Ethical Retailing Memo: David vs. Goliath: Planet Organic Markets Beats Out Whole Foods Market, Others as the 'Top Organic' Grocer in Canada

Canada's Planet Organic Markets, a national natural and organic foods retailer, edged out U.S.-based Whole Foods Market, Inc's Canadian division for the honor of top organic food retailer in Canada, in a survey and analysis by Corporate Knights magazine, a national publication which covers ethical and responsible corporate and business behavior and practices.

Planet Organic Markets received an A grade, and Whole Foods Market-Canada a B+ in the publications first "Green Grocer" survey, which is modeled after the United Kingdom's National Consumer Council's ethical grocers' survey.

Corporate Knights magazine rated Canada's top grocers--Planet Organic Markets, Whole Foods Market-Canada, Loblaws, Safeway, Metro, Provigo, Sobeys and a few others--in five areas: climate change, which looked at the availability of locally-produced food, the sale and promotion of CFL light bulbs, and in-store conservation efforts; consumer education, which looked at how organic and local food, Fair Trade products, and a reduced-meat diet are promoted; food sustainability, which surveyed the availability of organic products as well as responsibly-farmed fish and meats; household sustainability, which examined the stores' availability of "green" household products; and waste recycling, which looked at the recycled and Forest Stewardship Council content in product packaging , along with the stores' efforts to reduce the use of plastic grocery bags.

You can read more details about the survey and analysis here. There's also two links here, one for the actual survey methodology, and the other to view the survey questionnaire filled out by the Canadian grocers participating. The links are located in the yellow "resources" box on the right hand of the linked page.

While Planet Organic Markets and Whole Foods-Canada scored and A and a B+ respectively, the mainstream grocers mentioned above who were surveyed scored between a C and C+ overall, with their individual stores scoring a bit higher in the C to B range. This is because some stores take it on themselves to do more in the environmental and ethical categories surveyed compared to the chains as a whole.

Regarding Whole Foods Market-Canada, the Corporate Knights magazine survey was conducted before the supernatural grocer eliminated the use of all single-use plastic carrier bags from its U.S., Canadian and UK stores on April 22, Earth Day 2008.

Therefore, since plastic grocery bag reduction efforts are one of the criteria in the survey, Whole Foods' elimination of the bags completely in all its Canadian stores might have pushed it up a notch, from a B+ to an A, therefore perhaps coming in a dead heat with Planet Organic for first place. We don't know that for sure however.

Planet Organic Markets uses biodegradable plastic carrier bags in all its Canadian stores.

For a more detailed overview of how each of the grocery chains scored in the survey, as well as the differences between Planet Organic Markets and Whole Foods vis-a-vis the mainstream grocery chains, you can read this piece from Corporate Knights magazine about the survey.

Among some of the highlights of Planet Organic Markets' "green" and sustainability efforts, is the fact that its store employees were uniforms made out of bamboo, the grocer buys wind energy to power much of its operations, the store janitorial crews use sustainable cleaning products and all of the plastic grocery bags used in the stores are biodegradable.

Ironically though, one the question of local foods sourcing, Whole Foods Market-Canada did much better than Planet Organic Markets. Whole Foods also buys wind energy to power 100% of its Canadian stores.

The survey-takers said all of the Canadian grocers--with Whole Foods and Planet Organic at the top--are making good progress on reducing the use of single-use plastic carrier bags in their stores but there's much more progress to be made.

Canada is debating passing a law that would either put a per-bag fee on the plastic grocery bags or perhaps even ban their use completely in supermarkets. As we mentioned above, Whole Foods voluntary has stopped using single-use plastic carrier bags in all its stores in Canada.

As we've written about in Natural~Specialty Foods Memo recently, Canada's Planet Organic Markets' parent company, Planet Organic Health Corp. is expanding rapidly, including making two recent acquisitions of regional natural foods retail chains in the U.S.

Those two acquisitions, of 11-store Mrs. Green's Natural Foods Markets in New York and New Leaf Community Markets in Northern California, are the natural products' retailers first entry into the U.S. Market.

As we've also reported, Planet Organic is spending over $1 million to build a new, state of the art prepared foods facility in upstate New York for its Mrs. Green's retail operation. The grocer also plans to add additional Mrs. Green's stores in the upstate New York region and most likely elsewhere nearby.

