the link.]

Retail Memo - UK: Sainsbury's CEO and Tesco Marketing Chief Offer Differing Analysis of Food Retailing and Shopper Behavior at Retail Week Conference

News & Analysis

The British trade publication Retail Week is holding its annual retailing conference this week in the United Kingdom.

Today, executives from two of the UK's top supermarket chains, number one Tesco and number three Sainsbury's, addressed the UK retaling conference focusing on what each chain views as the state of food and grocery retailing and food shopper behavior in the nation at present in these recessionary times.

Representing Sainsbury's and speaking at the conference was its CEO, Justin King. And representing Tesco was Carolyn Bradley, the supermarket chain's director of marketing for the UK.

Interestingly, Sainsbury's CEO King and Tesco's Ms. Bradley painted an almost complete opposite picture of how their respective chain's are currently viewing consumers and food retailing in the UK, which like the U.S. and most elsewhere in the world is in the midst of a severe recession.

For example, Tesco UK marketing chief Bradley said the nation's leading supermarket chain believes consumers are trading down. Therefore Tesco has and continues to adjust its merchandising, marketing and promotions in a more discount price, value-based direction, she said in her speech.

According to a story in Retail Week today, she said UK consumers' trading down behavior is "manifesting itself through them changing lots of little things: consumers doing without a latte, finding cheaper ways to treat themselves and trading off larger purchases such as sofa or a holiday."

But in contrast, in his speech, Sainsbury's CEO Justin King said he doesn't see a significant consumer trade-down in the UK. Rather, he argued in his speech that the middle, where Sainsbury's is positioned in the market, continues to hold.

Below (in italics) is a summary of what CEO King said in his talk, from a report in Retail Week today:

"King said assertions that consumers are downtrading, that people revert to selfish behaviour and that the middle ground erodes in a recession is not what the supermarket is experiencing.

Sainsbury's is seeing that its customers are largely sticking with the company, but changing what they buy, cooking more and transferring spend from eating out to buying things like family ready-meals, King said.

Despite the warnings of many, Sainsbury's is not feeling the middle ground being squeezed, he added.

He said: "Being in the centre is a good place and you are uniquely positioned to work with customers as they make changes."

He added that the £10 million Sainsbury's has banked for Comic Relief so far this year proved that consumers were not becoming less altruistic.

King said that while his customers genuinely fear for their jobs, those that still have jobs also have household budgets that are under less pressure than they have been for a very long time.

Sainsbury's has conducted research into how different sectors within retail have been affected by previous downturns, and food has traditionally been the most resilient.

He also demonstrated the consistent messaging - "having the "same DNA", as he described it - in Sainsbury's adverts over the years, and over previous downturns.

He said that Sainsbury's focus on cooking and ingredients in its adverts is as relevant today as ever, with more people rediscovering cooking as a way to mitigate the food inflation that has been experienced.

King is keen to provide leadership to his staff and customers with a "glass half-full attitude".

He said that even if 1 million consumers lose their jobs this year, as economists predict, that will still leave 97 per cent of the workforce in employment, and Sainsbury's must continue to serve them.

At the same time, he believes that everything Sainsbury's is doing, with its focus on value, switching to own-label and more home cooking, will be even more relevant to those who are unfortunate enough to lose their jobs this year."

Now, read below (in italics) the Retail Week summary of Tesco's Ms. Bradley from her speech at the conference:

"Bradley said Tesco has been tracking consumers changing confidence, and where as price and fuel inflation were the main concerns last year, this has given way to job security as the biggest issue.

Unlike Sainsbury's chief executive Justin King, who spoke at the conference earlier in the day, Bradley said that she believed consumers are trading down.

She said that this is manifesting itself through them changing lots of little things: consumers doing without a latte, finding cheaper ways to treat themselves and trading off larger purchases such as sofa or a holiday.

Unlike King, Bradley also sees that consumers' concern for ethical matters giving way to price. She says that mums' main concerns right now are providing for their family, and not letting them suffer even when budgets have to be cut.

She defended Tesco's decision to launch its Discounter range, and said that it was done after Tesco had identified a substantial gap in the market between generic branded value products, and big brand merchandise.

She used the example of one customer who had been able to cut her weekly shopping bill in half by moving to the Discounter products.

She said price is where retailers need to start, and so Tesco has focused on reducing the cost of reducing everyday items, and giving customers more price choice for each item they buy.

Finally, she said that it was important to allow customers to retain a sense of fun and treats. Tesco has seen an increased take up of its Clubcard Deals, where customers can exchange Clubcard points for vouchers for days out and other leisure activities.

She said: "It is a way that they can still afford to go out to [places like] Café Rouge. These little luxuries offer huge value to customers."

She also pointed to deals on Finest meals, and entertainment promotions, as other ways the supermarket is allowing its customers to treat themselves."

Reading the summaries of the speeches given at the conference by the Sainsbury's CEO and Tesco's UK marketing chief, one could easily come to the conclusion they aren't talking about the same country or market, if we hadn't told you in advance that they are.

What makes the stark differences in Tesco and Sainsbury's analysis of the UK food and grocery retail marketplace all the more interesting is that historically both supermarket chains have a very similar customer base -- the middle. Neither are discounters like Wal-Mart-owned Asda. Nor are Tesco and Sainsbury's upscale supermarket chains like Waitrose or Marks & Spencer. They are historically mid-range operators.

For example, both competing supermarket chains offer an extensive selection of natural, organic, specialty and premium foods on store shelves alongside conventional manufacturers' and store brands. These natural, organic, specialty and premium products include the retailers' own brands, as well as premium prepared food items, organic produce and meats.

However, because of the recession, Tesco has made a strategic decision to go more discount; to put a much more aggressive focus on price than it has ever done. This decision is largely because the UK's leading supermarket chain (it has a nearly 31% sales market share) has been losing market share points (about 2.5 points in the last 18 months) to Asda and to the small-format, hard-discount German chains Aldi-UK and Lidl.

Sainsbury's on the other hand has resisted getting into the discount game full-force, although it to has been sharpening its pricing, promotions and value offerings, as CEO King said in his speech. But unlike Tesco, it hasn't strategically made a strong price- discount move.

This got us to thinking: Could it be that the main reason the viewpoints of the two executives representing Britain's leading supermarket chains are so differing is because each of the respective chain's has staked out a very different recession strategy and therefore used their speeches at the conference more to defend what each supermarket chain is doing strategically instead of actually attempting to diagnose what British grocery shoppers are really doing in terms of their behavior in these tough economic times?

We aren't making a value judgement on what either of the executives said in their speeches. Rather we're attempting to account for the major differences in how each of them says their supermarket chains view the current state of the British grocery shopper and UK food retailing.
Were Tesco and Sainsbury's radically different formats and food retailers, such an attempt at understanding these differences would be a moot point. But they aren't -- in fact the two chains have far more merchandising, positioning and and operational similarities than they do differences.

Lastly, the explanation could be simple. It's always difficult to attempt to describe consumer behavior in any global way. Perhaps what's happened is Sainsbury's has retained more mid-range shoppers than Tesco has. Therefore, Sainsbury's has yet to see a loss in sales of the same volume as Tesco has because of this possible scenario. So, based on this observation, CEO Justin King's "the center continues to hold" position makes more sense.

And if this scenario is true, that in the case of Tesco it has lost more customers to the discounters like Asda and Aldi, as the market share data tends to suggest, and it needs to win back these shoppers, then it makes sense the retailer tends to see the trading down consumer behavior much more so than Sainsbury's does.

From a macro perspective though, all data in the UK suggests shoppers are trading down when it comes to food and grocery shopping. The Tesco scenario. This is why Aldi and Lidl are the biggest percentage gainers in market share. There's also an abundance of other evidence that the trading down behavior has been going on in the UK for at least a year -- and increasing as the economy worsens.

If Sainsbury's isn't seeing it, that's good news for the chain and its shareholders. But if instead of not seeing it, Sainsbury's is missing it, then that will be bad news for the chain and its shareholders.

But fortunately we have a scorecard to track it. Sainsbury's will soon release its financial results. And new UK market share numbers will also be released soon.

By the same token, is what Tesco seeing, and doing about it, a clear picture of UK shopper behavior? Since Tesco is set to release it financials soon as well, along with the upcoming market share numbers coming out as mentioned above, we will be able to make some analysis of Tesco's approach, as voiced by UK marketing chief Bradley in her talk at the Retail Week conference, soon.

Local Foods Memo - Farmers' Markets: Farmers' Market Season is Fast-Approaching

Customers line the vendor stalls at the popular farmers' market in the small city of Sonora in Northern California's Gold Country foothills region. It's a social market as well as a farmers' market. [Photo courtesy of ianandwendy.com.]

Farmers market season is fast approaching in the U.S., as well as elsewhere in North America and the world.

The end of March and first of April marks the opening (although some have already opened) of thousands of farmers markets throughout the U.S., where local farmers and other food purveyors sell their fresh produce and artisan foods directly to consumers.

The farmers' market season is part of spring, that time of renewal in all things lifestyle.

The farmers' market movement in the U.S. has been growing super-fast over the last decade, and even picking up more steam in just the last few years, as new open-air markets open in cities, suburbs and small towns throughout America. There are thousands of farmers markets operating in the U.S. today.

What makes farmers' markets a unique format for fresh produce and artisan-specialty-natural foods retailing are essentially five key elements:

>In most cases the vendors grow all of the produce they sell at the markets. In states like California and a number of others, "state certified" farmers' markets exist in which all of the sellers must also be the growers. Non-growers-sellers can sell at non-certified farmers' markets but consumers like the certified markets because it ensures they are buying directly from the farmer.

>Most of the fresh produce sold at farmers' markets in the U.S. is "locally grown," coming from a distance of generally no more than about 100 miles from the market location.

>Organic fruits and vegetables abound. Since many of the growers-sellers at farmers markets are on the cutting edge of farming, the fresh produce they offer is in many cases organically-grown. Much of it also is biodynamic. For many farmers who sell at the markets doing so is more about saving money by not buying chemical fertilizer, pesticides and fungicides than it is a marketing tool. It's also about being conservationists of their land.

