Retail Memo: Newest Texas 'Newflower Farmers Market,' Which Sprouted From Parent 'Sunflower Farmers Market,' Blooms in Dallas, Texas

What's a "Newflower?"

Well, for purposes of this piece, it's a seedling that sprouts from a Sunflower, in this case Boulder, Colorado-based Sunflower Farmers Market, the fast-growing, fighting tiger chain of natural foods grocery stores founded and run by Mike Gilliland, who's first crack at the natural foods retailing game was Wild Oats Markets, which he founded in Boulder and ran for many years, and which today exists only as a now near-fully integrated part of Austin, Texas-based Whole Foods Market, Inc., which acquired Wild Oats in 2007 and finally gained full control of it on March 6 of this year, when it reached a settlement agreement with the U.S. Federal Trade Commission (FTC) over the regulator's nearly two year antitrust legal challenge against the acquisition. [See a linked bibliography on FTC v. Whole Foods here: Retail Memo: David Wales, Who Headed Up the FTC's Nearly Two Year Legal Challenge Against Whole Foods' Acquisition of Wild Oats is Leaving the Agency.]

Sunflower Farmers Market opened its third and newest "Newflower Farmers Market," banner store in Dallas (pictured at top), deep in the heart of Whole Foods Market country in Texas on March 18, less than a month ago. Whole Foods was founded in the 1970's and is headquartered in Austin, Texas.

Sunflower Farmers Market opened its first Texas store in November 2008 in Plano. It's second "Newflower Farmers Market" store bloomed in February 2009 in Austin, Whole Foods Market's hometown.

Why "Newflower" and not "Sunflower" in Texas?

When Sunflower Farmers Market opened its first store in Plano, Texas in November 2008 it went by the Sunflower Farmers Market banner.

However, the name "Sunflower Market" for natural foods stores happens to be owned by the supermarket chain Supervalu, Inc. Supervalu used to operate a handful of natural foods markets in the Midwest named Sunflower Market. The chain closed the stores in 2008, ending what was a new format test for Supervalu. However, the company retained the ownership of the Sunflower brand as it pertains to retail natural foods stores. [See our January 25, 2008 piece here: Breaking Retail News: SuperValu, Inc. to Close Sunflower Market Stores.]

Boulder, Colorado-based Sunflower Farmers Market, which currently operates 23 stores has a license from Supervalu to use the "Sunflower" name in the states of Colorado, Arizona, New Mexico and Utah, where it operates 20 of its 23 stores.

But Sunflower Farmers Market doesn't have a license from Supervalu, Inc. to use the "Sunflower" name in Texas, as well as in numerous other U.S. states, hence why the natural foods grocer changed the name of its then one store in Texas to "Newflower," and why the newest two Texas stores, and the all the other stores in the Lone Star State it will open, are and will be named "Newflower."

There's been some speculation that the reason Sunflower Farmers Market is using the "Newflower" name for its Texas stores is because there is an independent heath foods store in Texas named Sunflower. That's true, there is such a store. But the reason for the Newflower rather than Sunflower Farmers Market banner in Texas is because of the Supervalu ownership of the Sunflower name in the state.

Newflower Market, Inc. (the business name Sunflower Farmers Market uses) has a license from Supervalu, Inc. for the name Sunflower for certain states, but not for Texas," Bennett Bertoli, vice president of real estate for Sunflower Farmers Market, told Natural~Specialty Foods Memo (NSFM).

Additionally, Supervalu, Inc. confirmed to us that is owns the Sunflower Market name and currently licenses it to Sunflower Farmers Market only in Colorado, Arizona, New Mexico and Utah at present.

Supervalu, Inc. has no plans to bring back its small-format Sunflower Market natural foods format or stores anytime in the near future. The stores were a test of a standalone natural foods retailing format for the supermarket chain, and Supervalu decided to close the stores and beef up the natural and organic foods item selections in its over 2,000 U.S. supermarkets, including creating a new natural and organic store brand, rather than go forward with opening more Sunflower stores and creating a natural foods store chain.

Although from a retail marketing standpoint being able to use the Sunflower Farmers Market name in Texas and in other new states the natural grocer enters is a plus, there is a certain delight in the fact it is using "Newflower" in its newest state and market -- Texas. After all, sunflowers are plants that shed lots of seeds. And for Sunflower Farmers Market, other than being able to use its flagship "Sunflower" banner in Texas, which it obviously wanted to do, "Newflower," which sprouted from the "Sunflower" banner, seems to us to be about the next best thing. And to take the metaphor to a further extreme, more Newflower Farmers Market stores will "bloom" in Texas over the next couple years.