Planet Organic also is building a brand new New Leaf Community Market natural foods store in the seaside town of Half Moon in the San Francisco Bay Area's coastal region. That will give the natural grocer four New Leaf banner stores when the new store is completed later this year.

Both Planet Organic and Whole Foods Market, Inc. are expanding the number of stores they have in Canada.

Although Whole Foods Market, Inc. with sales over $6 billion annually, is a natural foods' retailing Goliath compared to Planet Organic Markets, with sales of about $120 million a year, Planet Organic is in a hyper-growth and expansion mode. Just seven years ago when the current Planet Organic Health Corp. parent company was formed as an umbrella for the stores and the company's other operations, retail sales were only $1.6 million annually.

Planet Organic Health Corp.'s move into the U.S. market with the Mrs. Green's and New Leaf acquisitions also demonstrates this natural foods' retailing David isn't afraid of Whole Foods post its acquisition of Wild Oats Markets, Inc., despite the fact U.S. Federal Trade Commission (FTC) persists in wasting taxpayer money to go back again and again to the federal appeals court, trying to get the Whole Foods/Wild Oats acquisition-merger broken up.

While we certainly believe there are instances when the FTC is warranted in stepping in to stop acquisitions and mergers which would restrain competition and pricing, the Whole Foods/Wild Oats merger isn't one of the instances in our analysis.

Just ask the marketplace, and natural foods' retailers like Planet Organic, Sprouts Farmers Markets, Sunflower Farmers Markets, Tesco's Fresh & Easy Neighborhood Markets and others who are expanding rapidly, and in the case of Sunflower and Sprouts, getting ready to open stores right in the heart of Whole Foods Market Country, in Texas.

Also ask mainstream supermarket retailers like Safeway, SuperValu, and Kroger, and mega-mass merchandisers Wal-Mart and Target, as well as scores of regional chains and thousands of independent grocers in the U.S., which are all getting deeper and deeper into the natural and organics categories. There's plenty of competition--and more coming--for Whole Foods Market, Inc. in the United States.

Planet Organic Markets is bringing its Canadian brand of "green" and ethical food retailing to the two natural foods chains its acquired in the U.S. As such, there are going to be some interesting changes at the Mrs. Greens and New Leaf stores in the coming months.

We also know Planet Organic is looking for other multi-store natural foods retailers in the U.S. similar to the two it acquired last year (Mrs. Green's) and this year (New Leaf).

Doesn't Planet Organic remind you of another fast-growing natural foods' retailer, say in about the late 1980's and early 1990's? That one from Austin, Texas. The one that was just starting to boom about that time and didn't even carry the title "supernatural" grocer yet?

You know, that Texas natural foods grocer who today, about 15 years later, is not only a national chain but an international natural products retailer as well? and continues to grow rapidly--and in new ways?

It does us. In many ways, today's Planet Organic, with its rapid-growth and innovation, looks much like Whole Foods Market, Inc. did 15 or 20 years ago. It will be interesting to chart the Canadian-based natural foods' chain's growth, both at home and now in the United States.

In conjunction with its responsible grocers' survey and rating project, Corporate Knights magazine published a special feature in its April, 2008 edition on responsible and "green" retailing in Canada. You can read the various articles on the topic in the magazine's April issue here.

Prepared Foods Memo: Planet Organic's Mrs. Green's Natural Market Planning Big Push in Fresh, Prepared Foods' Category

As we reported here, Canada's Planet Organic Health Corp. recently acquired two U.S. Natural foods' retail chains, 11 store Mrs. Green's Natural Market (acquired last year) based in Scarsdale, New York and 3-store (with a new store being built) New Leaf Community Markets (acquired this year), based in Santa Cruz in Northern California.

These two acquisitions marked Planet Organic's first move into the U.S.

We've said before the Canadian natural products' retailers move into the U.S. with these two acquisitions is further evidence of the argument we've been making since last year that contrary to the position of the U.S. Federal Trade Commission (FTC) and many U.S. natural foods' retailers, suppliers and observers that Whole Foods Market, Inc.'s acquisition of Wild Oats Markets, Inc. would stifle competition, we believe the opposite is true: that it's actually increasing competition and innovation by both natural foods' retailers and supermarket chains and independents in the USA.