>Price is generally good. The prices on both conventional and organic fresh produce at local farmers markets are generally as good or better than supermarket prices. Even in the cases when the prices are a bit higher, the value often is better because the produce tends to be fresher and of higher quality. There's also the added benefit of supporting local farmers.

>Farmers' markets are a social event. Farmers' markets allow consumers to get closer to the food they eat. As mentioned, most of the sellers at farmers' markets also are the growers. This allows for interaction between the farmers-vendors and consumers. Farmers' markets also provide a forum, centered around food, in which residents of a community can interact, visit and network. It's community at its best.

Since farmers' market season is fast-approaching, Natural~Specialty Foods Memo (NSFM) decided to search the web and choose a selection of stories and articles about farmers' markets in the U.S. (and one in the UK at the bottom of the list) for our readers. (We will have more about Canadian and UK farmers' markets in upcoming posts.)

Below are links to the articles we've selected. All of the stories are from March 17, 2009:

~Tampabay.com: Tampa farmers markets a boon for frugal food shoppers
~Seal Beach Daily: The beauty of buying local: fresh and fun at the new Seal Beach farmers market
~Valley Courier: Local flavor
~Vernon Morning star: Eating close to home
~California Farm Bureau magazine: Considering organics? Farmers offer advice on how to get started. And: Growth in organic food sales continues, at slower pace
~Boston Globe: Economy of scales
~Christian Science Monitor: Refugee job hopes wax and wane at farmers market
~Minneapolis City Pages: Great news from Chef Shack!
~Hobby Farms.com: Top 10 Ways to Support Agriculture
~WXII12.com: New Farmers Market To Open In Downtown Winston-Salem
~MPNNow.com: Farmers, families like veggie coupons
~Rural Northwest.com: Growing the Farmers' Market
~The Post-Standard: Farmers markets seminars coming up
~Richmond TimesFarmers market in western Henrico opens April 25
~United Kingdom: Liz Hurley to take up stall at Stroud Farmers' Market

Enjoy.

Natural~Specialty Foods Memo (NSFM) will be visiting a variety of farmers markets in the U.S., Canada and the United Kingdom in the upcoming spring and summer months, bringing first-person reports about local foods' selling and buying, along with photographs, to the Blog. Stay tuned.

Reader Memo: If You Sent Us an E-Mail Last Week -- Please Resend it Today

Natural~Specialty Foods Memo (NSFM) had a problem with our nsfoodsmemo@yahoo.com e-mail account late last week. The problem, now fixed, resulted in all of the e-mails sent to us in the latter part of last week being deleted.

There were 7-8 reader e-mails from Wednesday, Thursday and Friday we were in the process of responding to. If you sent us an e-mail anytime last week and haven't received a response, would you please resend your e-mail to us so we may respond.

The e-mails deleted included one or two labeled "Newflower," about the Sunflower Farmers Market natural foods chain and its "Newflower" stores in Texas. Would that reader please resend those e-mails to us at either nsfoodsmemo@yahoo.com or nsfoodsmemo@gmail.com, or to both of those accounts.

Additionally, for all readers who sent e-mails to Natural`Specialty Foods Memo (NSFM) last week but haven't yet received a response from us, you too can resend those e-mails to either one of the above accounts, or to both.

Thank You

Ethical Foods Memo: Does (Egg) Size Matter? Size of Eggs Emerging as Hen Welfare, Taste Issue in United Kingdom

If laying larger eggs is painful for a chicken, imagine what it must be like for an Ostrich, an Emu and a Pheasant. Pictured above, left -to- right: An Ostrich egg (far left), a Emu egg, a Pheasant egg, and (far right) a chicken egg (large grade). [Click on the photograph to enlarge.]

In the United Kingdom, when it comes to eggs, most consumers like them larger rather than smaller. For example, while in the U.S. large grade eggs (with medium grade not far behind) are the number one seller in retail stores (as well as the most promoted by grocers), extra large and even jumbo hold that honor in UK supermarkets.

The upscale Waitrose supermarket chain even sells Ostrich eggs, which make a jumbo grade egg from a chicken look tiny. [Read our May 1, 2008 piece here: Local Foods Memo: Never A Grocer to Have its Head in the Sand, Waitrose is Selling Locally-Produced Ostrich Eggs at its UK Supermarkets.]

But like all things involving food, and eggs particularly seem to generate lots of debate -- the back and forth good for you, bad for you debate, for example -- the latest egg controversy, this time in the UK where "egg size truly matters," has to do with whether or not larger eggs are bad.

Specifically, some "eggs-perts" in the UK are now sounding the alarm, saying all the fuss about the desirability of larger eggs in the UK is...well, "egg-cessive."

These folks argue that not only is it painful for chickens to lay larger eggs, but that smaller eggs actually taste better than the larger cousins.

This arguments isn't new all together, at least in the case of other foods. For example, chefs tell us that smaller fish generally taste better than larger versions of the same family or variety. And, generally speaking, most smaller-sized version of vegetables (like Italian Squash, for example) tend to taste better than there large or jumbo relatives.

But this is the first time we've heard the "smaller tastes better" argument applied to the humble and wonderful egg.

The "does egg-size matter" debate took to the pages of one of Britain's leading newspapers, the Daily Mail," yesterday in a piece by staff writer Marcus Dunk titled: "Egg-cessive? Large eggs are painful for hens to lay, claim experts. What's more they're less tasty. So should we stop shelling out for them?

Large egg cruelty: In the Daily Mail story, Tom Vesey, chairman of the British Free Range Producers' Association, claimed: "It can be painful to the hen to lay a large egg … it would be kinder to eat smaller eggs," he is quoted as saying.


The Daily Mail piece also attributed to Mr. Vesey this: "He also said medium-sized eggs 'taste better'. So in a world that is constantly downsizing, is it time that we embraced the smaller-sized egg"?

Backed up by some science: The story also quotes a scientist in the piece. "Christine Nicol, professor of Animal Welfare at Bristol University, agrees. 'There is no strong published evidence of pain in egg-laying hens but it's not unreasonable to think there may be a mismatch in the size of the birds and the eggs they produce.'"

"We do often spot bloodstains on large eggs. I would never buy jumbo eggs."

The "does egg-size matter" debate appears to have begun in the UK in full force. Will it soon travel across the pond to America? We predict PETA (People for the Ethical Treatment of Animals) will soon get involved in the "egg size" issue, focusing on the hen welfare aspects. Remember we predicted it first.

Click here to read the story, "Egg-cessive? Large eggs are painful for hens to lay, claim experts. What's more they're less tasty. So should we stop shelling out for them"? in the Daily Mail. [There's a companion story from the Daily Mail here: "Lay off large eggs: Shoppers warned big varieties cause pain and stress to hens."]

[Reader Note: You can follow Natural~Specialty Foods Memo (NSFM) around on Twitter at: www.twitter.com/nsfoodsmemo.]

Retail Memo: Whole Foods Market is Selling Brand 'Wild Oats'- We Offer Three Retailers We Suggest Could Benefit From Buying the Brand

Whole Foods Market, Inc. - FTC Settlement Agreement: Post-Mortem Analysis

As we reported in this piece [Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge] on March 6, 2009, the settlement agreement reached between Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) over the FTC's antitrust legal challenge to Whole Foods' 2007 acquisition of Wild Oats Markets, Inc. included three elements or terms. Those terms are:

>The selling of 13 (12 former Wild Oats' units, one existing Whole Food's unit) stores currently being operated by Whole Foods Market, Inc.;

>The selling of 19 closed stores; 10 closed by Wild Oats before the acquisition and nine closed by Whole Foods Market, Inc. post-acquisition and;

>The selling by Whole Foods Market, Inc. of the "Wild Oats" brand and all related intellectual property.

As part of the settlement agreement, a third-party receiver is handling the sale of the 32 stores and the "Wild Oats" brand and intellectual property.

It is the third element of the settlement agreement -- the selling of the brand -- that we focus on in this piece today.

It's our analysis that having to sell the brand is something that hurts Whole Foods Market not at all.

In fact, since acquiring Wild Oats Markets, Inc. in 2007, Whole Foods' has done pretty much all buried the brand by design and strategy. Therefore, we see no downside -- nor do we believe Whole Foods Market, Inc. does -- in the natural grocery chain's selling of the "Wild Oats" brand.
If Whole Foods Market gets a decent price for the brand and related intellectual property, it's our analysis and opinion that the retailer probably will view that aspect of the settlement deal as pure blue sky. [We don't think the selling of the stores hurts Whole Foods in anyway either, as we mentioned in our March 6 story. It's all blue sky for Whole Foods.]

Natural~Specialty Foods Memo (NSFM) does see some value in the "Wild Oats" brand -- not particularly to Whole Foods Market, especially at this point in time since the natural grocery chain already made a strategic decision not to use the brand long before the FTC settlement requirement to sell it -- but to a handful of other retailers.

In this vein, we offer an analysis below of three very different retail chains -- natural foods grocery chain Sunflower Farmers Market, mega-retailer Wal-Mart, and online retailer Amazon.com -- that could benefit from buying and using the Wild Oats brand.

Sunflower Farmers Market

The fast-growing Boulder, Colorado-based natural foods chain, which was founded by and is run by Mike Gilliland (CEO), who also founded Wild Oats in 1984 in Boulder, might want to take a look at buying the "Wild Oats" brand from Whole Foods Market, Inc.

This is not just because of the nostalgic fact that Gilliland founded and named the grocery chain Wild Oats, although that aspect has a heart warming aspect to it, but rather because the brand name could offer some merchandising and marketing advantages to Sunflower Farmers Market.

The Texas connection: First, probably because an existing health food store in Texas has the name "Sunflower," Sunflower Farmers Market has chosen to name its stores in the Longhorn state "Newflower." Might it not be interesting if Sunflower Farmers Market buys the "Wild Oats" brand from Whole Foods and then changes the name of those Texas stores to "Wild Oats," using the old Wild Oats logo (which is attractive) and related intellectual and brand properties?

We think doing so could offer benefits to Sunflower in its Texas stores. The "Wild Oats" brand name still has brand equity, in our analysis, particularly among primary natural foods shoppers, and particularly in the Western U.S.

