Whole Foods may not be allowed to take over Wild Oats

At the same time as Whole Foods was opening in London, the antitrust authorities in the USA announced that they opposed the planned takeover by Whole Foods of its second biggest competitor Wild Oats. Whole Food’s entry in the European market is regarded by the British organic industry as a positive development.

Picture: Run to the new opened Whole Foods Market in London

Wild Oats achieved in 2006 an annual turnover of 1.2 bn US-Dollars and has 110 stores. As a consequence or the announcement of the Federal Trade Commission to challenge the merger, Whole Food’s shares dropped sharply in the short term. The hearing, to be held in a federal court, is scheduled to start Juli 31 and conclude on August 1. (Source: click here)

At the moment it is not clear what is to happen to the Fresh & Wild stores, most of them located in London. The chain was acquired by Whole Foods at the beginning of 2004 and consisted at the time of eight stores. The specialist store in Notting Hill, about one and a half km from the new Whole Foods in Kensington closed down a few months ago. Many of the customers have probably gone to Planet Organic’s organic supermarket just a stone’s throw away. In contrast to the parent company, about 75 % of stock in Fresh & Wild stores, whose retail area measures around 200-300 m², is organic. Currently, there are still five of them in operation.

Fresh & Wild and Fresh & Wild Organic are being developed as own brands for Britain. The house brand 365 has, according to an industry insider, been registered by a competitor.

In September 2007, Whole Foods in London would like to introduce a delivery service. It will start with Kensington but will be gradually extended. Customers can already put their names down for this service.

For the most part, the organic industry in England welcomes the involvement of the Americans. “It helps to grow the business” is what you can often hear people saying. The big and not unjustified hope is that the whole industry will attract the attention of the public much more because of the professionals from the USA. The high level of reporting the opening is naturally contributing, and it not only benefits Whole Foods but also smaller stores like Daylesford Organic (report to follow shortly). 

Other whole food retailers are pleased with the product range because it makes it easier for them to see what is available on the market. “So now I won’t have to wait for the next trade fair,” says one retailer hopefully.

There seems to be hardly any fear of the Americans, even though it could get tough for this or that organic supermarket with 200-300 m² of retail space and mean more investment in advertising. However, since the new Whole Foods location in Kensington does not have car parking, given the traffic conditions in London it is not likely that customers will accept driving for half an hour or an hour to go shopping. Many Londoners will have a look round the Whole Foods store but then drive there only once in a while. It is likely that the people who shop there regularly will come from Kensington itself and the adjoining areas.

It may be that the new Whole Foods Market is mainly relying on capturing the market share of big companies like Waitrose, Sainsburys, Tesco and M&S. Marks & Spencers, that also has a really good stock of organics, is less than 100 m from Whole Foods in Kensington High Street.

The probability of Whole Foods coming to Germany or France in the next five years is not high. The American giant will be too preoccupied with expansion in Britain. The expenditure involved in planning 5000 – 8000 m² stores is immense. The selection of around 500 employees is a huge job too. Putting together a product range tailored to a particular country and finding new suppliers in Germany or France would take a great deal of time. Added to all this is the fact that communication would not be as easy as in England. In the longer term, however, we can certainly expect this competitor from the USA to spread his wings. He will position himself in Germany between the sophisticated organic range of Tegut, the appealing presentation in the food department of Karstadt and the now 400 organic supermarkets. How much room is left in the market is an open question. Walmart put its experience of Germany behind it by quitting the scene at great loss.

It is possible, of course, that Whole Foods would unintentionally step into the shoes of the companies that tried hard to go in the direction of eco-department stores at the end of the 1990s but which failed because of the state of their internal organisation and lack of profitability.

First, however, the Kensington store, which is said to have cost £ 7 million to fit out (three times as much as Whole Foods stores in the USA and Canada), has to demonstrate that it can operate successfully. Each week, 70,000 customers are expected to come through the doors and spend £1 million. To encourage them in, the store is open 8.00 - 22.00 weekdays and Saturdays and 11.00 - 18.00 on Sundays.

"Whole Foods - Whole People - Whole Planet", that is the task John Mackey has set himself. Much water will flow under the bridge before he achieves that goal.

18.06.2007