As we reported in a previous piece, Planet Organic plans to add numerous new stores to its recently acquired Mrs. Green's (in the east) and New Leaf (in California) chains in the next couple years. Further, Canada's Planet Organic is on the lookout to acquire other small-to-medium-sized regional natural foods' retail chains in the U.S.

We've now learned Planet Organic is making a major investment at its Mrs. Greens operation in New York in the prepared foods' category.

Historically, when it was an independent operation, Mrs. Green's Natural Market supplied its 11 units with fresh, prepared foods out of a 3,000 square foot kitchen in the basement of one of its stores. This cramped commissary put a crimp on the volume of deli and other prepared foods' items the retailer could supply to it busy stores. It also meant the 40 chefs and others working in the 3,000 square foot basement kitchen were elbow-to-elbow for eight hours a day.

This situation no longer will be the case though. Planet Organic plans to build a new, state-of-the-art 30,000 square foot, above ground kitchen/commissary where not only will the retailer's chefs and others have plenty of space to create the fresh, prepared foods, but also will allow the natural foods' grocer to supply its stores better and with a larger variety of prepared foods items.

According to Harold Hochberger, Mrs. Green's founder and current Co-President under Planet Organic's ownership, the 3,000 square foot basement kitchen currently produces everything from fresh, organic pies and fruit smoothies, to complete vegetarian meals for distribution to and for sale in the stores.

The fresh, prepared foods produced in the basement kitchen account for about $3.5 million a year in sales for the 11-store natural foods chain, or about about 8% of total store sales, Hochberger says.

With the addition of the new, above-ground commissary which will be ten-times the size of the current basement kitchen, Mrs. Green's is looking forward to not only increasing the quantity and variety of prepared foods for its stores, but increasing that $3.5 million in annual prepared foods' category sales considerably.

Hochberger says prepared foods sales in the Mrs. Green's stores have been increasing by about 15% annually for the last few years. He and Planet Organic believe with the new commissary, which will cost at least $1 million to build and equip, sales growth will be even higher once the facility is operating. He says he expects the facility to open in about six months.

Planet Organic Health Corp. is currently launching an aggressive growth plan, on top of seven year's of already rapid growth, focusing on its home market of Canada and in the U.S.

Seven years ago, annual gross sales for the company were only $1.6 million. At present, the Canada-based natural products company has sales of about $100 million. That's a gain of $7 million a year in each of those seven years.

Planet Organic is a diversified, publicly-held natural products company. In addition to operating nine natural foods supermarkets in Canada under the Planet Organic Market banner (with more on the way) and the Mrs. Green's and New Leaf stores in the U.S., the company also operates 48 natural health stores in Canada under the Sanger's Health Centre banner and eight similar stores under the Healthy's and Planet Organic Living banners.

Planet Organic Health Corp. also owns Trophic Canada, which is that country's leading manufacturer and marketer of natural supplements.

Planet Organic's two acquisitions in the U.S.--one on the east coast and the other on the west coast, which are two of Whole Foods Market, Inc.'s strongest market regions--proves despite the arguments of the FTC and some suppliers, natural foods' retailers and industry observers, that retailers including Planet Organic and others like Sprouts Farmers Market and Sunflower Farmers Market, don't believe the combined Whole Foods/Wild Oats chain poses neither a barrier to entry in the natural foods' retailing category in the U.S. or offers too stiff of competition for them to grow and thrive.

After all, if they did believe such was the case, would all three of the natural foods' chains mentioned above be in such rapid expansion modes like they are?

Retail Memo: Canada's Planet Organic Enters U.S. Natural Foods Retailing Market

Perhaps in a shot across the produce department and dietary supplements counter at Austin, Texas-based Whole Foods Market, Inc., which is expanding its number of natural products' supermarkets in Canada, Canada's Planet Organic Health Corp., a natural foods' and products' retailer based in Edmonton, Alberta, is moving into the U.S. natural products' retailing market in the U.S. via two very recent acquisitions.

On Friday, Planet Organic, which is Canada's biggest natural products retail chain, bought Santa Cruz, California-based New Leaf Community Markets, a privately-owned retailer which operates five stores in the Northern California seaside communities of Santa Cruz and Capitola, and in nearby Felton and Boulder Creek, in the Santa Cruz mountains.