It would also be an ironic development were this to happen since Whole Foods Market is based in Texas. Sunflower just opened its first "Netflower" store in Austin, where Whole Foods' corporate headquarters is located, a couple weeks ago.

Additionally, brand "Wild Oats" might also offer Sunflower Farmers Market some additional options and benefits.

For example, the natural grocer could use "Wild Oats" as a private label brand. Wild Oats Markets, Inc. had a full line of natural and organic products under the brand, even selling the brand and line at Kroger stores throughout the U.S. for a few years, in addition to in the Wild Oats Market stores.

Whole Foods Market, Inc. has now sold off most of the "Wild Oats" brand items, replacing them in the converted former Wild Oats Market banner stores with Whole Foods Market store brands. But the recipes, graphic design for the labels and all of the other intellectual and material property still exists for the brand's product line. All Sunflower, or any other grocer, need do if they acquire the brand is to decide what products they want to put under it and hire vendors to produce the products.

Perhaps brand "Wild Oats" would make a good premium natural products brand for Sunflower Farmers Market, featuring either just organic or both natural and organic items, for example.

Further, owning the brand would allow Sunflower Farmers Market and Gilliland to use it on any stores it desired at any time. For example, Perhaps as the chain grows it creates a second retail format, branding it "Wild Oats." We could see a higher-end format from Sunflower (after the recession), for example, that used the Wild Oats retail brand on it. This would fit with the positioning of the brand on products being of a more premium natural and/or organic nature, under that scenario.

Lastly, imagine the marketing-oriented public relations attention buying the "Wild Oats" brand would have for Sunflower Farmers Market and Mike Gilliland.

We can see the headlines now: (1) "Wild Oats' brand returns to founder." (2) Mike Gilliland sows his 'Wild Oats': plans Texas stores under the Wild Oats Market banner." (3) It's 'Back to the Future' for Sunflower Farmers Market founder and CEO Mike Gilliland, as he prepares to launch a new line of private label natural and organic products in the Sunflower stores under the 'Wild Oats' label."

This could be publicity no amount of money can buy, particularly timed with the launch of the rebranded "Newflower" stores under the Wild Oats' retail banner in Texas, or the launch of a new proprietary natural product line under the "Wild Oats" brand for Sunflower. Just some food for thought.

And, since the settlement with the FTC requires a third-party receiver to sell brand "Wild Oats," Whole Foods Market, Inc. can't veto a sale of the brand and its assets to Gilliland and Sunflower Farmers Market (or to any other competitor), should the natural grocer decide to acquire it.

Wal-Mart Stores, Inc.

We go from small but fast-sprouting Sunflower Farmers Market to global giant Wal-Mart in this journey.

We think buying the "Wild Oats" brand from Whole Foods has some merit for Wal-Mart. For example, Wal-Mart brands its fast-growing line of natural and organic products under the "Sam's Choice" brand. While it's nice that this brand honors Wal-Mart founder Sam Walton, it really has very little resonance in consumers' minds when it comes to natural or organic food. In fact, since Sam Walton was a very frugal man, we doubt he would have spent the extra money that natural and organic food and grocery items cost anyway.

Wal-Mart could use brand "Wild Oats" for private label brand natural-organic products in a few ways.

First, it could brand all of its natural and organic products under the brand, including changing existing "Sam's" items to brand "Wild Oats."

Second, it could create a two-tier brand system. "Sam's" would be used for lower price-point natural and organic items, "Wild Oats" for higher-end, premium natural-organic items.

Lastly, Wal-Mart could use the "Wild Oats" brand name strictly for organic food and grocery items, then use "Sam's" or something else for "natural" only.

We think Wal-Mart needs a better brand for natural-organic using one of the above three product scenarios

Wild Oats' is a good brand name, still has equity, and is for sale. Therefore, although we know this is way down on the list of Wal-Mart Stores, Inc.'s priorities list, we think acquiring the brand from Whole Foods Market would offers a nice opportunity in the natural-organic products categories for Wal-Mart, which continues to move deeper into the categories, and will move much faster once again in the natural-organic private label and retailing spaces once the recession ends.

Wal-Mart also now operates four (soon to be five when it opens a new store in Peoria, Arizona later this year) of its small-format Marketside grocery and fresh foods stores. (Wal-Mart also has two Marketside stores under construction in San Diego County, California, with three more planned in California.) The 15,000 -to- 20,000 square foot markets feature a limited assortment of basic food and grocery items, including natural, organic and specialty items, fresh meats and produce, perishables and in-store prepared foods.

The Marketside stores are more upscale than any of Wal-Mart's other formats. A selection of natural and organic items in the stores under the "Wild Oats" brand could be a nice addition to the natural and organic item selection-segment in those stores for Wal-Mart.

Amazon.com

In 2007 the online retailer Amazon.com started selling shelf-stable food, grocery, household item, health and body care and related packaged goods. Today the online mega-store's inventory in these respective categories is vast and extensive, including offering lots of natural, organic and specialty food and grocery items for sale.

Shoppers order the food and groceries online just as they do everything else that Amazon merchandises. The orders are then delivered to shoppers' homes via Federal Express, UPS or other basic delivery service.

In a little over two years, Amazon has gone from merely experimenting with selling food and groceries to actually selling a considerable volume of product, including a decent amount of natural and organic food and grocery products.

We think Amazon should take the logical next step in its progression as an online grocer and start offering its own brand products. Since the web retailer doesn't have the volume needed to really yet have a store brand everyday or discount grocery brand, we suggest a good place to start would be with a natural and organic products store brand.

Therefore, why not brand "Wild Oats"? The brand still has consumer awareness and equity. Everything is there to rapidly start producing whatever products are desired; all that's needed are vendors. And, the brand is for sale.

Amazon could create its own natural and organic food and grocery proprietary brand under the "Wild Oats" brand. It could start small, say with about 45-75 items in a half dozen -to- a dozen categories to start. We would suggest all the products be consumables and health and body care to start. Then it could go from there with the brand.

Amazon also could extend the brand "Wild Oats" across the numerous categories it sells products from. For example, how about "Wild Oats'" proprietary brand organic cotton clothing? What about body care, vitamins, supplements? How about a line of "green" cleaning products under the brand."

In other words, brand "Wild Oats" could allow Amazon to have a proprietary brand that it could use to create it's own "brand" in the numerous categories -- from food and drink to clothing and health and body care -- that avail themselves of a natural-organic products focus.

Amazon is without a doubt big enough to do this. We think it would be a very positive development for the online mega-retailer. It also, in our analysis, would help build better product brand equity for the online retailer.

Amazon.com is a major player in natural products retailing across numerous categories. The Wild Oats brand could allow it to become a much bigger category player in many mainstream and niche natural and organic products segments, from consumables to clothing, and much more.

Conclusion: Brand 'Wild Oats' - will any retailers bite?

There are other retailers besides the three we offer that could benefit from acquiring the brand from Whole Foods Market, Inc. Most interesting to us will be if a competitor -- like Sunflower Farmers Market, Sprouts Farmers Market or Natural Grocers by Vitamin Cottage -- buys brand "Wild Oats" with the design of using it as the name for a chain of stores.

Or, if another format retailer, say Target or Wal-Mart, were to buy it with the idea of someday using "Wild Oats" for a chain of natural foods markets. We doubt this scenario -- but that doesn't make it any less interesting.

It's our analysis that the FTC hopes something like the first scenario above happens -- that some competitor of Whole Foods Market buys the brand and uses it to compete against Whole Foods.' That's the key reason the FTC required there be a third party receiver appointed to handle the sale of the brand and the store sales: It wanted to make sure that Whole Foods Market, Inc. couldn't veto the sale of brand "Wild Oats" or the sale of any of the stores on the block to a competitor.

It will be interesting to see if any retailers bite and make an offer to buy the brand. Readers: Which retailers do you think could benefit from buying brand "Wild Oats" from Whole Foods Market, Inc? Offer your idea(s) and opinion(s) by using the "comments" link below. Just click and type.

[Related posts: March 8, 2009: Retail Memo: The FTC-Whole Foods Market Settlement Agreement Looks Much Like Our January 'Blueprint-Template For A Settlement Deal' Proposal ... March 6, 2008: Retail Memo: The 'Whole Bibliography' - FTC v. Whole Foods Market Antitrust Case & Issue ... March 6, 2008: Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge ... March 5, 2008: Daily Memo: Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6]

[You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at: www.twitter.com/nsfoodsmemo.]

Guest Memo: Satire From The Onion - 'FDA Approves Salmonella'

FDA director Stephen Sundlof okays the bacteria for eating, drinking, and applying directly to the skin. [the Onion. March 10, 2009.]

On The Lighter Side

From the Natural~Specialty Foods Memo (NSFM) Editor's Desk: As we're all too aware, the food-borne pathogen salmonella is a tough one to shake. In 2007 it showed up in salad greens in the United States. In 2008 it appeared in fresh peppers and Roma tomatoes. And now -- its peanut butter. Salmonella appears to be the enterobacteria that keeps on giving when it comes to appearing in various parts -- and products -- of the U.S. food supply chain.

And try as it might, the U.S. Food and Drug Administration (FDA) just hasn't been able to figure out how to stop these frequent and very serious food safety issues centered around Salmonella contamination in a host of very different foods and food products.

Perhaps the satirical publication "the Onion" has the right approach in a piece it published today. In that piece, "FDA Approves Salmonella," "the Onion" offers an "if you can't beat it embrace it" approach to the Salmonella contamination issue.

We reprint the humor piece from "the Onion" below (in italics). Remember -- it's satire:

WASHINGTON—Calling it "perfectly safe for the most part," and "not nearly as destructive or fatal as previously thought," the Food and Drug Administration approved the enterobacteria salmonella for human consumption this week.

The federal agency, which has struggled in recent years to contain the food-borne pathogen, and repeatedly failed to prevent tainted products from reaching store shelves, announced Monday that salmonella was now completely okay for all Americans to enjoy.

"Rigorous testing has shown that salmonella is...fine," FDA director of food safety Stephen Sundlof said. "In fact, our research indicates that there's no need to pull any more foodstuffs from the market. Not raw chicken. Not contaminated spinach. Not thousands of jars of harmful peanut butter. Not anything."

"It's approved," Sundlof continued."Healthy, delicious salmonella is finally approved."