Dallas Newflower Farmers Market blooms

The grand opening on March 18 of the Dallas "Newflower Farmers Marke"t store, which is located at 1800 North Henderson Avenue at Lewis Street in the city, was jam-packed. The Sunflower-Newflower format (the store formats are the same, just the names are different) focuses on offering natural and organic groceries and fresh foods at discount prices. In fact, it's slogan is "Serious Food...Silly Prices."

Dallas residents aware of the discount pricing focus of the stores, along with hearing about it via the pre-Dallas store opening press attention and advertising in the city, turned out in large numbers for the store's grand opening, many with reusable shopping bags in hand, looking for natural and organic food and grocery bargains.

Newflower didn't let the shoppers down. The natural grocer offered hot grand opening deals in every department of the store. Sunflower-Newflower puts a major emphasis on offering fresh produce at everyday low prices, and the Dallas store's produce department was packed with opening day shoppers grabbing up cart fulls of low-priced fruits and vegetables.

The store's grand opening began at 6:30am with a free breakfast served in the store's parking lot to opening day early birds courtesy of the natural grocer.

The Dallas "Newflower Farmers Marke"t store's doors were opened at 7am on March 18. And the first 200 shoppers to enter the store and make a purchase were given a nice surprise -- each was presented with a free reusable shopping bag filled with $50 worth of free groceries courtesy of the Newflower store team.

Day-long grand opening activities included lots of food sampling throughout the store, a free beef bbq and even free chair massages for the bargain hunting grand opening day shoppers.

Sunflower-Newflower founder and CEO Mike Gilliland, who attends every new store grand opening, was at the Dallas store event on March 18, spotted throughout the store, and often in the produce department, which some say is his favorite part of the stores.

Sunflower Farmers Market founder and CEO Mike Gilliland stationed in the Dallas "Newflower Farmers Market" store's produce department on grand opening day. The word is that the produce department is the grocer's favorite of all. In fact, a Dallas Newflower store employee says that on the March 18 grand opening day that the CEO, who also bagged customers grocery as part of the opening, kept running off from the store front end to spend more time in the produce department.

Never the shy entrepreneur and grocer, Gillian said at the grand opening: " We're thrilled to bring our grocery store concept to Dallas, especially with today’s hard economic times. Newflower is the most cost-effective grocery choice, by offering fresh produce and all-natural meats from local vendors at down-home prices. We make healthy cooking easy, with in-store recipe cards, nutritional programs and the lowest prices around."

The Sunflower-Newflower markets are a bit of what we call a hybrid natural foods store, reminiscent of what Gilliland did with the Henry's (Southern California) and Sun Harvest (Texas) banners when he was at Wild Oats and the banners were a part of the chain. By this we mean they aren't orthodox natural-organic foods stores. The stores feature more mainstream-type and specialty items, along with natural and organic products.

Whole Foods Market, Inc. sold off the 35 Henry's and Sun Harvest stores in Southern California and Texas to Los Angeles-based Smart & Final shortly after acquiring Wild Oats in 2007. Gilliland had left Wild Oats long before the Whole Foods acquisition.

The format

The Sunflower-Newflower stores are no frills markets in terms of their design; attractive but basic. This allows the natural grocer to have less overhead, which allows it to achieve cost savings, and in-turn offer natural and organic food and grocery items at generally everyday lower prices than Whole Foods market and most supermarket chains do.

In a sense, Gilliland and team are attempting a natural-organic foods retail natural-organic category killer format, while at the same time trying to make sure sure the markets are both destination as well as neighborhood-oriented markets. The format seems to be working so far in all three regards, from our observations and analysis.

The new Dallas "Newflower Farmers Market" store also has a number of "green" features, according to the retailer. These include: energy efficient light fixtures, the use of recycled and refurbished equipment, cases and fixtures whenever possible, and cash registers that use double sided receipts to reduce paper waste by 40%.

The front of the store also features a skylight-style awning designed to let natural light into the front of the store, as the photograph at the very top of this piece shows.

One of the fighting tigers

Natural~Specialty Foods Memo (NSFM) has termed Colorado-based Sunflower Farmers Market one of what we call the three fighting tiger natural grocery chains. The other two fighting tigers are Arizona-based Sprouts Farmers Market and Colorado-based Natural Grocers.