Planet Organic acquired the company (New Leaf Community Markets) but only three of the five stores; two in Santa Cruz and one in Capitola. The other two stores will remain named New Leaf, but will be owned by independent operaters in some sort of a franchise arrangement, according to Rex Stewart, a co-ower of New Leaf Community Markets.

Additionally, New Leaf is nearly finished with a new store in the nearby coastal city of Half Moon Bay. That store is set to open soon. Further, Just last Tuesday the natural product's retailer received approval from the Santa Cruz City Council to build a brand new, $4 million natural foods supermarket in that city's westside. In fact, it was the search for capital to build these two new stores, and to remodel the existing stores, which led New Leaf to Planet Organic, Stewart said.

Edmonton, Alberta-based Planet Organic operates a chain of eight natural foods supermarkets in Canada under the Planet Organic name, 50 franchised vitamin and natural foods stores under the Sanger's Health Centres banner, Healthy's, a chain of seven natural health foods-oriented stores, and owns Trophic Canada, a manufacturer and marketer vitamin, dietary, mineral and herbal supplements.

Planet Organic will acquire all of the outstanding stock in New Leaf Community Markets, including a 5% share owned by employees, co-owner Stewart said. The Canadian parent company will infuse the small chain with capital so that it can remodel the existing three stores as well, and build new stores down the road, according to Stewart. He said he and his partner, co-owner Scott Roseman will continue to run the company under Planet Organic's ownership.

The Northern/Central California Coast region of which Santa Cruz is a part, is a politically progressive area, which among other things is home to a University of California campus and some of the best surfing waters in the U.S. It's also a major tourist attraction. In the late Spring and through the Summer the city of Santa Cruz and surrounding area's population swells by tens of thousands each week.

The Santa Cruz area has a very competitive natural products' retailing scene. In addition to New Leaf, there are local independent natural foods' stores Staff of Life and Food Bin. There also are a number of upscale, independent grocers in the area which offer extensive selections of natural and organic foods and products.

Further, Safeway Stores, Inc., Nob Hill Foods (a banner of Sacramento-based Raley's) and Albertsons' supermarkets' in the region all have expanded natural foods sets do to the demographics of the area. And, the 600 pound supernatural foods retailing gorilla, Whole Foods Market, is in the process of building a superstore (its first) in Santa Cruz.

New Leaf Community Markets isn't the only U.S. acquisition Planet Organic has made in recent weeks to signal its entry into the U.S. natural foods' and products' retail market. Just before it bought New Leaf, the retailer acquired the 11-store Mrs. Green's Natural Market natural foods chain, which is based in Scarsdale, New York.

The two acquisitions give the Canadian natural products' retailer a presence on both the east and west coasts' in the U.S., the top two natural products' retailing regions in the country. Mrs. Green's has stores located in New York state, New Jersey and Connecticut. The three states are commonly referred to as the tri-state region.

With the purchases of both New Leaf and Mrs. Greens', Planet Organic has two retail banners and (when the two new New Leaf stores open) 16 stores currently in the U.S. We expect more, similar acquisitions.

While Whole Foods Market, Inc. isn't likely to worry too much about that level of competition, the move by Planet Organic into the U.S. market demonstrates that unlike many natural foods' retailers--and the U.S. Federal Trade Commission--the Canadian retailer doesn't believe Whole Foods' has a monopoly on natural products' retailing in the United States.

Not only that, but since Northern California, where Planet Organic bought the New Leaf stores, is one of Whole Foods' strongest markets--it has 25 stores in the region and plans to build another 23-25 in the next 4-5 years--it appears Planet Organic isn't afraid of taking on the big guy.

We've written often since the Whole Foods/Wild Oats merger in August, 2007 that we believe the acquisition of Wild Oats Markets, Inc. by Whole Foods Markets, Inc. would actually stimulate more competition in the natural foods' and products' retailing sector rather than stifle it, like many argue. We believe impirical evidence like Planet Organic's entry into the U.S. market is proving us right.

Further, late last year, Boulder, Colorado-based Sunflower Farmers' Market announced it has raised millions of dollars in new capital and beginning this year is launching a major growth drive, including moving into new regions of the U.S. like Texas (Whole Foods' homeland), Utah and maybe even California.

The natural foods' retailer plans to open as many as 10-15 new stores a year for the next 4 -to- 5 years. The natural grocer currently has 15 stores in Colorado, Arizona, New Mexico and Nevada. four new stores are set to open soon in Colorado, and the first two stores are currently being built in Utah.