Following the announcement, the FDA released a 20-page report, which included evidence that salmonella is barely more dangerous than other live-culture products such as yogurt, and results from a clinical trial which found that participants who ingested salmonella were totally fine for up to three minutes.

The report also concluded that salmonella has been around American kitchens for centuries now, and must therefore be at least harmless, if not actually good for us.

"Of course, as with everything, we encourage moderation," lead FDA researcher Phillip Millar said. "Don't just eat a whole pint of salmonella in one sitting. It's like ice cream or, for example, E. coli in that respect."

Added Millar, "A little bit goes a long way."

According to FDA officials, the intracellular bacterium will be commercially available in a variety of forms. Plans are already in the works to offer salmonella as a flavorful topping, food spread, powdered drink mix, dessert gelatin, and as a "no frills" yellow liquid guaranteed to enhance one's overall eating experience.

With hundreds of possible applications, the newly approved gram-negative microbe will also open the door for many innovative and exciting products.

"This is thrilling news," Hellmann's CEO Robert Reichert said. "We've been waiting for the federal go-ahead to produce salmonella for decades now. In fact, we have an entire line of lukewarm, sun-soaked, and partially turned mayonnaises that we just know Americans will love."

A variety of products containing the newly approved food-borne microbe will hit non-refrigerated shelves this month. [the Onion. March 10, 2009.]

One of several new foods to feature the motile microorganism is Salmonell-Os—an O-shaped breakfast cereal packed with hearty typhoid clusters—which is expected to hit grocery stores by April.

Other products currently in development include Salmonella Helper, Kraft's Extremely Painful Mac, 'Nella Wafers, and peanut butter.

"Now that salmonella's been approved, we're working overtime to get our products to market," said David Wellbrook, head of sales for Oscar Mayer, the nation's leading producer of bologna-based goods. "I've never seen so many orders come through in a single year, much less a single day. It's incredible."

News of salmonella's approval also comes as a relief to many homemakers, who, until now, had been cautioned against letting the bacteria spread.

"It used to be such a pain to have to sanitize my kitchen," Chicago resident Margaret Thewles said. "Now all I need is one cutting board. I'll cut raw poultry on it, prepare my salad veggies on it, and then use it to serve dessert when I'm done."

Salmonella is said to contain the seven essential forms of bacteria growing infants need. [the Onion. March 10, 2009.]

Michael Weinback, a California native and father of two young children, agreed with Thewles."

This is…arrghhh…great," Weinback said from the bottom of his living room stairs. "Oh, Jesus…here it comes agai—uuuuhhhhh, Christ. Get hel…just get…aarrghh.

[Natural~Specialty Foods Memo (NSFM) Editor's Note: NSFM thanks"the Onion" for permission to reprint the satirical story above. Click here to read the original satirical piece at "the Onion" Web site.

Retail Memo: The FTC-Whole Foods Market Settlement Agreement Looks Much Like Our January 'Blueprint-Template For A Settlement Deal' Proposal

The FTC - Whole Foods Market, Inc. Settlement Agreement

The four members (their normally are five but the FTC is currently one short) of the U.S. Federal Trade Commission (FTC) voted unanimously on the settlement deal with Whole Foods Market, Inc., announced on Friday, March 6, ending the nearly 20-month legal battle waged by the FTC to overturn the 2007 friendly acquisition by Whole Foods Market of Wild Oats Markets, Inc. [Read the details of the settlement agreement in our March 6 piece here: Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge.]

Additionally, the 4 -to- 0 unanimous vote in favor of a settlement by the FTC's Commissioners came just eight days after President Obama named the only Democrat on the FTC, Jon Leibowitz, as its new Chairman, and just a few days after Chairman Leibowitz officially assumed the duties of FTC Commission Chairman.

[Read: Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6, And: Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6. And: Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks.]

Below is a link to the press release issued by the FTC on Friday, March 6, announcing the settlement deal ending its antitrust legal challenge to Whole Foods Market's 2007 acquisition of Wild Oats:

[Link: FTC Consent Order Settles Charges that Whole Foods’ Acquisition of Rival Wild Oats was Anticompetitive.]

Below is the key quote from FTC Commissioner Jon Leibowitz in the March 6 press release regarding why the federal regulatory agency responsible for antitrust enforcement and consumer protection decided to reach and agree to a settlement with Whole Foods Market, Inc., despite for 20 months saying it's goal was to overturn the acquisition in order to preserve competition in what it called the "premium natural and organic retailing segment (PNOS) in a number of U.S. markets:

"As a result of this settlement, American consumers will see more choices and lower prices for organic foods,” said FTC Chairman Jon Leibowitz. “It allows the FTC to shift resources to other important matters and Whole Foods to move on with its business."

Although we've previously suggested the two parties should reach a settlement agreement in numerous pieces beginning some time ago, Natural~Specialty Foods Memo (NSFM) formally called for the FTC and Whole Foods Market, Inc. to reach a settlement on the legal case in this January 29, 2009 piece, where we focused the argument on the need for a settlement to be reached: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement.

In that call for a settlement, we said achieving a settlement is important in part so that the FTC can move on to more important matters, including finding real antitrust cases to challenge, and so that Whole Foods Market can get back to what it does: merchandising and selling natural and organic food and grocery products.

In other words, FTC Chairman Leibowitz basically says in the March 6 press release what we said in our January call for a settlement, as well as in a number of stories prior to that.

In our January 29 piece, [Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement], we also offered a settlement blueprint or template for the FTC and Whole Foods. The basis of the settlement blueprint comes from the reporting, writing about and analysis we've been offering on the deal and antitrust challenge since the summer of 2007.

Below is a part of what we offered in the January piece:

A settlement blueprint or template

"In other words, the universe of stores we are talking about regarding a post-merger, combined Whole Foods-Wild Oats isn't much more than 100 nationally throughout the U.S. in these 29 markets where the FTC deems Whole Foods Market, Inc. a PNOS segment monopoly.

Our argument since the summer of 2007 has been that a post-merger, combined Whole Foods-Wild Oats isn't a monopoly. [You can read a recent story in which we made our argument as to why that's the case at the link here: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly.]

However, looking at FTC v. Whole Foods Market, Inc. today from a completely practical standpoint, we see no reason why the FTC and the natural grocer should not be able to achieve a settlement. After all, we are talking about a universe of just slightly more than 100 stores that the FTC is saying a "PNOS" category monopolist (Whole Foods) makes. We're also talking about just 29 specific U.S. markets. These two key facts need to be the starting point for negotiation, we suggest.

The FTC and Whole Foods need to look at each of these 29 markets and the number of stores the combined Whole Foods-Wild Oats has in each of the markets. Both parties then need to do an independent competitive analysis on each of these markets, including in the analysis not just natural foods class of trade retailers but also food retailers that are hybrid natural-organic-specialty supermarkets. These include retailers like Gelson's and Bristol Farms in Southern California, Raley's and Andronico's Markets in Northern California, The Fresh Market (chain), which has stores in the south, Midwest, Mid Atlantic and eastern regions, Wegmans in the east, Haggen Foods in the Pacific Northwest, and the numerous other natural-organic-specialty "hybrid" chains that fit this category in the 29 markets designated as monopolist by the FTC.

Once this real competitive analysis is done in the 29 U.S. markets, the FTC and Whole Foods then need to agree on Whole Foods' closing an agreed upon number of those 100-plus former Wild Oats stores in each of the respective markets. There still might remain 29 of those markets after the independent competitive analysis work is done, which is something that can be completed in a matter of a few days. But there also could be fewer than 29 remaining after the analysis.

The burden in the FTC's administrative process is on Whole Foods in reaching a settlement, that's why the natural foods grocery chain reached out to the FTC and submitted a settlement offer. In return the FTC suspended action on the case for five days. We think thus far that's a positive spirit of cooperation.

As all lawyers and negotiators know, first time settlement offers are seldom accepted. Instead they tend to be the opening entree to get settlement talks started. Whole Foods has served that opening entree with its offer. The FTC has responded in kind with the temporary halt of legal activity. Both moves are good negotiation openers. After all, another thing all good negotiators know is that the best negotiations come when both sides give a little something right at the start." [Read the entire story here.]

What we suggested is essentially the framework the FTC used in arriving at the settlement deal.

The FTC required (and the natural grocer agreed) Whole Foods Market, Inc. to put up for sale 32 stores -- 13 stores (12 former Wild Oats units and one existing Whole Foods unit) currently in operation and 19 stores that already have been closed, some by Wild Oats before the Whole Foods Market acquisition, the others closed by Whole Foods post-acquisition. [Read the details, including a list of the stores to be sold, here.]

Additionally, the FTC required Whole Foods to put the Wild Oats brand and associated intellectual property up for sale. This is really nothing to Whole Foods since if it thought the Wild Oats brand had value to the company it would be using it in some way. Instead, Whole Foods has intentionally shelved the Wild Oats brand. Now perhaps it can even make a few bucks from selling it.

[Of course, in the dynamic and interesting world of food retailing anything can happen. Perhaps Mike Gilliland, the founder of Wild Oats and now founder and CEO of fast-growing Boulder, Colorado-based Sunflower Farmers Market, will buy the brand from Whole Foods and bring back the Wild Oats name in the form of a chain of natural foods stores bearing the banner. For example, Sunflower is opening stores in Whole Foods' hometown market of Texas. However, because of what likely is a trademark issue with a natural foods store in Texas that uses the "Sunflower" name, the natural grocer has renamed its thus far handful of Texas' stores "Newflower." Wouldn't it just be ironic if Gilliland bought the Wild Oats brand from Whole Foods Market, Inc. and instead changed the name of the Texas stores to "Wild Oats"? It's intellectual property and retail brand marketing food for thought. And you read it here first.]

So, in a nutshell, the FTC seems to have used a very similar process to the one offered in our blueprint-template to arrive at a settlement deal; the key element of such a settlement agreement being, as we suggested, having Whole Foods agree to sell some selected stores in return for the antitrust regulator dropping its legal action, so that both parties could move on to doing what they should respectively be doing, antitrust enforcement and consumer protection for the FTC, and selling natural-organic groceries for Whole Foods Market.

We think the settlement is a good one for Whole Foods.