All three of the Western U.S.-based natural grocers are fast-growing, and all three fear not to take on Whole Foods Market head-to-head in various markets, hence the fighting tiger name. All three, for example, are taking on or plan to take on Whole Foods right in its very own backyard of Texas, as they are in Colorado, Arizona, Southern California (Sprouts only so far there), New Mexico and Utah.

All three of the fighting tigers are using a similar, no frills everyday low-price formula as well, although each does so in its own unique way. It's not an accident that Whole Foods is focusing much more on value and pricing these days in its stores. The competition from these three fast growing natural grocery chains, along with the bad economy, has and is forcing Whole Foods to become much more price competitive, both on everyday prices and in its promotions. And Whole Foods is doing so.

Competition good

This competition, along with the competition from supermarkets and discounters that are getting deeper and deeper into the natural and organic foods categories, is good for the industry overall because it will lead to a greater democratization of healthy, natural and organic foods.

The better the prices on the category items the more consumers can buy them, changing the industry from a niche (and some might say even elitist) enterprise to one aimed more at the masses. That's good for retailers and suppliers as well. More shoppers equals more sales. And more sales equals more efficiencies, which translates into higher profits.

That's a prescription both Dr. Natural and Dr. Organic would love to write.

Below are photographs from the grand opening of the new Dallas Newflower Farmers Market that sprouted in Dallas, Texas on March 18, 2009:

Shoppers check out and get "checked out" at the Dallas "Newflower Farmers Market" store on grand opening day, March 18, 2009.

The produce department is a central departmental feature in the Sunflower-Newflower stores. Although the stores average about 15,000 -to- 25,000 thousand square feet, the produce department in the stores is much larger than an average store of that size would have. This is by design. Sunflower-Newflower prices both conventional and organic fresh produce at low everyday prices. This serves not only as a way to draw shoppers to the store but helps grow market basket sizes in the stores as well. Notice the no frills, farmers' market-style design of the produce department above in the new Dallas Newflower store. Doing so provides cost savings which allows for the everyday low produce pricing practice. It obviously also fits in with the chain's overall theme and name.

Inside the Newflower Farmers Market store that opened in Dallas, Texas on March 19, 2009. Notice the basic, no frills product refrigerated cases and the painted cement floors. This is part of the chain's no frills store design which allows it to offer natural and organic products at lower everyday prices than many of its competitors. The focus is on the the product and its price rather than on the store's design. The balloon the happy little girl is holding were given out to children, along with other treats, all day at the store's March 19 grand opening event. The balloon is doing a great job of holding her attention so that mom can concentrate on her shopping.

Below is a selection of related, past stories and posts from NSFM:

~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

~December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas

~October 27, 2008: Retail Memo: Sprouts Farmers Market Store Number Eight 'Sprouts' in Texas; Deep in the Heart of Whole Foods Market Country

~October 21, 2008: Retail Memo: Natural Grocers Joining Sunflower Farmers Market in Opening First Stores in Whole Foods Market's Home City of Austin, Texas USA

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

~August 15, 2008: Retail Memo: 'Business Week' Discovers Sunflower Farmers Market, Just As Many Shoppers Are Doing Daily

~June 19, 2008: Retail Memo: Two Food Retailing Chains (Among the Growing Legions) Who Fear Not the Whole Foods Market, Inc.-Wild Oats Juggernaut

~July 8, 2008: Retail Memo: Former Raley's CEO Michael Teel and Partner Developing New Prepared Foods, Natural-Specialty Foods Chain in Sacramento, California

~May 18, 2008: Small Format Food Retailing Special Report: Raising (the stakes in) Arizona: Wal-Mart On-Track to Open First Marketside Stores in Arizona This Summer

~May 13, 2008: Small Format Food Retailing Special Report: Sprout's Farmers Market Gets $22 Million in New Financing; Will 'Sprout' 100 New Stores Over Next 5 Years

~April 29, 2008: Independent Grocer Memo: Utah's 75 Year Old Harmons Combats the Big Chains With Low-Prices; Gets Ready For Whole Foods' By Going Upscale & Natural

~February 24, 2008: Retail Memo: The Whole Foods Mrkt., Inc. as Monopolist Fallacy: How Sprouts Farmers Mrkts. and Others Are Growing Into the Heart of Whole Foods Country

~December 20, 2007: Retail Memo: Natural-Born Category Killers

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

Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas

Sunflower Farmers Market founder and CEO Mike Gilliland in the produce department of the natural foods retailer's new store in Plano, Texas, its first natural market in the state. The store opened in late November. [Photo credit: Amy Gutierrez, American-Statesman.]

