The battle for organic bragging rights in Seattle took a turn for the more intense in November. Whole Foods, Inc., a grocery chain which carries only "natural" (containing no added substances) and "organic" (grown without the use of pesticides or herbicides) foods, added a glamorous new store on NE 64th and 11th NE in the Roosevelt district, the 100-store chain's first outlet in the area.
Strangely enough, Whole Foods planted its newest digs in a market it had ignored for years, and, like dropping a gauntlet, stuck it virtually on top of Puget Consumers Co-op, the regional granddaddy of organic retail, founded in 1968. And PCC was not pleased. "They entered the market in a very assertive and aggressive fashion," Jeff Voltz, PCC's CEO, says. "We have four stores within a two-mile radius of their location—they put it right in our face."
With only eight stores in the region, PCC counts 42,000 members and projected sales of $70 million this year. The co-op owned the local organic/natural market—until now, when it stands face to face with a Goliath of a competitor. Whole Foods is an Austin-based company that started about 20 years ago. Publically owned—it's traded on the Nasdaq Exchange—this is no small enterprise. Whole Foods reported $1.6 billion in sales in 1999 alone. But until now—perhaps because of the strength of the cooperative-food market movement here—the company has avoided the Puget Sound region. Yet Ron Megahan, who was brought in by Whole Foods to oversee the new store's launch, says, "We really felt Seattle was a great opportunity and an excellent match."
"We knew two years ago that they were coming," PCC's Voltz says, "and there was a certain amount of anxiety." Voltz admits PCC has already felt the impact, although he won't say how much. PCC has responded to the arrival of Whole Foods by adding more staff to stores to improve customer service, looking at consolidating into larger stores, exploring joint marketing—including Internet shopping—with an alliance of cooperatives in the region, and, finally, plumping their status as the ultimate destination for earth-friendly, socially conscious retail. "We are so locally oriented," Voltz says. "Unlike Whole Foods, our profitability doesn't go anywhere else. We've made loan guarantees for local organic dairies and the first organic chicken farm."
Another difference bears mentioning. "Whole Foods isn't unionized, but PCC workers are," Voltz points out. This has led to grumbling from PCC staffers about their new competitors. Other Whole Foods debuts saw more dramatic responses, such as when its Berkeley store opened and the grocery clerks' union protested by picketing.
The location of its new store may be a coincidence, but Whole Foods' arrival here is another indication that the organic/natural grocery segment has a food fight on its hands. Overall, food retailing shows about a 3 percent increase per year, according to Gene Kahn, founder of Cascadian Farms (a Skagit Valley producer of organic fruits and preserves), so not a lot of new business opportunities exist. But retail sales for natural and organic foods are growing fast: Kahn says they now account for about 1.5 percent of total food sales but are expected to be four or five times that in 10 years. Grocery chains, like Kroger-owned QFC, are expanding their natural and organic products, and General Mills Corporation recently purchased Cascadian Farms. With a nod to the changing marketplace, PCC opened a 23,000-square-foot store in Issaquah in November.
For shoppers expecting the cramped, post-hippie surroundings of the old-time granola-cruncher groceries, walking into Whole Foods is like entering the Magic Kingdom. The store is lit with the warmth of a hearth. It also has a spacious sense of abundance, more in keeping with the Aurora Avenue Larry's Market or the QFC in University Village. And at over 45,000 square feet in floor space, it's more than double the size of any Puget Consumer's Co-op.
Their produce is gorgeous and hard to miss—pyramids of peppers, lettuces, and fruits ornament the western entrance. On the east side, the espresso and juice bars, surrounded by tables and chairs, invite visitors to hang out. Whole Foods also sports a large selection of vitamins, health-resource books, exotic teas, and other items once found only in wholier-than-thou stores. Checkout lines, high-quality meats, nonstandard produce, and gourmet seasonings abound. The takeout selection could put a good-sized deli to shame, and volumes of consumer information are there for the taking.
Once you look at your receipt, though, you won't mistake a Whole Foods "experience"—a company term—for a trip to Safeway with Club Card discounts. Whole Foods can mean a whole lotta dough. Most of the shoppers I talked to were impressed with the appearance but leery of the impact on their wallets. To this Megahan says, "We want to give our customers the best value, but value doesn't always relate to price."
Of course, the hunt for organic and natural foods has always been expensive; neither PCC nor Whole Foods is a bargain-shopper's dream. Traditionally, however, the organic and natural-foods retail market has catered to consumers who take their consumption seriously—sophisticated shoppers who know the difference between lecithin and lactobacillus and are willing to dig deep into their pockets. That market is broadening, and Whole Foods is eager to grab as much of it as possible. According to company literature, their mission includes "providing a market for earth-friendly products, supporting team member excellence and happiness, and creating wealth through profits and growth." Whole Foods wants to place itself right in the middle of the intersection of this greater interest in healthier foods and an economy able to support more upscale presentation in grocery shopping.
But the intersection is getting more crowded. "There's a lot of new competition," PCC's Voltz warns. "Whole Foods, Trader Joe's, Shoreline Central Market [opening later this year]." The hope is that the market is growing faster than that competition—although the conspicuous 1996 failure of Boulder, Colorado-based Alfalfa's Market on Sand Point Way shows how volatile and unforgiving the organic marketplace can be. "You know, we thought that the last couple of years were crazy," PCC's Voltz says. "But I think we're going to look back at those as the stable years."
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