Reader Resource: Below are links to all of the FTC-filed information on the settlement deal with Whole Foods Market, Inc.:

>Agreement Containing Consent Orders
>Decision and Order [Public Record Version]
>Order To Maintain Assets
>Analysis of Agreement Containing Consent Orders To Aid Public Comment
>Commission Letter Approving the Divestiture Trustee Agreement
>Divestiture Trustee Agreement [Public Record Version] [Appendices B, D, and E Redacted]
>Amended Part 3 Administrative Complaint [Issued on September 8, 2008]
>News Release
>Order Withdrawing Matter From Adjudication

Retail Memo: The 'Whole Bibliography' - FTC v. Whole Foods Market Antitrust Case & Issue

FTC v. Whole Foods Market, Inc. - Settlement Deal Reached

In this story [Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge] published earlier today we reported on and offered some analysis about the settlement agreement reached today by Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) in the FTC's nearly two-year antitrust challenge to Whole Foods' friendly 2007 acquisition of Wild Oats Markets, Inc.

Natural~Specialty Foods Memo (NSFM) has been reporting on, writing about and offering analysis on FTC. v. Whole Foods Market, Inc., as well as suggesting to both parties on how to resolve the case and issue, since August, 2007.

In our analysis pieces, we first suggested over a year ago, and right up until recently, that one way for the FTC and Whole Foods to resolve the antitrust case would be for the two parties to agree on Whole Foods Market, Inc.'s divestiture of a set number of former Wild Oats stores acquired in the deal, thereby satisfying the FTC's claim that a combined Whole Foods-Wild Oats is a monopoly in what the regulatory agency called the "premium natural and organic retailing segment (PNOS)."

That's just what the FTC and Whole Foods Market, Inc. agreed to in its settlement deal announced today -- that Whole Foods will put up for sale 13 stores (12 former Wild Oats units and one existing Whole Foods store), along with 19 other former Wild Oats stores already closed, some closed by Wild Oats before the 2007 merger, others closed by Whole Foods Market post the 2007 acquisition. [See our story linked above for the details.]

Since the 19 stores are already closed, and since Whole Foods Market, Inc. would love to sell them anyway, what the settlement amounts to is the mere closing of 13 existing, operating stores by Whole Foods. Most of those stores are in the Western U.S.

Additionally, if the stores don't sell in a year, Whole Foods Market gets to keep them, per the settlement agreement with the FTC.

In our analysis, that's a good deal for Whole Foods Market.

Of course, since it's been our analysis since August, 2007 that the entire FTC antitrust challenge to the friendly acquisition by Whole Foods of Wild Oats was pure folly, based on a false premise, which the FTC then attempted to make real in court, the settlement also is a good deal for the FTC because it allows it to save face and provides it with at least a verbal, if not real, argument and justification for its nearly two-year expenditure of taxpayer money and agency resources and legal talent in battling the acquisition of Wild Oats by Whole Foods Market, Inc.

We should add that we've had no dog in the fight. We own no Whole Foods Market, Inc. stock. Do zero business with Whole Foods in terms of any sort of vendor relationship, and only shop at the stores from a consumer perspective as part of a multi-format, multi-store food and grocery shopping strategy.

We also happen to be antitrust hawks when we see real concentrations of monopolistic power in any business sector, including food and grocery retailing. For example, if Kroger Co. acquired Safeway Stores, Inc. or Supervalu, Inc. we would have an antitrust problem. The same if Wal-Mart were to acquire Costco... or even Target. Although in the current retailing climate we would look on such deals much more openly that we would have just a year ago.

But we do know a food retailing (natural-organic, premium or otherwise) monopoly when we see it. And the combined Whole Foods-Wild Oats wasn't one, as we've argued since August, 2007.

Below is a bibliography of all of the recent, relevant stories we've written and posts we've made regarding FTC v. Whole Foods Market, Inc. Additionally, at the bottom of the recent bibliogrpahy, we include links from the Natural~Specialty Foods Memo (NSFM) archives, going back to 2007, to stories and posts about the legal battle between Whole Foods and the FTC over the 2007 acquisition of Wild Oats.

Recent Bibliography: FTC v. Whole Foods Market, Inc.

Beginning on February 25, 2009, to today, March 6, the end of the FTC's halt of legal proceedings in its antitrust case against Whole Foods, and the day a settlement agreement was announced, we provided a daily countdown, updating what was happening (or not happening) each day in the negotiations, along with providing related news, information and analysis.

Daily Memo: Countdown to March 6, 2009:

>Read our Thursday, March 6, 2009 Daily Memo at the link: [Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge]

>Read our Wednesday, March 4, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

>Read our Tuesday, March 3, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6]

>Read our Monday, March 2, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

>Read our Friday, February 27 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

>Read our Thursday, February 26 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6]

>Read our Wednesday, February 25 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6]

February, 2009:

February 24, 2009: Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks.... February 22, 2009: Retail Memo: The 'Whole Analysis' - Whole Foods Market Inc's First Quarter Financials, FTC v. Whole Foods...The Natural Grocer At Home and Abroad....February 11, 2009: Retail Memo: 'God And Man at Yale' - The FTC-Whole Foods Settlement Talks: Whole Foods CEO John Mackey Speaks Out at Yale University....

February 5, 2009: Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive....February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?....February 1, 2009: Promotional Merchandising Memo: Whole Foods Market's Super Bowl In-Store Promotional Merchandising Message: 'Value'....

January, 2009:

January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand....January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement....January 25, 2009: Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units....

January 24, 2009: Retail Memo: Despite its Battle With the FTC and Other Struggles, Whole Foods Market Still Ranked 22nd 'Best Place' to Work in America By Fortune....January 24, 2009: Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market....

January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....

January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....

January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....

January 15, 2009: Retail Memo: Fresh & Wholesome Market Fears Not A Whole Foods Market Monopoly; In Fact Part of its Competitive Strategy is to Be the Anti-Whole FoodsRetail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information....

December, 2008:

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....

December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied....

December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....

December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....

December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....

December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

Natural~Specialty Foods Memo (NSFM) Archive Bibliography

FTC v. Whole Foods - Linkage from the NSFM archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors. You can search the archives using the "search" function at the top of the Blog as well.

[Reader Note: Follow Natural~Specialty Foods Memo (NSFM) around on Twitter at www.twitter.com/nsfoodsmemo.]

Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge

FTC v. Whole Foods Market, Inc. - Settlement Deal Reached

Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) have reached a settlement agreement deal in the FTC antitrust case against Whole Foods' 2007 acquisition of Wild Oats Markets, Inc., doing so on the last day in which the FTC had agreed to halt its legal proceedings in the case.

Below (in italics) is what we said yesterday in this piece [ Daily Memo: Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6] about the down-to-the-wire settlement negotiations between Whole Foods Market, Inc. and the FTC:

"The FTC imposed the halt last month after Whole Foods brought an offer of settlement to the U.S. Federal Government agency responsible for antitrust enforcement and consumer protection.

According to our sources, the Whole Foods market settlement offer included the selling of a certain number of former Wild Oats stores now converted to the Whole Foods' brand in some of the 29 U.S. markets where the FTC claims a combined Whole Foods-Wild Oats is a monopoly in what the FTC calls the "premium natural and organic retailing segment (PNOS)."

Natural~Specialty Foods Memo (NSFM) first reported in February, 2009 that the initial settlement offer made to the FTC by Whole Foods, the action that started the settlement talks, included an offer by the natural grocery chain to divest some of the former Wild Oats stores as the key ingredient of a settlement agreement. We are the only publication we can find that reported this.

Today, Whole Foods Market, Inc. announced it has reached a settlement with the FTC over the long legal battle, saying the key element of the settlement involves just what we said it would above, which is the divestiture of a number of stores.

Whole Foods will sell 31 Wild Oats stores and other assets to settle the FTC's antitrust challenge, the natural grocery chain and the government agency responsible for antitrust enforcement and consumer protection said today.

Pursuant to FTC protocol, the settlement agreement has been placed on public record for a 30-day comment period ending April 6, 2009, after which the FTC will issue a final ruling.

The settlement agreement: Under the terms of the agreement, a third-party divestiture trustee has been appointed to market for sale:

~Leases and related assets for 19 non-operating former Wild Oats stores, 10 of which were closed by Wild Oats prior to the merger and nine of which were closed by Whole Foods Market;

~Leases and related fixed assets (excluding inventory) for 12 operating acquired Wild Oats stores and one operating Whole Foods Market store (13 total); and

~Wild Oats trademarks and other intellectual property associated with the Wild Oats stores.

"We are pleased to have reached a mutually-satisfactory agreement with the FTC. We believe it was in the best interests of all our stakeholders to resolve this matter so we can dedicate our full attention to selling the highest quality foods available in our inviting store environments," John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market," said in a statement today.

"It will be business as usual in the 13 operating stores to be marketed for sale. We are committed to serving our shoppers by continuing to operate these stores in the manner our customers deserve and expect. We will be offering Team Members in stores that are sold the choice of either a guaranteed job offer in another store or an enhanced severance package."

Terms and conditions of the settlement agreement: The divestiture trustee will have six months to market the assets to be divested. For any good faith offers that are not finalized by the divestiture trustee during the six-month period, an extension of up to six months may be granted. This twelve month period may be further extended to allow the FTC to approve any purchase agreements submitted within that time period. The only other obligations on Whole Foods imposed by the settlement agreement are in support of the divestiture trustee process.

According to Whole Foods Market, Inc., after receiving final approval on the terms of the settlement deal by the FTC, which is expected prior to April 30, 2009, the natural grocery chain expects to record a non-cash charge of approximately $19 million or less relating to the potential sale of the 13 operating stores.

These stores had combined sales of approximately $31 million in the first quarter of fiscal year 2009, or approximately 1.3 percent of the Company’s total sales of $2.5 billion, Whole Foods said today.

The natural grocery chain says it will incur some cash expenses relating to legal and trustee fees which are not expected to be material. No material additional charges are expected related to the 19 closed properties, for which a lease liability reserve is already recorded, or related to the trademarks which have been fully amortized.