There are a number of multi-store and single store independent natural foods' retailers in both Northern/Coastal California and the east coast tri-state region which Planet Organic can acquire as a way of creating a chain in the U.S. Many are in need of additional capital to expand, and would likely welcome an opportunity to sell if the arrangements are similar to what the Canadian retailer is doing with New Leaf and Mrs. Green's.

It's rather possible we believe we're seeing the potential building of a new, decent sized natural products' retail chain in the making with Planet Organic USA.

Resources:
>Read a related piece we wrote on January 11, 2008, "Whole Foods' to Planet Organic: The Pie is Big Enough for Both of Us."
>Read a related piece we wrote on October 29, 2007 about the Whole Foods Market, Inc. acquisition of Wild Oats Markets. Inc. here.

Retail Memo: Whole Foods to Planet Organic: The Pie is Big Enough For Both of US

Austin, Texas-based Whole Foods Market, Inc. was accused by everyone from the U.S. Federal Trade Commission (FTC) and consumer groups, to various independent natural foods retailers and certain suppliers, of trying to create a supernatural foods retailing monopoly with its acquisition of Wild Oats Markets in the U.S. in September, 2007.

However, in Canada Whole Foods is holding out an olive branch to home-grown, Alberta-based natural products retailer Planet Organic Market.

Yesterday afternoon on Canada's Business News Network (BNN), Peter Hilge, head of Whole Foods' Ontario regional division, said the natural and organic products pie in Canada is big enough for both giant ($6 billion annual sales) Whole Foods Market, and smaller (about $100 million annual sales) Planet Organic Market, to share.

Hilge, who appeared on the program with Planet Organic Market CFO Darren Krissie, said he believes with organic category sales growing by 20% a year in Canada, along with the fact Whole Foods' stores in the country are much larger than Planet Organic Market stores, he sees no reason for the two natural products retailers to have a "knock-down, drag-out" fight over market share.

"I think there is more than enough pie that we can share," Hilge answered when the host on the popular business network afternoon program asked him if there was going to be a battle between the two natural and organic product retailers in Canada. Hilge added that such a fight "would be nonsensical,"

Krissie seemed to like the fact that Hilge stated more than once that it isn't the much larger retailer's goal to grab market share away from home-grown, Alberta-based Planet Organic. That might be the unintended consequence of Whole Foods' store expansion program in Canada however.

Whole Foods Market currently has six stores in Canada; four in Vancouver and two in Ontario. Three of the four Vancouver-area stores are operated under the Capers banner. One of the Ontario stores is in Toronto and the other is in Oakville. The supernatural grocer has plans to build more stores in Canada, especially in Ontario where it currently has only the two units. A new store in Vancouver is almost finished and set to open soon.

Planet Organic Market also operates six stores in Canada. The stores are much smaller, and far less comprehensive in product selection, than Whole Foods' Canada stores.

They also are more "health food" oriented in contrast to Whole Food's superstores, which not only feature extensive selections of natural and organic groceries, but specialty and gourmet foods, whole health and body sections, in-store dining and prepared foods-to-go offerings, huge fresh produce, meat and seafood departments, and other in-store specialty departments like wine cellers and craft beer sections.

Planet Organic Market, like Whole Foods Market, Inc., is publicly traded. However, it's market capitalization is a mere fraction of Whole Foods'.

The 25 year old Planet Organic is the home town Canadian retailer though. And it's also on a growth spurt. Canadian consumers appreciate the local angle, even though they also seem to be enjoying shopping at Whole Foods' natural and organic products retail emporiums.

Since Whole Foods Market, Inc. only has six stores in Canada, and Planet Organic and Whole Foods' stores don't currently go head-to-head in any neighborhoods to speak of, the extension of the olive branch should be real for sometime as well as figurative.

That will likely change as both chains add additional stores throughout Canada. Or--and we are just thinking out loud here--might a merger be in the future for the two retailers?

Is Planet Organic Market possibly the future Wild Oats of Canada from a merger and acquisitions standpoint? We don't have any scoops in that regard. We're just merely thinking that olive branches can often be good first entrees (or dates), and can often lead to more extended relationships.

You can view the BNN program interview featuring Whole Foods Canada's Hilge and Planet Organic Markets' Krissie at the link here.