Earlier today we wrote and published this piece, "Fast-Growing Natural Foods Chain Sunflower Farmers Market Responds to Whole Foods Market, Inc. Subpoena For Sales, Financial and Related Information," about Boulder, Colorado-based Sunflower Farmers Market's responding to a subpoena it received, along with 95 other natural products retailers, from Whole Foods Market, Inc. for its sales, financial and related records. Whole Foods Market has issued the subpoenas to these retailers as part of its battle with the U.S. Federal Trade Commission (FTC) over last years' acquisition of Wild Oats Market, Inc.

In the piece, we mentioned that Sunflower Farmers Market, which was founded by Mike Gilliand, who is the company CEO and who also happens to be the founder and former CEO of Wild Oats, is going head-to-head against Whole Foods Market, Inc. in a number of markets, including in its home state and headquarters city of Austin, Texas.

Below is a recent story by Lily Rockwell, a staff writer for the American-Statesman newspaper based in Austin, Texas where Whole Foods Market, Inc. is headquartered. Ms. Rockwell covers the Texas food retailing scene closely and does so well. Below is the story:

Sunflower makes a bid for Austin's organic food shoppers
Colorado chain making inroads on low-cost premise

By Lilly Rockwell
American-Stateman Staff Writer
Sunday, November 23, 2008

Plano, Texas — At 6:30 a.m., the sun hasn't risen yet, and the streets in this Dallas suburb are deserted. But in a beige strip mall surrounded by newly built homes, hundreds of people are waiting in line, shuffling their feet in the cold air.

They are here for the grand opening of natural foods chain Sunflower Farmers Market's first store in Texas . With stores that are smaller than those of traditional grocers, Colorado-based Sunflower touts its rock-bottom prices, convenience and wide selection of produce.

Sunflower is expanding into Texas. In addition to the Plano store, which opened Nov. 12, the first of several planned Austin-area stores — at William Cannon Drive and Manchaca Road —is scheduled to open in January, followed by a second Dallas-area store later in the year.

Sunflower will be the first significant new grocery player to enter the Austin market in years, and it aims to be a major competitor among organic food stores such as Whole Foods Market, Central Market, Sun Harvest and Wheatsville Co-op.

Customers who had lined up for Sunflower's Plano opening said they were lured by advertisements offering grapefruit at 10 for $1 or natural lean ground beef for $1.57 a pound.

But the real attraction was the free bag of groceries the first 200 customers received, a popular draw for shoppers who said they are watching every penny as the economic downturn continues.

"We stayed up all night," said Angela Wendt, who arrived at 6:15 a.m. to check out the store. She said she normally shops at stores such as Wal-Mart, Kroger or Sprouts Farmers Market, another natural foods store in the Dallas area.

But what about Whole Foods, which has a 62,000-square-foot store little more than a mile away?

"I can't afford it," Wendt said. "They are too pricey."

Sunflower wants to lure customers who, like Wendt, are as concerned about price as about organic and natural foods. Sunflower offers a mix of organic and conventional foods, and hopes to undercut even Wal-Mart on its produce prices.

"They do have an excellent selection, really good pricing, and they've done extraordinarily well in the markets they have gone into — and they have gone into some competitive markets," said Mary Mulry, a food consultant who once worked for Central Market and Wild Oats Markets.

In Austin, Sunflower will go up against market leader H.E. Butt Grocery Co., which owns Central Market and stocks some organic and natural foods in its H-E-B stores, as do Wal-Mart and Randall's.

"There is definitely a depth in the market for organic similar to Boulder," said Steven Hoffman, the director of the Boulder, Colo.-based Organic Center. Whole Foods spokeswoman Libba Letton said about Sunflower: "More competition is healthy for the marketplace."

Sunflower was started by Mike Gilliland, who in 1987 co-founded Wild Oats Markets Inc., long considered one of Whole Foods' biggest rivals. He left Wild Oats in 2001.

Last year, Whole Foods purchased Wild Oats for $565 million, buying out its largest competitor. Although the sale was completed in August 2007, the Federal Trade Commission is still contesting the purchase on antitrust grounds.

Gilliland's inspiration for Sunflower came when he was chief executive for Wild Oats.

"Towards the end of my time, Whole Foods was just kicking our butt everywhere, and so we bought a chain of stores called Henry's Marketplace in the San Diego area. And they just seemed really, really different enough that they competed well against Whole Foods and against everyone, really," Gilliland said.

He recommended to the board that Wild Oats pursue the Henry's strategy of natural foods at low prices, he said, but they declined to pursue it.