The addresses for the 13 operating stores offered for sale in the settlement deal are:

7133 N. Oracle Rd., Tucson, AZ
8688 E. Raintree Dr., Scottsdale, AZ
2584 Baseline Rd., Boulder, CO
1651 Broadway St., Boulder, CO
3180 New Center Pt., Colorado Springs, CO
5910 S. University Blvd., Littleton, CO
9229 N Sheridan Blvd., Westminster, CO
340 N. Main St., West Hartford, CT
4301 Main St., Kansas City, MO
1090 St. Francis Dr., Santa Fe, NM
7250 W. Lake Mead Blvd., Las Vegas, NV
19440 N.W. Cornell Rd., Hillsboro, OR
6930 S. Highland Dr., Salt Lake City, UT

[Note that 12 of the 13 operating stores are located in the Western U.S. Only one, the store located at 340 N. Main St., West Hartford, CT, is outside of the western states. This is because the Western U.S. region was the primary U.S. market region the FTC claimed Whole Foods Market held its strongest "monopoly" in, in what the FTC called the "premium natural and organic retailing segment (PNOS)." Also, note the high number of stores in Colorado (5 of the 13), which is where Wild Oats Markets, Inc. was headquartered. No problem there for Whole Foods -- it has two too many stores in Boulder anyway. And the two stores in Boulder for sale are two units Whole Foods has been struggling to decide to keep or dump. It would have likely kept them for political reasons. But now being forced to sell them is actually a blessing in disguse. Want to bet the two Boulder stores were offered up in Whole Foods' initial settlement offer to the FTC?]

The addresses for the 19 non-operating Wild Oats stores offered for sale are:

5350 W. Bell Rd., Glendale, AZ
1422 N. Cooper Rd., Gilbert, AZ
874 E. Warner Rd., Gilbert, AZ
9028 W. Union Hills, Peoria, AZ
13823 N. Tatum Blvd., Phoenix, AZ
15569 W. Bell Rd., Surprise, AZ
200 W. Foothills Pkwy., Fort Collins, CO
8194 S. Kipling Pkwy., Littleton, CO
6424 Naples Blvd., Naples, FL
4600 Shelbyville Rd., St. Matthews, KY
87 Marginal Way, Portland, ME
8819-8833 Ladue Rd., St. Louis, MO
7831 Dodge St., Omaha, NE
517 N. Stephanie St., Henderson, NV
4879 S. Virginia St., Reno, NV
5695 S. Virginia St., Reno, NV
2077 N.E. Burnside St., Portland, OR
17711 Jean Way, Lake Oswego, OR
3736 W. Center Park Dr., West Jordan, UT

[Note that 15 of the 19 non-operating stores are located in the Western U.S., with only four stores outside the market region. The reason for this is the same as above.]

Some head-scratching in order

This is a reasonable settlement deal for both parties, in our analysis, although since we've argued beginning in 2007, right after the FTC issued its legal challenge against Whole Foods Market's friendly acquisition of Wild Oats in 2007, that the FTC's monopoly argument and antitrust action was pure folly, it wasn't a needed deal.

Putting that aside, it is a settlement offer that could have been acheived long ago, saving Whole Foods Market, Inc. (and its shareholders) millions of dollars in legal fees, and saving the American taxpayer a likely equal amount in expenses incurred by the FTC "on behalf of American consumers," not to mention being able to have focused the FTC's resources in other, more important, areas instead of its aggressive attempt to overturn the deal.

But at least its a settlement, something we called for months ago.

And it could actually be a positive one in some respects for Whole Foods, particularly the solution to the two Boulder, Colorado stores (two of the 13 operating stores to be sold), and the selling of the six closed stores in Arizona, which is a market region that's overstored, and in which grocers are suffering seriously because the state has been hit so hard by the housing foreclosure mess, financial crisis and economic recession. The grocers suffering the most in Arizona are upscale retailers like Whole Foods market and others.

Additionally, the settlement deal really amount to Whole Foods Market only having to sell 13 stores, since the 19 stores already have been closed and the natural grocery chain would love to sell them anyway. That's nothing folks.

But right now, we're going to fix ourselves a cheese plate (artisan of course), along with some organic grapes and whole grain crackers on the side, and pour a glass of bio-dynamically-produced, organic red wine, while we then engage in some focused head-scratching over why, after all these many months of laboring to overturn the deal, the FTC now agreed on a reasonable settlement deal which it should have proposed itself at least one year ago.

But stay tuned, as we have an upcoming analysis piece on the Whole Foods Market, Inc. - FTC settlement agreement coming up.

Background summary: FTC v. Whole Foods Market, Inc.

The FTC challenged Whole Foods Market's August 28, 2007 acquisition of Wild Oats Markets, Inc. shortly after the two companies announced the deal.

Prior to completion of the acquisition, the FTC filed a motion in the United States District Court for the District of Columbia seeking a preliminary injunction to enjoin the acquisition. The FTC had also filed a complaint commencing an administrative proceeding challenging the acquisition.

On August 16, 2007, the United States District Court for the District of Columbia denied the FTC’s motion for a preliminary injunction.

The FTC appealed denial of the preliminary injunction motion to the United States Court of Appeals for the District of Columbia Circuit and on July 29, 2008 the Court of Appeals reversed the District Court and remanded the case to the District Court for further proceedings.

On remand, the FTC renewed its motion for preliminary injunctive relief pending resolution of the administrative action, specifically seeking a hold separate order, the rebranding of all former Wild Oats stores, and the appointment of a trustee or special master to establish an independent management team for the former Wild Oats assets and oversee Whole Foods Market’s compliance with the order.

The administrative proceeding was scheduled to commence on April 6, 2009. On January 28, 2009, the FTC issued an order granting Whole Foods' motion to withdraw the administrative case from adjudication for the purpose of considering a proposed consent agreement that would resolve the administrative proceeding. A further order dated February 4, 2009 extended the withdrawal through March 6, 2009.

On March 6, 2009 Whole Foods and the FTC reached a settlement deal.

Daily Memo: Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6

FTC v. Whole Foods Market - Settlement Talks

Natural~Specialty Foods Memo (NSFM) is beginning to understand how MSNBC cable news host Keith Olberman must feel each and every night on his program, "Countdown With Keith Olbermann," the format of the show being an hour-long "countdown" of the day's top news stories, now that we've been counting-down the days until March 6, regarding Whole Foods Market's and the FTC's settlement deal negotiations.

And, as the March, 2009 calendar page at the top reminds us in black and white, March 6 is almost here.

Today, Thursday, March 5 ended without the U.S. Federal Trade Commission (FTC) and Whole Foods Market announcing a settlement deal had been reached in FTC v. Whole Foods Market, Inc., the regulatory agency's legal case designed to overturn Whole Foods' 2007 friendly acquisition of Wild Oats Markets, Inc.

Tomorrow is the day the FTC has said its temporary halt in legal proceedings regarding the antitrust case will end.

The FTC imposed the halt last month after Whole Foods brought an offer of settlement to the U.S. Federal Government agency responsible for antitrust enforcement and consumer protection.

According to our sources, the Whole Foods market settlement offer included the selling of a certain number of former Wild Oats stores now converted to the Whole Foods' brand in some of the 29 U.S. markets where the FTC claims a combined Whole Foods-Wild Oats is a monopoly in what the FTC calls the "premium natural and organic retailing segment (PNOS)."

If there is an announcement tomorrow, we think it will include one of, or a combination of, the five things detailed below:

>The FTC could announce an extension of its halt in legal proceedings, saying negotiations with Whole Foods are continuing, but that more time is needed. In our analysis, such an extension would likley be for no more than two weeks, because the FTC has set April 6 as the start date for its administrative trial in the antitrust case.

> Both sides could announce that no settlement deal has been reached but they are continuing talks but no extension of the FTC halt.

> One or both sides could announce that no settlement deal has been reached and they will no longer negotiate a settlement.

> Both sides could announce a settlement deal has been reached.

>Both sides could announce nothing. It's Friday, and even if the two parties were to reach a deal they might not announce it on a Friday.

Of course, if there is bad news to announce, they probably will do it tomorrow, since Friday is the favorite day for government agencies, politicians and corporations to announce bad news. It's the end of the week and fewer people pay attention to the news on weekends. The financial markets are also closed on the weekends. So you announce it after the markets close on Friday.

For now, we're going to leave it here. But we will be reporting and offering some fresh analysis tomorrow, Friday, March 6, 2009. Stay tuned.

Daily Memo: Countdown to March 6, 2009

Read our Wednesday, March 4, 2009 Daily Memo at the link: ]Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

>Read our Tuesday, March 3, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6]

>Read our Monday, March 2, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

>Read our Friday, February 27 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

>Read our Thursday, February 26 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6]

>Read our Wednesday, February 25 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6] [Note: There's a bibliography of recent posts on FTC. v. Whole Foods Market, Inc. from Natural~Specialty Foods Memo (NSFM) at the bottom of the linked column. This is our first Daily Memo on the countdown to March 6.]

Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6

FTC v. Whole Foods Market, Inc. - Settlement Talks

Today passed without an announcement from the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. as to whether or not the two parties have reached a settlement deal in the ongoing FTC antitrust challenge to Whole Foods' 2007 friendly acquisition of Wild Oats Markets, Inc.

There are now only two days until the FTC's halt of legal proceedings in the antitrust case ends. That halt in legal proceedings ends Friday, March 6.

The FTC could extend the halt if it feels the ongoing settlement talks are progressing, but that all that's needed is more time. Of course, that assumes a settlement deal isn't reached by Friday.

Additionally, April 6 is the date the FTC has set to begin an administrative trial in FTC v. Whole Foods Market, Inc., its antitrust case against the natural grocery chain. That trial will be chaired by an FTC-appointed Administrative Law Judge, who will hear the respective legal arguments from both sides, and then rule on the status of the Whole Foods-Wild Oats merger.

Wild Oats Markets, Inc. no longer exists as a corporate entity. And Whole Foods Market, Inc. has basically fully-integrated Wild Oats' into the Whole Foods Market culture and operating system. Only about 6-10 of the about 100 former Wild Oats stores Whole Foods kept post-acquisition haven't been rebranded under the Whole Foods Market name.

Whole Foods volunteered to not rebrand those remaining stores until there is a resolution to the FT. v. Whole Foods Market antitrust case and issue.

