Whole Foods Market, the US grocery chain, arrived in London's affluent Kensington High Street last June to a fanfare of publicity. The 80,000ft2, three-floor former department store, boasting in-store restaurants, cookery classes and extravagant window displays, was hailed as the harbinger of a revolution in the way UK supermarkets sell food.
Just one year later, however, analysts say the early customer traffic has trailed off at the natural and organic foods specialist's flagship store, which is repositioning in an attempt to shed its image as a grocer for special occasions. It is launching a campaign to promote itself as a shop where consumers can buy everyday goods to compete more effectively against Waitrose and Marks & Spencer.
Whole Foods Market - often referred to in the US by the nickname 'Whole Pay Check' - is also ramping up its price promotions. However, many retail experts believe that the retailer, whose motto is 'Whole foods, whole people, whole planet', will struggle to compete in this arena in the UK.
High-risk hurdles
Whole Foods Market's change in positioning is not without risks, according to Simon Threadkell, creative director at design agency Fitch, which has worked with Tesco and Asda's owner, Wal-Mart. 'It is at a major disadvantage because of its lack of heritage in the UK,' he says. 'Both Waitrose and M&S have longstanding histories in the country, so it will always be playing a catch-up game.'
He also believes the store can no longer compete on product offering alone, because of the strength of supermarket own-labels, which are weakening claims on indulgence by premium brands, as well as closing the gap between the more upmarket chains and major multiples.
Tesco and Sainsbury's have both boosted their premium own-label offerings; Tesco Finest, worth 拢1.2bn, has overtaken Kellogg as the UK's biggest grocery brand, with Sainsbury's Taste the Difference close behind.
Morrisons, meanwhile, is overhauling its premium own-label The Best, while The Co-operative is expanding its Truly Irresistible brand. The latter is also building on its ethical positioning as part of a strategy to re-establish itself as the UK's leading fairtrade retailer.
'Not only do these supermarkets have rival products sold generally at lower prices, but they are easier to shop in,' says Threadkell. 'Whole Foods is great for bits and pieces and a nice lunch, but it's too Disneyland without being unique.'
Whole Foods Market is shifting its strategy amid tentative plans to add UK stores, but with cash-strapped shoppers hunting for bargains, there seems to be little space for another major player.
In the three months to the middle of June, discount supermarkets Aldi and Lidl posted year-on-year sales growth of 21% and 13% respectively. Tesco and Sainsbury's fell behind the market average, dropping 5% and 4% respectively.
Claire Wilde, client services director at retail marketing agency Live & Breathe, can see scope for the Whole Foods Market brand outside London. While she argues that it needs to adapt its offering ahead of a national roll-out, she also warns against diluting it.
'There is gap in the market for a quality high-street store with a convenience angle,' says Wilde. 'M&S is making inroads with Simply Food, but there is space for upmarket deli-style stores.'
She believes Whole Foods Market should consider smaller shop formats. However, the retailer decided not to rebrand the smaller stores of organic chain Fresh & Wild, which it acquired in 2004. 'Waitrose still has a weekly-shop appeal, but never went into that space. The sector is still dominated by the independents, even in upmarket towns,' she adds.
Whole Foods Market chief executive John Mackey claims the London store is one of the company's 10 best performers in terms of sales, and promises it will deliver profit early next year.
However, with no official expansion plan announced, questions will be asked as to what extent Whole Foods Market can pose a serious threat to the established UK grocery chains.
WHOLE FOODS MARKET
- The company has more than 270 stores in the US, UK and Canada.
- It has another 89 stores planned globally.
- It generated global sales of $6.6bn (拢3.3m) last year.
DATA FILE - 'QUALITY' GROCERS
- Waitrose
UK stores 187
Of products stocked, 55% are Waitrose own-brands, including:
- Waitrose Easy to Cook
- Waitrose Pizzeria
- Waitrose Cooks Ingredients
- Marks & Spencer
UK stores 609 (incl. 288 Simply Food)
Its own-label brands include:
- Gastropub
- Cook!
- Count on Us
- Nutritionally Balanced
- Italian Ingredients
- Whole foods market
UK stores 1 (+ 5 Fresh & Wild)
Private-label ranges include:
- Fresh & Wild Everyday Value
- Fresh & Wild Organic
- Whole Treat