"I essentially did it myself in 2002," Gilliland said, noting that the stores seek to appeal to a wider audience than a Wild Oats store.

"Instead of trying to concentrate on the top 5 or 10 percent of the market in terms of income or education, we are trying to grab that 60 percent of customers that are somewhat interested in natural foods but are price-sensitive or ... are almost part-time natural foods folks," Gilliland said.

Sunflower has emerged in a different era than Wild Oats did, Gilliland said.

"Twenty-five years ago, if you had the product and you were a big natural foods store, it was a big deal," Gilliland said. "All you had to do was open the door and people would pay whatever."

Now, Gilliland said, "it's more of a precision business than it used to be in terms of we don't work on a lot of margin, so we have had to adopt a lot of big-grocery-store practices in terms of ... just really watching the pennies."

Mulry said Gilliland is renowned for his frugality, making sure to buy the least expensive furnishings in a new store. "It doesn't cost him as much to open a store as, say, the equivalent size would be if it were a Whole Foods," Mulry said.

Although Sunflower's first store was in Albuquerque, N.M., it is based in Boulder, where Gilliland lives.

In 2007, Sunflower received a $30 million investment from PCG Capital Partners and began rapidly expanding into Arizona, Colorado, Utah, Nevada, New Mexico and Texas.

Gilliland said Sunflower has no plans to expand beyond those states and instead will focus on more stores in the states it already serves.

"It's a concept that really fits a large, unmet demand," said Tim Kelleher, a partner with PCG. "They offer tremendous value, fresh and natural foods in a farmer's market setting. While Whole Foods has done a great job over the last 10 years, it is not a store that everyone can shop because of the high prices."

Sunflower's motto is "Serious food. Silly prices," and through its own distribution and delivery system and local food sources, it aims to have the lowest-priced produce of any grocery competitor.

Industry experts say Sunflower is smart to position itself around the low-price theme.

"Sunflower is very appealing for a number of reasons," said Mulry. "The produce is very, very competitive, and they do have a good selection of organics. They will compete with Whole Foods, Central Market and H-E-B. It's a smaller store, and this is something that has been overlooked."

Sunflower's first big test came when it opened a store in Boulder this year.
Boulder has a large variety of organic food stores, including several Whole Foods locations, and Safeway's Lifestyle stores, which are similar to Central Markets.

"I know that here in Boulder, the Whole Foods store has a big bulletin board where they compare prices to show it is a good place to shop where you are being cost-conscious," Hoffman said. "Sunflower will try to come in at a niche where you can get healthy fare at lower costs. That is their marketing strategy, but it needs to play out in terms of whether that is true or not."

Gilliland said Whole Foods might struggle to convince customers that it is price-competitive.

"They are very intelligent pricers; they are smart guys," Gilliland said. "I don't know how you overcome the glitz image. At the end of the day, people impulse-shop. They have great prices on macaroni and cheese and canned soup and the commodity stuff, but people still go in and grab the $8 loaf of bread and the $15 cheese."

Whole Foods, which historically has performed well during recessions, is now watching its store sales growth slow and its profits fall. To shore up sales, Whole Foods began a national "Whole Deal" price promotion, which has included coupons and frequent-shopper cards.

Whole Foods and Wild Oats had a notoriously competitive relationship. Whole Foods CEO John Mackey once sent Gilliland a copy of the board game "Risk" with the note "Forewarned is forearmed" when Whole Foods was going to open a store in Boulder, which was Wild Oats' home base. Gilliland replied with the board game "Twister" and this note: " We are going to twist around you by being nimble."

Gilliland called their rivalry fun, but said he and Mackey no longer talk.

"In the old days, everybody was friends and knew each other and helped each other out. And then we became public companies and ... had investors, and everybody has to play it closer to the vest," Gilliland said. There are no hard feelings over the purchase of Wild Oats, Gilliland said, calling it a "logical outcome."

"When it becomes a public company, you don't have that ownership or the emotional investment that you had in the early days," Gilliland said.

When Whole Foods opened a store near Wild Oats in the past, the Wild Oats store would lose 40 to 50 percent of its business, Gilliland said.

In contrast, at Sunflower "that doesn't seem to be the case," he said. "In Colorado, they've come (within) a couple square miles of us, and it might get a little effect the first week, and then a week later it is back to normal."

[Natural~Specialty Foods Memo Editor's Note: Sunflower Farmers Market will open its first Texas store in Austin, where Whole Foods is headquartered, early next year. Click on the link to Watch video from the opening of the Sunflower Farmers Market in Plano, Texas.]