With only two days remaining until March 6, both sides are working hard on reaching a settlement deal.

The countdown clock is ticking faster and faster though.

New FTC Chairman Jon Leibowitz

Meanwhile, as we reported last week, President Obama has named current FTC Commissioner Jon Leibowitz as the new Chairman of the federal regulatory agency responsible for antitrust enforcement and consumer protection.

Leibowitz, a Democrat known to be an antitrust hawk, was named FTC Commissioner by Republican President George W. Bush in 2004. And his appointment to the position by President Obama signals what the President has said will be a significant component of his term as President -- increased regulation, including stronger antitrust enforcement.

As an FTC Commissioner though Leibowitz has signaled a flexibility in being willing to reach a settlement in the Whole Foods-Wild Oats antitrust matter.

Ironically, from the standpoint of the Whole Foods case at least, many legal observers (and Democrats) consider the FTC to have overall been weak on antitrust enforcement during President Bush's two terms.

But in the case of Whole Foods Market's $565 million acquisition of Wild Oats in 2007, the FTC has been an antitrust enforcement hawk, pursuing its attempt to overturn the deal for about 18 months, including appealing federal judge Paul Friedman's original decision in 2008, which gave Whole Foods Market the green light to go forward and integrate the Wild Oats stores into Whole Foods.

A federal appeals court overturned the judge's ruling in favor of the deal last year. That's why the case is where it is today.

This selective antitrust enforcement makes the already bizarre desire by the FTC to overturn the deal even more bizarre.

First off, the natural products retailing industry, with all due respect, is hardly a vital, mainstream business in the U.S. in terms of being an essential way of feeding the majority of Americans. It is vital for other reasons. Maybe 20% (and that's probably a generous estimate) of American consumers purchase all or most of their food and groceries at natural foods class of trade stores, like Whole Foods, the former Wild Oats, Sunflower Farmers Market and others.

Second, the net result of Whole Foods' acquisition has been to add a grand total of about 100 stores to its "retailing empire" of about 279 total stores to date. By contrast, Wal-Mart operates nearly 4,000 stores in the U.S. and Safeway Stores, Inc. about 1,600 in the U.S.

Safeway has just about as many supermarkets (about 260), which merchandise a strong and rapidly increasing selection of natural and organic foods, in just Northern California alone, where it has its corporate headquarters, as Whole Foods has total number of stores in the entire U.S., (about 269; 11 are in the UK and Canada), for example.

Lastly, as we've argued since 2007, the entire premise of the FTC's antitrust action against the deal rests on its argument that a combined Whole Foods-Wild Oats (those about 100 added stores) is a monopoly retailer in 29 U.S. markets, in what the FTC has termed the "premium natural and organic retailing segment (PNOS).

This is pure folly. No serious participant in, or analyst of, the natural-organic foods retailing industry -- and food and grocery retailing in general -- really thinks that's true.

Rather, as we've argued often in Natural~Specialty Foods Memo (NSFM), natural and organic foods retailing in America today is a multi-corporate (and independent), multi-format retailing business. U.S. consumers today are just as likely to buy their natural and organic food and grocery products at Trader Joe's, Costco, Safeway and a host of other stores, as they are to purchase the goods at a store operated by Whole Foods Market, Inc.

So, why the selective antitrust enforcement by the FTC? And why the laser beam-like focus on Whole Foods' $565 million friendly acquisition of Wild Oats (tiny in terms of food retailing industry acquisitions), which in the end added only 100 stores to the natural grocery chains store-count and sales volume bottom line throughout the entire United States?

Additionally, doesn't the FTC realize that Wild Oats board tried to sell the company to numerous grocery chains before Whole Foods came along? That included shopping Wild Oats to Kroger Co, the largest U.S. supermarket chain and the third-largest seller of groceries in the U.S., after number one Wal-Mart and number two Costco? Kroger said no thanks.

We just can't believe the FTC really believes a combined Whole Foods-Wild Oats presents any real monopolistic barrier to Whole Foods Market, Inc.'s competitors, or that it poses a valid consumer protection issue for America's food and grocery shoppers.

We even know one of Whole Foods natural foods class of trade competitors who laughs at the whole Whole Foods as a monopoly concept and FTC argument. Hint: The natural foods chain this person runs is competing head-to-head against Whole Foods Market in numerous market regions in the U.S.

But since there are at least four, fast-growing natural foods chains taking on Whole foods on a regional basis in the U.S. in a big way by opening numerous new stores, your guess as to who the person is isn't so easy.

But the mere fact there are those four natural foods chains doing so should be enough to suggest Whole Foods' competitors, as well as the market in general, doesn't agree with the FTC.

Can you? (Feel free to offer your opinion by using the comments link at the bottom of this post.)

Daily Memo: Countdown to March 6, 2009 (February 25 -to- March 6):

>Read our Tuesday, March 3, 2009 Daily Memo at the link: Daily Memo - Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6

>Read our Monday, March 2, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6.]

>Read our Friday, February 27 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6.]

>Read our Thursday, February 26 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6.]

>Read our Wednesday, February 25 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6. [Note: There's a bibliography of recent posts on FTC. v. Whole Foods Market, Inc. from Natural~Specialty Foods Memo (NSFM) at the bottom of the linked column.]

[You can follow Natural~Specialty Foods Memo (NSFM) around on Twitter.com at: www.twitter.com/nsfoodsmemo.]

Blogging-Grocers' Memo: Grocers That 'Blog,' 'Twitter,' 'Facebook' ... and More

Safeway 2.0: Safeway Stores, Inc. recently became the latest major (as in third-largest U.S. supermarket chain) grocery chain to add a Blog to its Website, Safeway.com.

Safeway Stores bills its relatively new Blog as "The Official Safeway Blog." The Safeway Web site-based Blog is written by Kate, who is a full-time Safeway employee. Below is how Kate describes the Safeway Blog and herself:

About the Blog
Welcome to the official Safeway blog. What's this blog all about? In a nutshell, it's about family, food, value and fun. Of course, what makes this blog really exciting is YOU — so join the conversation!

About the Author:
Hi, my name is Kate. I am mom to three wonderful daughters Gabriella, Madeleine, and Mae and wife to a great guy, Max. I work full time at Safeway and a large part of my job is getting to hear from a lot of women out there about everything that's important to them. Welcome to my blog.

Safeway Stores, Inc. added Kate's Blog when it did a redesign of its Safeway.com Web site in the late fall of last year.

In the Blog, Kate writes about a wide variety of topics: nutrition, meal ideas, local foods, natural and organic products, what's happening in the stores, promotions, and the like. She also encourages readers to comment on the posts.

For example, below is Kate's post from today, March 4, 2009:

Local Mandarins
03-04-2009 08:10 AM
By Kate

My favorite fruit of winter is the mandarins, we go through a five pound bag a week! Super sweet, easy to peel, and the girls love them. The brand we have in our store is from California, which I appreciate as I know they didn't travel huge distances to get to my store which means they’re always fresh (haven’t had a “dried out” one yet) and taste great! We try and support our local businesses in whatever we do –the local “pizza place”, the barber – vs. the chains. We feel it’s particularly important now as we’ve seen so many businesses close on our “main street”. What do you buy that’s local?

[View the Safeway Web site Blog here.]

Safeway Stores, Inc. isn't using the Twitter micro-blogging, social networking site as of yet, something grocery chains like Whole Foods Market, Trader Joe's, Tesco's Fresh & Easy, Oregon's New Season's Market and a number of others have started to do. Are you listening Kate? We think it would be a great tie-in with her Blog.

The New Seasons Market Blog - and Peanut Butter: Speaking of Portland, Oregon-based New Seasons Market, the nine-store natural foods chain also is a "Blogging-Grocer." And the independent natural grocery chain recently used its Blog to update consumers and customers on the peanut product recall, which appears to be far from close to being over.

The February 19 Blog post is titled: "What's the Story With Our Bulk Peanut Butter Recall?"

In the post, New Seasons' president Lisa Sedlar says the natural grocer has thus far removed over 135 different FDA-recalled peanut-related products from store shelves. She says it's been the most massive product recall she has experienced in her 20-plus years in the natural products industry.

[You can read her post on the peanut product recall and issue in the New Season's Market Blog here.]

New Seasons Market also has a feed on the popular social networking site Twitter. You can view it here. Below are New Seasons' two most recent "Tweets" (Twitter talk for posts) on its Twitter feed:

@rebeccashapiro Of course. Plenty of GF cereals to munch an along with alternative milks like hemp & hazelnut.about 5 hours ago from TweetDeck in reply to rebeccashapiro
Free cereal & milk tasting this weekend.

Cereal: It's the budget crunch that goes great with milk! http://budurl.com/freecerealabout 6 hours ago from TweetDeck.

[Read about another way New Seasons Market has used its Blog: December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data.]

New Seasons' also uses Facebook. There's a link to its Facebook site on the Blog.

The "Whole Leader" of the "Blogging-Grocer" Pack in the U.S.: Whole Foods Market, Inc. is the pioneer in the food retailing industry in using Blogs as a part of the its social networking communications and marketing outreach strategy.

The first Blog on the Whole Foods Market Web site was (and is) "The CEO's Blog, written and published by CEO John Mackey. He started the Blog in 2005. CEO Mackey hasn't been posting much on his Blog of late though. His last post was in early November, 2008.

CEO Mackey also no longer posts anything on his "The CEO's Blog" about the FTC. v. Whole Foods Market, Inc. ongoing antitrust case. He stopped posting about the legal case last year after just one post (See the May 21, 2008 post here) about his return to Blogging. He did so so as to not interfere with the ongoing litigation.

Last year Whole Foods kicked-up its Blogging activity a few notches when it redesigned its Web site and added its very active "Whole Story" Blog. The natural grocer uses the Blog regularly, posting culinary suggestions and recipes, items about new products at Whole Foods, nutrition information, stories on sustainability, local foods and other similar issues, and a "Whole Lot More."

Whole Foods also has been using the Blog to inform consumers about the FDA peanut product recall, including listing all of the items its pulled from its shelves in Blog posts.

Whole Foods also includes food-related videos and podcasts on its Web site in conjunction with its "Whole Story" Blog.

Additionally, Whole Foods now has a series of interactive forums on its Web site, in which consumers can discuss food-related topics and issues with each other, as well as with Whole Foods Market's Bloggers.

Lastly, Whole Foods ties its Web site Blogging in with three social networking sites: Twitter, Facebook and Flikr (for photographs). The links to each are here: Whole Foods Market photos on Flickr, Whole Foods Market on Facebook, Whole Foods Market updates on Twitter.

A number of Whole Foods regional divisions, such as Los Angeles and Columbus, Ohio, also have Twitter sites of there own, which offer a local angle.

Whole Foods Market is taking Blogging and the use of social networking sites very seriously. In fact, its the only grocery chain of any format we are aware of that currently has a senior staff member, Paige Brady, who's full-time job is social networking. She's Whole Foods' "Blogger-in-Chief."

At this point in time, based on our research, Whole Foods is the top "Blogging-Grocer" in the U.S.

[Suggested Reading: June 7, 2008: Retail Memo: Whole Foods Market, Inc. Launches New and Improved Company Blog; Leadership 2.0 and Increased Transparency on the Move in Food Retailing ... May 22, 2008: Retail Memo: Whole Foods Market CEO John Mackey is 'Back to Blogging'; As Well as Being 'Back in Town.' ... May 25, 2008: nday, May 25, 2008 Retail Memo: More On John Mackey's Return to Blogging...United Kingdom's Waitrose Chief Exec Mark Price Goes His Own Way in His 'The Grocer's Blog'.]

The UK's "Grocery-Blogger-in-Chief": The May 25, 2008 post linked above mentions Mark Price, the CEO (official title: managing director) of the upscale Waitrose supermarket chain in the United Kingdom. If by our own account Whole Foods Market is the leading "Blogging- Grocer" in the U.S., Waitrose gets that honor in the UK.

In addition to Waitrose chief Mark Price's Blog, there's also a Blog by the grocery chain's nutritionist, and another by a local British hog farmer who supplies premium pork to Waitrose.

We really like the personal touch Waitrose uses in its Blogging. It creates interest in the personalities behind the grocery chain.

[You can check out the latest Blog posts from the Waitrose folks here.]

[Three past stories from NSFM about the Waitrose "Blogging-Grocers": Retail Memo: Waitrose's 'Chubby Grocer' Mark Price 'Weighs-In' on His Rival; Marks & Spencer CEO and 'The King of Pants' Sir Stuart Rose... Leadership 2.0 Memo: More Food and Grocery Industry Leaders Need to Adopt Digital, Interactive Communications Strategies in This Digital Age... Retail Memo: More On John Mackey's Return to Blogging...United Kingdom's Waitrose Chief Exec Mark Price Goes His Own Way in His 'The Grocer's Blog'.]

A Very Independent "Blogging-Grocer": Jim Hiller, the owner and CEO of Michigan's eight-store Hiller's Markets, goes his own way in his grocer's Blog, taking positions and offering his opinions in the Blog on a variety of issues.

His chief issue of late has been urging folks to buy American automobiles, which shouldn't be a surprise since Hiller's stores are located in the Detroit, Michigan region, home to America's struggling "Big Three" automobile companies.

But Hiller also writes about a wide-variety of other issues in his Blog -- like oysters -- which he wrote about in a post on February 16.

But today's post in his Blog, "Jim's Blog: A Message From the Helm," on the Hiller's Market Website is about cars. It's titled: "A New Ride," and is well worth reading. [Click here to read the post.]

We like that independent grocer Jim Hiller shows who he is in his Blog. After all, one of the keys to the success of independent grocers in the U.S. is showing a personality. Jim Hiller does that in spades, as does Hiller's Market in its merchandising and operations.

[Suggested Reading: December 23, 2008: Independent Grocer Memo: Eight-Store Michigan USA Independent Hiller's Markets Demonstrates Why Independents Survive and Thrive in the U.S.]

[Blogging-Grocers Memo is a regular feature of Natural~Specialty Foods Memo (NSFM). If you spot a grocer Blogging about something of interest (or even not of interest), feel free to send us a note and a link at: nsfoodsmemo@yahoo.com. Comments on grocers and Blogging are welcome on this post. Just click the "comments" link below and offer your opinion.]

[Follow Natural~Specialty Foods Memo (NSFM) around on Twitter at: www.twitter.com/nsfoodsmemo]

Daily Memo - Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6

FTC. v. Whole Foods Market, Inc. - Settlement Talks

There was no announcement today regarding whether or not the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. have reached a settlement in their talks over the FTC's antitrust challenge to the natural grocery chain's 2007 friendly acquisition of Wild Oats Markets, Inc.

And, according to our sources, no settlement deal has been reached as of yet.

There are only three days remaining until March 6, the date the FTC has set as the end of its halt in legal proceedings regarding FTC. v. Whole Foods Market, Inc.

The FTC has set April 6, 2009 as the date it will begin an administrative trial in which an FTC-appointed Administrative Law Judge will hear arguments from both sides regarding the antitrust aspects of the 2007 acquisition of Wild Oats by Whole Foods Market, Inc., assuming a settlement isn't reached before then. After hearing the arguments, the judge will offer an administrative ruling on the status of the merger.

Whole Foods Market wants to avoid the April 6 administrative trial, which is why the Austin, Texas-based natural grocer made a settlement offer to the FTC in February. The FTC did not accept that initial offer.

But in response to the offer, which we're told involved Whole Foods Market closing and selling some of the about 100 former Wild Oats stores it now operates, the FTC announced its halt of legal proceedings as a good will gesture so that the two sides could further negotiate a settlement deal.

The FTC halt ends on Friday, March 6. However, the U.S. federal regulatory agency responsible for antitrust issues and consumer protection could extend the March 6 date if it desires.

Natural~Specialty Foods Memo's (NSFM) Countdown to March 6, 2009:

>Read yesterday's (Monday, March 2, 2009) Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6.]

>Read our Friday, February 27 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6.]

>Read our Thursday, February 26 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6.]

>Read our Wednesday, February 25 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6. [Note: There's a bibliography of recent posts on FTC. v. Whole Foods Market, Inc. from Natural~Specialty Foods Memo (NSFM) at the bottom of the linked column.]

[Reader Note: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at: www.twitter.com/nsfoodsmemo.]

Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6

It's well-past the end of the business day today, Monday, March 2, and no announcement has come from the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. on if the two parties have reached a settlement agreement to the FTC v. Whole Foods Market, Inc. legal case, in which the FTC is attempting to overturn the 2007 friendly acquisition by Whole Foods of Wild Oats Markets, Inc.

The two parties resumed talks today we're told, following taking the weekend off. Our sources say no settlement agreement has been reached yet.

The FTC has halted its legal challenge against the deal until Friday, March 6 so that the two parties can negotiate a settlement to the long-running FTC challenge.

However, the FTC has set April 6, 2009 as the start date for an administrative trial in which an FTC-appointed Administrative Law Judge will hear arguments on the case from lawyers from Whole Foods Market, Inc. and the FTC. After the hearing portion of the trial is over the Administrative Law Judge will make a ruling on the status of the merger.

The FTC can extend its March 6 halt of legal proceedings if it feels settlement talks between the regulator and Whole Foods are moving in a positive direction and more time is needed to complete the negotiations.

But both the March 6 deadline and the April 6 trial date are fast-looming

Natural~Specialty Foods Memo's (NSFM) Whole Foods - FTC countdown to March 6 series:

>Read our Friday, February 27 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6.]

>Read our Thursday, February 26 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6.]

>Read our Wednesday, February 25 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6. There's a bibliography of recent posts in Natural~Specialty Foods Memo (NSFM) at the bottom of this column as well.]

Whole Foods Market, Inc. - News & Notes

>Read a recent analysis (February 22, 2009) we did on Whole Foods' first quarter 2009 financial performance and related issues here: [Retail Memo: The 'Whole Analysis' - Whole Foods Market Inc's First Quarter Financials, FTC v. Whole Foods...The Natural Grocer At Home and Abroad.]

Whole Foods Market in the Media

>In the February 22 story linked above we included some analysis about Whole Foods' operations in the United Kingdom. The UK trade publication Retail Week has a story today about Whole Foods Market-UK. You can read it at the link here: Anybody remember Whole Foods Market?

>The Chicago Tribune newspaper has now joined Natural~Specialty Foods Memo's (NSFM) about 20-month argument that the FTC's attempt to overturn the 2007 friendly acquisition of Wild Oats by Whole Foods Market, Inc. is folly. Here is just one of the many pieces in which we've made that argument: [Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly.]

In the Saturday, February 28, 2009 story the Chicago Tribune writer says: "So here's a bit of unsolicited advice for the FTC: Quit obsessing over Whole Foods Market's acquisition of Wild Oats Markets." Read the entire piece here: FTC's imagined threat. [See, we've been right all along.]

>Austin, Texas-based Whole Foods Market opened a new store today in the Lakewood section of Dallas, Texas. Bizjournals.com covered and writes about the store opening today here: Whole Foods opens Lakewood location.

>As part of its recent strategic emphasis on value, Whole Foods is focusing on merchandising and promoting products for cooking at home, which millions more U.S. consumers are doing in the current economic recession than they were just a year ago. One of the programs within this cooking at home promotional emphasis for Whole Foods is its new seasonal kitchen program. The Providence (Rhode Island) Journal writes about the program here: A return to home cooking.

New FTC Chairman Jon Leibowitz formal announcement today

We first reported in this February 24, 2009 piece [Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks] that FTC Commissioner Jon Leibowitz was a lock to become the new chairman of the federal regulatory agency responsible for competition, antitrust regulation and consumer protection.

We said President Obama would name Leibowitz FTC Chairman by last Friday, February 27. As we reported On Friday in this piece[ Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6][See, Leibowitz in as new chairman] the White House confirmed on Friday that Mr. Leibowitz was indeed the President's choice to head the FTC.

The White House made its formal, public announcement regarding Jon Leibowitz being named by the President to head the FTC today. Note: since Mr. Leibowitz is already an FTC Commissioner, he need not go through the Senate confirmation process as would be the case for a an outside presidential appointee the the position.

Here's the Washington Post's report today: FTC's Lone Democrat Named as New Chairman.